Tax the rich not the poor!

Over four million low-paid workers felt some relief when Gordon Brown was forced into his tax u-turn. It prevented them from losing out following abolition of the 10p tax band. But around one million workers were not assuaged, as they were still left worse off after the government's crisis 'compensation' action.

Judy Beishon

However, the pain and anger over these tax decisions may turn out to be relatively minor compared to what is to come. Figures from the Institute for Fiscal Studies (IFS) show that 18 million families will become worse off as a result of the expected level of taxes and benefits over the next two years.

The IFS says that this will be due to the recent increase in the personal tax allowance being a one-off measure for this year only; this year's higher winter fuel payments could also disappear; and because the upper earnings limit for National Insurance contributions will rise.

The IFS also looked at how high public-sector debt has become, and concluded that if the government extends the extra personal tax allowance (the recent £2.7 billion u-turn) beyond this financial year, it will break through its limit of the debt rising to no more than 40% of national income. This is based on the economy growing at the rate predicted by the government, a rate that even the International Monetary Fund thinks is too optimistic, so the situation is likely to be much worse.

With the onset of the coming recession, not only could the prediction of 18 million families suffering from tax and benefit changes become a definite fact, but they could be joined by many more millions of families and single people too, as the government seeks to place the burden of the economic crisis on their backs. And the amounts of money involved could be much worse than currently feared.

This is the picture for the coming period under a government that has prioritised the greed of the super-rich and big business. Over decades, taxation rates have progressively contributed to rising inequality. For most of the 1970s, big corporations paid 52% of their profits in tax, but that percentage has been reduced step-by-step ever since, to now being just 28%.

Likewise with income tax on the highest earners; for most of the 1970s it was 83%, but it is now only 40%. The lowest tax band over the same period went from around 35% to 20%, so income tax for low to average earners has decreased much less than it has for the rich.

Add together all taxes: income tax, council tax, national insurance and the long list of indirect and hidden taxes that we are subjected to, then the lowest paid workers pay a massively greater proportion of their income in tax than the rich. And this is before taking into account the huge tax evasion engaged in by the wealthiest in society, estimated at around £25 billion a year by the TUC.

It is no surprise that a recent survey showed that 74% of people in Britain think that those on low incomes should be taxed less. The struggle of low-paid workers to get by, while food, energy and housing costs shoot up, is becoming intolerable, especially when contrasted with the unprecedented level of wealth of the small minority at the top of society.