At last there is clear blue water between the UK political parties in the run up to the General Election - over taxation.
And the parties are acting true to traditional form - Labour wants to raise taxes, and Conservatives want to lower them.
But the picture isn't quite so straightforward. The Tax selected, National Insurance, is actually a tax on the poor, taxing those on low and middle income at a higher rate than those on high income.
National Insurance is a sort-of 'hidden' tax. It doesn't appear on any headline rate, so successive governments, in my memory beginning with Margaret Thatcher (Conservative) but probably since a long time before, have kept income tax low whilst taking the money out of yours and my pay packets through National Insurance. It has now reached a phenomenal 23.8% (higher than the average tax rate which is made up of 20%, 40% and 50% tax rates with a tax-free allowance for the lowest paid). The trick is, that over half of NI is paid directly by the employer to the treasury and doesn't appear on my pay slip, so although it is part of my cost of employment, I don't see enough to get upset. I do see the 11% I pay, just not the 12.8% my employer pays.
Labour plans to raise National Insurance still further, though I'm not clear whether this is by 2% overall (1% on Employers and 1% on Employees) or only 1%. Either way, it is enormous. But it is much worse than this - National Insurance represents a tax on the poor because above a certain income (£844/week ~ £42,000/year) the employee rate goes down to 1%. This means that the total tax take from payroll (ie Income tax, National Insurance by employee, National Insurance by Employer) is:
% Income Tax
Earnings in Euro
Earnings in USD
National Insurance actually starts to go DOWN as a % of the total after £50,000 earnings per year, and total taxation hardly rises as a % above this level.
Can we have a little more honesty from politicians please?