Tax and money

In all the commentary on tax, what appears to be missing is some essential reality.  If you increase the threshhold at which tax starts to be paid, the sums lost to the revenue in terms of income are relatively large for relatively small changes in the threshhold rate.  So, the increase announced last year will cost the revenue a relatively large sum of money. 

If you reduce the threshhold at which the top rate of tax starts to be paid, then the sums gained by the revenue are relatively small for relatively large changes in the threshhold rate.  So the reduction announced last year will raise a relatively small sum of money for the revenue.

The problem is that there are very large numbers of people who pay the lower rate of tax and considerably fewer people pay the higher rates of tax - remember that you are in the top 10% of earners if you are paying the top rate of tax - over about £40,000 per annum. 

So when someone says to you, that we could reduce the impact by raising tax for the richest - the simple answer is to ask which richest?  By how much?  And, how much can you and will you raise by your proposal?  The problem for most of us is that we think anyone who earns more than us is rich and that we are average - and that applies to the banker and the lawyer who works in the City as much as the doctor or the headteacher, many of whom will fall into the top 3 or 4% of earners in the country.