Thursday, 20 November 2008

Two Labour Takes on LIT

The latest comments from Norman Quirk of the Scottish Chambers of Commerce on Local Income Tax have drawn two different responses from the Labour Blogosphere. His comments that it would be "the wrong tax at the wrong time" and further and more disturbingly that it would be a "tax on labour" I'll deal with in a bit but first the Labour responses.

First there is former Railways Minister Tom Harris, who churns out yet again the old Labour line that LIT is people paying more income tax. Sad but true that Labour have for the last 11 years thought that people only focus on income tax. How else could one describe the fact that they have raised the overall taxation on the individual by stealth taxes and simultaneously closed the percentage of income paid in taxation between the top 20% and the lowest 20% of the UK population. Indeed Tom seems to miss that it is replacing another tax and shows very poor maths when he says:

"if they manage to implement it, and push Scots’ income tax up to three per cent
more* than what everyone else in the country is paying"

LIT (although as I've said whether the SNP really want a true local LIT is in dispute) is a progressive tax. With prices rising fixed percentage taxes such as VAT which we pay on our food, our fuel on top of our fuel duty etc are regressive especially to those on lowest incomes. For each 5 pence increase in their bills almost another penny goes to the exchequer. The council tax is a fixed rate tax. In hard financial situations you still have to find a way to pay it no matter what change you may find in your situation, only in the worst case scenario may you get social security support to assist you in that. Indeed should you be unable to pay it due to tight financial times it can cost those least able to afford it more either through fines, bank charges for a failed Direct Debit etc. as a few people have mentioned to me in recent months.

An LIT instead of course reflects you're ability to pay. Heck it can even been taken at the point of source therefore you'd budget around the net take home pay. Rather than face the possibility of paying your council tax or your fuel or food bill.

Take on the other hand the leader of Labour's group on Edinburgh Council, Ewan Aitkin who takes a more cautious view. He unlike Tom Harris seems to realise that this gift horse could turn into a Trojan horse very easily saying:

"Implementing the LIT is never the issue. Being seen to be fair and equitable is."

Aitken at least seems to realise that LIT would wash well the people if not the business leaders, and crucially says:

"it does make political sense because people feel, for good or for ill, unfairly
treated by the Council tax."

Of course he then go on to point out that the SNP plans figures for LIT do incur a shortfall, which is of course one reason why a centrally set rate does not account for local expenditure requirements, nor the ability of the residents of that local authority to burden the load.

So while one is blinded by one tax is headline grabbing the other at least is realising the fairness issue of taxation is important to the electorate. Possibly more so as we are buying more and more banks with our taxes. Of course if they (the voters) are not happy with the way the local authority finances, spends and runs things they can democratically have their say within 4 years. A more difficult task if, like me, the SNP do not represent your constituency in the first place to then unseat the Government.

*Seeing as it is only 3% on taxable income even the increase of a 3% LIT would not equate to 3% more income tax than someone else on equal income.

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