Thursday, 6 December 2012

How will Osborne's tinkering affect you?

BBC News is keen to stress the reduced tax burden that we'll enjoy thanks to Osborne's tinkering:

What's happened to taxes?
...people whose incomes put them on the border of the higher-rate 40% income tax bracket will benefit a bit.

The threshold for the 40% rate will rise by 1% in 2014 and again in 2015, from £41,450 to £41,865, and then to £42,285.

Investors will also see some benefit, with the annual exempt amount for capital gains tax rising by 1% to £11,100.

The inheritance tax nil-rate band will rise from £325,000 to £329,000 in 2015-16 [SP: i.e. 1.23%]

Does the BBC expect that tax bands should remain forever fixed? How else to explain their decision to spin 1% rises as a benefit, despite the fact that inflation is running higher than 1%?

Funnily enough, they remember about inflation later in the article:

How will my benefits change in April?
Millions of people claim state benefits of one sort or another, and many working age benefits will rise by 1% in April.

That is probably going to be a cut in real terms though, as it is below the current level of inflation, which is 2.7% under the Consumer Prices Index (CPI) measure.

It would be a lot more transparent, and thus harder for the BBC to spin, if the starting point for every budget was an across-the-board inflation adjustment.

Of course, what we really need is radically simplified tax and benefits system, with most taxes and benefits disappearing altogether.

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