Income Tax is the Best Way to Fund Public Services…

How we fund our services has always been discussed in elections. Even in N. Ireland where border politics tends to dominate, every one of us knows that we need to pay more if our NHS is to function properly and be able to look after our sick and our elderly properly. However, in this election both of the UK parties of government – Labour and Tory – are rushing to reassure the electorate that income tax will not go up if they are elected.

I suggest this either madness or dishonesty. Why do we have such a negative attitude towards income tax?

In my last payslip before I retired my monthly take home pay was £2713. I did not feel rich, but certainly did not feel poor or impoverished. I could not have told you how much I paid in tax or national insurance without looking up a payslip – life is too short and too full of more interesting things to dwell on than tax.

[In fact, my gross pay was £4021 for the month (approx. £48k per year) and the tax for the month was £510 with a further £386 going on National Insurance and £410 on Pension leaving me with £2713 – I was paying roughly 22% of my income in tax and insurance.]

We are not over taxed, not even remotely. I saw the beauty of our PAYE tax system when I was on a healthy monthly income of £4K, I was paying over £500 in tax but could afford this as well as my mortgage and children. Now as a pensioner with a much-reduced monthly pension income of £1565 my tax bill is reduced to only £103. I am not well off, but can afford this. Income tax is the fairest of all taxes, those who earn very little, pay very little.

I suggest that one of the reasons why Income Tax gets such a bad press is that the very rich who should pay much more tax than you or I (but often do not), own our news sources and ensure that their objections to their larger tax bills take centre stage. The fact that many of the very rich use off-shore accounts and tax havens to avoid paying tax fuels a sense of unfairness. As someone said, ‘I don’t mind paying more in taxes because the poor can’t pay tax, but I do object to paying more because the rich won’t.’

In the coming days we will hear people suggest that money should be raised through methods other than tax. Water Rates seems to be the preferred option in N. Ireland with suggestions of a household bill of £300 being applied to rich and poor alike. Some (eg Reform) may promote other more crazy solutions such as using insurance to pay for our health service. Interestingly a friend from Australia informs me that he pays 190 Australian dollars or over £95 per month on health insurance and that this is not considered high for someone in their 60s. The heads of some of those in Reform would explode if this additional amount had to be taken out through our income-tax.

I suggest that if we all take an honest look at our tax bills, most will see them as low compared with the number of services we receive for that tax – see table opposite showing the percentage of our taxes spent on each service in 2022-23. The idea that purchasing these service individually would be cheaper or fairer is very naïve.

I accept that N. Ireland’s Assembly has no ability to raise income tax and may eventually have to charge water rates etc. I suggest that when they do so, they vary the amount charged based on income of the households – a process known as means testing. No-one likes paying more tax but will do so if it the system is fair.

 

 


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