Citizens’ Income not Tax Allowances

Tax allowances up, benefits pegged at 1%. The Citizens’ Income would reverse this poor to rich handout by Osborne. A personal tax allowance of £9,440 gives little to anyone on an income below that level, for example it is worth £1,000 (£19per week) on an income of £5,000. To anyone paying tax @20%, it is worth 20p in the pound on the top £9.440 of their income. In other words, it saves them £1,888 in tax. If your top rate of tax is 40%, your allowance is worth 40p in the pound. It makes you £3,776 better off, or £72.62 per week. For comparison, Jobseekers Allowance is £71p.w. The Citizens’ Income would – will – share this out so that everybody gets the same amount. The figures below may be shaky, but if somebody cares to put accurate figures on this, that’s great. It’s a simple principle. This is what would happen if personal tax allowances were abolished and replaced by the same kitty shared equally by everyone.

If 4 million taxpayers pay 40% tax on £9,440, that’s £15,104 million per annum in the kitty

Another 20 million pay 20% on their top £9,440 – £37,760m. That’s £52,960m, call it £53 Billion in total.

Leave out the kids for now, just keep Child Benefit universal and unconditional.

40 million adults will receive about £1,325 each – £25 50 per week.

Of course the deal is that everybody then pays tax on their entire income. Just for the sake of argument, let’s assume that the tax rate stays at 20% up to £41,000p.a, the approximate figure at which the higher rate kicks in now. This doesn’t look very helpful at first sight, because the ‘break even’ point at which you pay more in tax than you get from the grant is only £128 per week. In practice this change would not be introduced in isolation, but just for illustration, if everything else stayed the same, the unemployed would receive this £25.50 as a top up to their £71 JSA. It would make part time work more feasible, and for some part time mums, and for many disabled people who can do some work, but not full tilt all week, £25.50 would be a considerable help, but for most it would be neither here nor there.

But now look at the graph at the top of the page. It shows that up to £13,000 per annum (2009 figures) the state or other public bodies claw back a massive proportion of everybody’s income. One purpose of a full Citizens’ Income is to shift that burden higher up the income scale. To convert personal tax reliefs into the first bit of a Citizens income will make a start on this process. The peak of the claw back would no longer start at zero, and would be less than 100%. To raise the £25.50 to a meaningful level (I don’t want to go into details here) would need other sources of revenue. One obvious component is to give Jobseekers Allowance of £71 to everyone, and to make it revenue neutral by raising the income tax level so that again, this would recoup more from those on higher incomes. But a source which I shall discuss in detail in a future blog is resource taxes, for example see:

http://usbig.net/alaskablog/

Remember, the Citizens’ Income will have to be a thought experiment at first. An unconditional, truly universal revenue neutral sum of £25.50 as a citizen’s right in contrast to the poor to rich fraud perpetrated now would be a valuable wake-up call for many.  Despite the advice they were given in Dynamic Benefits, a report commissioned by Iain Duncan Smith, illustrated in the above graph, the government’s way of removing the poverty trap is to abolish or erode means tested benefits, making actual poverty worse. The victims are understandably angry, but it is the basic con-trick which need exposing. Meanwhile the beneficiaries still get away with lampooning the victims as all day TV watchers.

The two statements put out by the Green Party in response to the Chancellor’s statement

http://greenparty.org.uk/news/2012/12/05/an-alternative-autumn-statement-2012/

are thorough, and should be taken seriously. But the need for this blog was reinforced by what I did not find, notably the central part the Citizens’ Income should be playing. The Green Party understandably avoids any hint that questions growth as the only answer to austerity. They are afraid that they would not be given the opportunity to answer half baked attacks.

The Citizens’ Income is relevant to the fuel duty rise. This might make sense seen as a short term growth stimulating measure (necessary if you haven’t thought of the Citizens’ Income), but it is long term lunacy. Fuel costs will rise, and so they should, to face up to ecological realities. With a Citizens’ Income, a reasonable fuel component can be included.

Finally, don’t forget that a comprehensive view of this blog topic is available in my book ‘Citizens’ Income and Green Economics’ from the Green Economics Institute

http://www.greeneconomics.org.uk/

Or, if you live in Leeds, from

http://radishweb.co.uk/

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