Tuesday, May 13, 2008

British Labour increases tax free threshold out of desperation

Following on from the fiasco of abolishing the 10% income tax rate (putting thousands of people on low incomes on a higher tax rate), the absolute gutting of Labour in the local body elections, polling for the Crewe-Nantwich by-election (a safe Labour seat) that shows a 7000 vote majority being overturned with a Conservative victory, the UK Chancellor of the Exchequer has announced a "compensation package". He had to, as Labour backbench MPs were threatening to vote against the Budget legislation because of the abolition of the 10% tax rate, quite simply Brown's government was risking losing supply from its own party! The days of Labour being trusted with the economy in the UK are over, but it is two years till the next general election.
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The package is simple. The low income tax free threshold is to be raised by £600 per annum to £6035 a year. However, the so-called "rich" get none of it, because the threshold for the 40% top tax rate is being reduced by the same proportion.
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Of course none of this comes from cutting spending. No, another £2.7 billion of borrowing to fund this tax cut. Never mind, Labour wont be in forever, they can let those nasty Tories clean up the finances and get them blamed for cutting spending.
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Labour under Gordon Brown is running bigger and bigger deficits and an ever more complicated tax system. How long can Labour in the UK overspend and overspend? Could it ever consider that its heavy borrowing programme contributes to the credit crisis and the level of interest rates?
Meanwhile, New Zealanders might wonder why neither major party believes in income tax free thresholds, when their family and friends in the UK can earn around NZ$15,000 and pay no income tax. Libertarianz and ACT are advocating a $10,000 tax free threshold and even the Greens advocated a $5,000 threshold at the last election.

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