Tim Almond

Lib Dem Tax Plans

The Lib Dems stress that the tax rises, many of them to be debated today by the party’s conference in Brighton, will fund tax cuts for lower and middle-class people.

The problem is that it doesn’t work like that. It would only work if we each had set incomes and no flexibility in the labour market.

Let’s say that you’re working in a job with overtime. By doing a weekend of overtime, you can afford to hire a tiler to come round and retile your bathroom. So, you do the overtime, while he does the tiling. You pay the tax on your work, and the tiler pays the tax on his.

Now, add to the tax burden, and the amount of hours you have to work to pay for that tiler increases. At some point, it becomes more beneficial for you not to hire the tiler, but to do the job yourself. No tax for your work, no tax from the tiler.

In more subtle forms, this might also be someone deciding that taking a promotion that pays them a lot more isn’t worth it because they’ll have more responsibilities, longer hours and so forth. And if they’re not going to see much of it, they’d rather just sit at home and play on their Wii.

Tags: Politics //