It is worth noting that the real (ie above inflation) increases in council tax since Labour came to power in 1997 represent the equivalent of an extra 2p on the basic rate of income tax.
In 1996/97 (the Conservatives’ final year), council tax yielded £10.1bn.
Had this risen in line with inflation, the yield in the current tax year 2003/04 would have been some £12bn. According to the April 2003 Budget statement, the yield from council tax in 2003/04 is set to be £18.6bn.
One pence on the basic rate of income tax yields a little over £3bn, and therefore this real increase is equivalent to 2p on the basic rate of income tax. Truly a stealth tax that drops through your letterbox!
Meanwhile, the Liberal Democrats favour abolishing council tax and replacing it with a local income tax (LIT). To raise the same amount of revenue as council tax, the LIT would have to be equivalent to 3.5p on each of the 10p, 20p, 22p and 40p income tax rates. Taken in conjunction with the LibDems proposed 50p income tax rate on earnings of more than £100,000, and together with the existing 1% employee NIC surcharge, this produces a potential top direct tax rate on earnings of approaching 55%.
Does Darwin's theory apply to taxation? Colin ponders...
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