Robert Halfon, the Tory MP for Harlow, has been promoting the return of a 10p tax rate in co-ordination with Right Angle via the website CutTaxTo10p.com for a while now. It's a policy which hasn't generated much traction in the cabinet, because the LibDem policy on personal taxation at the lowest level - progressively raising the Personal Allowance on which no tax is paid - has dominated coalition thinking on how to increase the take-home pay of the lowest paid without burdening business with the prohibitive costs of increasing the minimum wage.
However, today Ed Miliband has also come out in favour of the idea - although he's stopped short of confirming it as a policy that will be in the next Labour Manifesto - and to complete the chutzpah of having stolen a Tory Policy for a keynote speech as a Labour Leader, he's also stolen a Liberal Democrat Policy - the Mansion Tax - as a method of affording it.
Now, setting aside for a moment the fact that Labour have previously earmarked the Mansion Tax to pay for tax credits - and the money can't go to both, which raises questions about the basic credibility of either policy - there also needs to be a debate over the actual worth of a 10p tax rate.
The Telegraph reports that:
One proposal being studied in Whitehall would see the first £2,500 of taxable income taxed at 10p in the pound rather than the current 20p.The figures here are rounded - the personal allowance 2013-4 will be £9,440 - but the point made seems reasonable. But is it really?
This would reintroduce the 10p rate for income between £10,000 and £12,500, about the level of the national minimum wage.
One of the problems with the 10p tax band is the bureaucratic cost associated with it. Compared to raising the Personal Allowance, creation and maintenance of a new tax band will have a much steeper bureaucratic cost, and will be much more complicated effect on the legions of self-employed (disclosure: such as myself). As only £250 per taxpayer will be raised within this tax bracket, as the administration cost increases the utility of the tax band decreases - fast.
From the Liberal Democrat point of view, such a tax bracket is at best a half-hearted move towards a sensible tax policy. The feeling within the party consultations on Income Tax generally revolves about the idea that (as one gentleman at Autumn Conference Policy Consultation last year put it):
There is no intellectual justification for taxing the minimum wage at allSome of us (including myself) would even go further, and stake the point that a 0% tax rate beyond the national minimum wage was desirable, to go at least as far as the nominal "living wage" level (of course, we would want such a move to be properly costed).
Moving the Personal Allowance is of course twice as effective at implementing the 10p tax band: that is, a 10p tax band between £10,000 and £12,500 has the same effect as a Personal Allowance of £11,250 for anyone earning over £12,500.
However, it is also more effective at increasing take-home pay for anyone earning between £10,000 and £12,249 than a 10p rate would be.
The 10p tax rate has always been a policy in search of a problem for it to solve - when it was suggested by the Tories it seemed to be an attempt to have a separate Tory tax policy, which they could easily compromise on in the event of another coalition. From Labour it seems to be a little bit of shrivening, a first step towards acknowledging the ills they caused under the Brown era government.
But as an actual policy, such a narrow tax band is so tiny a policy that it might as well not exist.
Let's not just have low tax on the minimum wage - let's have no tax on it!