THE PRESS give the impression that vast numbers of workers are hit by the top tax rates. In fact only around 10 percent of people pay the higher income tax rate of 40 percent levied on salaries over £34,515 a year. Very few of these are ordinary workers.
For example, the very top of the nurses' pay scale outside London is £29,990 and even in inner London it is £34,218. The vast majority of nurses are, of course, on far less. You would have to be a nurse consultant (and take on management functions) to get into the top income tax bracket. The official New Earnings Survey released last year showed:
- 10 percent of all workers get less than £4.80 an hour, or £187.20 for a 39-hour week.
- 25 percent of all workers get less than £6.00 an hour, or £234.00 for a 39-hour week.
- 50 percent of all workers get less than £8.41 an hour, or £327.99 for a 39-hour week.
- Only 10 percent of all workers get more than £18.76 an hour or £731.64 for a 39-hour week.
- Just 2 percent get more than £50 an hour or £1,950 for a 39-hour week.
The often-quoted 'average wage' of £22,000 a year (£423 a week) is an average boosted by the overpaid executives at the top.
Back to Thatcher?
WHEN VICIOUSLY right wing Tory Margaret Thatcher came to power in 1979 she immediately set about cutting the top rate of tax-to 60 percent. It remained at this rate until 1988. It is surely not asking too much to go back to Thatcher's tax policy. Such measures would raise around £22 billion a year extra revenue.
If we wanted to take more far-reaching steps we could go back to the tax policy of Denis Healey, Labour's chancellor in 1978. Then the top rate for income over the equivalent of £100,000 today was 83 percent.
Business gets off
IT IS not just individual rich people who are getting off lightly. New Labour's tax changes have also handed billions to businesses. Cuts in the tax on profits (corporation tax) alone are expected to cost £20 billion by 2004-5.
When Labour came to office the full rate of corporation tax was 33 percent. Now the main rate is 28 percent. Because of other changes the Institute for Fiscal Studies estimates that someone setting up a company can now earn up to £16,000 a year tax-free.
An employee on the same income would expect to pay £3,927 in national insurance and income tax.