tag:blogger.com,1999:blog-22974616.post1403727468595171290..comments2023-10-02T14:33:18.136+01:00Comments on The Very Fluffy Diary of Millennium Dome, Elephant: Day 3524: No, Captain Clegg is RIGHT; the Institute for Fiscal Studies HAVE gone nuts!Millennium Domehttp://www.blogger.com/profile/08430269096817934037noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-22974616.post-55506369440032413052010-08-30T00:45:20.566+01:002010-08-30T00:45:20.566+01:00However, where I think the real confusion arises i...However, where I think the real confusion arises is in the use of HOUSEHOLD income rather than PERSONAL income.<br /><br />Because the TAX system treats people as INDIVIDUALS, not households, so a couple or a family ALL get the personal allowance raise.<br /><br />Now, I'm sure the IFS are not proposing that we return to joint taxation of partners, but in that case what is their justification of translating what is LITERALLY a "personal" allowance into a "household" allowance?<br /><br />(The Government, I have to admit, can't be completely free from blame here, because in the case of BENEFITS some benefits are withdrawn if another person in the "household" is earning more than the Government deem fit.)<br /><br />But anyway, having given it some thought, I realise that a household with two or maybe even three members working even on around median income PERSONALLY would be in the upper end of the HOUSEHOLD income distribution scale and yet would gain substantially - £400 or £600 per year – where a single worker earning an equivalent sum (£50 or even £75 thousand) would gain nothing.<br /><br /><a href="http://www.statistics.gov.uk/cci/nugget.asp?id=334" rel="nofollow">Median HOUSEHOLD income seems to be about £30,000 (2008 figures) </a>.<br /><br />That in itself is SUGGESTIVE: by not being much higher than median income, it suggests that the lower HOUSEHOLD incomes are made up of households with only ONE earner, while households with more than one earner rise into the "top half" of the income distribution.<br /><br />(And I think, actually, that a LOT of "households" with daddy and daddy/mummy and mummy/mummy and daddy both going out to work and earning £25,000 each would be rather SURPRISED to learn that according to the IFS that meant that THEY were in the "top half" of the income distribution.)<br /><br />But obviously this throws off all my workings because without a model of the mix of single high earners to couples (and more) on multiple moderate incomes that make up the upper deciles of the HOUSEHOLD income scale, then I can't guess how the increase in personal tax allowance translates to households gains.<br /><br />Equally, though, I do think that the IFS rather needed to "show their workings" here – to STATE that the top half of the income scale gain BECAUSE there are large numbers of families where two bread-winners bring home £25k.<br /><br />So, long story short (too late!) I completely agree with what you say, but I don't think it invalidates my assertion that the IFS article rests on an assertion that is far from as cut and dried as they appear to claim.<br /><br />All the best<br />MMMillennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-17461114768385816732010-08-30T00:44:53.049+01:002010-08-30T00:44:53.049+01:00I have in fact been trying to work out how the IFS...I have in fact been trying to work out how the IFS can be right, and I think you may have put your finger on it.<br /><br />But I think it is FAIR to protest that the language used is at best SLIPSHOD and at worst WILLFULLY MISLEADING.<br /><br />There are two things to say here: there's the important distinction which you identify, between "SOME PEOPLE in the top half of the income distribution" and "the top half of the income distribution". <br /><br />There is also a distinction between INDIVIDUALS and HOUSEHOLDS and which I'll come to in a moment.<br /><br />And by not making these distinctions CLEAR the key sentence is, at the very least, open to interpretation.<br /><br /><br />Anyone earning between £7,475 and £42,875 (adjusted for inflation) will gain a full £200 per year as a result of the increase in personal allowance (people earning between £6,475 and £7,475 will get a proportion of that – as what tax they pay is eliminated – as will people earning between £42,875 and £43,875 – as the new higher rate tax they pay takes back the gain from the higher personal allowance).<br /><br /><a href="http://www.statistics.gov.uk/cci/nugget.asp?id=285" rel="nofollow">Median income in the UK in 2009 was £489 per week</a>, which is £25,428 per year, which – by coincidence or not – is almost halfway between £7,475 and £42,875.<br /><br />So it's FAIR to say that there are people in the top half of the income distribution WILL gain. <br /><br />But using the phrase "the top half" does NOT make clear that the UPPER part of the top half DOES NOT benefit; and it conceals that benefits from the tax change also fall into the BOTTOM half of the income distribution.Millennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-25804050658571343192010-08-29T19:23:27.694+01:002010-08-29T19:23:27.694+01:00As much as I don't like the IFS report I think...As much as I don't like the IFS report I think you've got it wrong here.<br /><br />"the top half of the income distribution"<br /><br />refers to the upper 5 deciles of the household income distribution.<br /><br />According to that distribution higher rate tax is only paid by about 10% of the population, i.e. the richest decile.<br /><br />The ridiculous thing about this report is that the upper half of the income distribution does not refer to people who are particularly wealthy for the most part, which is I why I can't get particularly upset that there not getting as stuffed by the changes as the IFS would seem to want them to be.Stephen Wigmorehttps://www.blogger.com/profile/15604582974059809054noreply@blogger.com