A tax where someone with twice my earnings pays around three times as much as me can’t be compared to a poll tax, where I would pay exactly the same as them. The most progressive tax cut of course would be a “negative poll tax” – best accomplished by an increase in allowances at the bottom end, clawed back for higher earners if necessary.

Yeah but the rich (who spend more on luxuries, both in absolute and proportional terms, than the poor) pay 17.5% on more things than the poor. They end up paying more overall.

Think of it like this. No matter what you earn, everyone pays about the same on their essentials. Now however you look at it, the rich will have more money left over to spend on luxuries, so no matter what the VAT rate is, the rich will buy more luxury goods than the poor. So whether the VAT rate is 15% or whatever, the rich will pay more VAT than the poor because they spend more money on goods which have higher VAT on them, both proportionally and in absolute terms.

Comparing it to the poll tax is just stupid.

I wouldn’t object at all to the 50% rate IF the poor were taken out of tax altogether and not forced to act as supplicants within Brown’s lunatic tax credit scheme.

True.

What follows?

Lots.

Care to elaborate?

Sure,

my repsonse (which is also on my blog):

is:
“Think carefully about what you are saying:

Poor people have to spend almost all their money on bare essentials: rent, food, clothes for their kids.

They don’t have much left over for “luxuries” (taken in a broad sense, not in the technical VAT sense). Yet what they do have left-over for more than the bare essentials suddenly gets taxed at 17.5% – the same rate that those who have to dedicate a far smaller proportion of their income to essentials incur.

Doesn’t that look wrong to you?”

Now, John has written a very long and detailed counter-reply, which I intend to respond to in due course. You read it at:

http://badconscience.wordpress.com/2009/04/22/vat-a-regressive-tax-that-nobody-is-talking-about/

and give me some traffic in the meantime

http://www.statistics.gov.uk/downloads/theme_social/Family_Spending_2007/FamilySpending2008_web.pdf

It certainly is a waste in terms of what it was designed to achieve.

http://badconscience.wordpress.com/2009/04/22/vat-a-regressive-tax-that-nobody-is-talking-about/

In terms of a fiscal stimulus, the liberal democrats may well be right that it is a waste – if you want to boost spending, there are arguably better ways to do it.

But the Liberal Democrat position is silent on the issue of tax justice in terms of addressing a regressive tax – just like Labour and the Tories. Which is interesting considering that the Lib Dems are doing a good job of trumpeting issues like tax credits and raising the threshold on low income earners.

I thought the government spun the VAT cut very badly – it was presented as the biggest part of the stimulus whereas other measures like cutting tax for people on low incomes and bringing spending forward were more important for recovery, they didn’t make the point about it helping small businesses and protecting jobs where people might be thinking about having to lay someone off due to tightened margins, and this progressive slant was not referred to. However the policy itself was a good thing.

I thought the Liberal Democrat position was to call it a “waste”, though?

For those on index-linked benefits, even their notional gain from the VAT cut will be wiped out by the fact that it will be uprated in accordance with a lower rate of inflation. The £20 in everyone’s pocket soundbite has been hopelessly ineffective, because most people haven’t seen those twenty pounds, so just see it as spin.

I remember so vividly the claptrap at the time complaining of how we should have an economy based on the continental social-democratic model.

I spent the 90s living in Frankfurt, Germany and guess what? Lo and behold, local taxes, the equivalent of the poll tax, were paid by every single working person at exactly the same rate, whatever their income or net worth. Because if I get my bin emptied or my street swept I have to pay exactly the same cost; similarly if I go and buy any service or product in the ecomomy they do not ask my neighbour to subsidise it. That is exacly how people portrayed it to me.

That does not, of course, mean that the good citizens of Frankfurt were right; it is a value judgement and not “manifestly” right or wrong.

However, rioting on the street to blackmail others into paying for your services – now, that IS manifesly wrong………………..