In place of cuts: a fairer and more progressive tax system

By Joe Cox / @compassoffice

Today Compass published its report “In Place of Cuts“. The report sets out tax proposals which would see 90% of income earners benefit from reforms that make Britain’s tax system fairer.

At present, proportionally the poorest tenth of people pay 46% of their earnings in tax while the richest ten percent pay only 34%. The blueprint calls for a shift to a more progressive taxation system, reversing the trend of the last 30 years which has seen the tax system become more regressive. We propose to do this by introducing a 50% rate of tax at £100k, introducing higher council tax bands and abolishing tax havens for ‘non doms’. The report also calls for the 10% rate of tax to be reinstated.

The report also warns against cutting public sector jobs. It calculates that after redundancy pay, added unemployment benefit and the reduction of demand that arises from unemployment, very few cost savings are made through shedding public sector jobs.

As an alternative, the Compass report outlines how the deficit can be managed by making the tax system more progressive and cutting certain projects, such as Trident.

Polling shows huge support for the idea of a more progressive tax system:

* 78% would like to see a tax system whereby the richest 10% at least pay the same percentage of their income in tax as the poorest 10%; only 14% disagree.

* 59% would like to see the re-introduction of the 10p tax band,Â- with only 13% against.

*• 62% would like to see tax reform measures that increase the incomes of 90% of households, with 24% against.

Measures outlined in the report would benefit 90% of income earners and send a clear signal to those on middle and low incomes – people who have slowly drifted away from the Labour Party since 1997 – that Labour are clearly on their side. At the same time it would expose the Tory plans of savage cuts in public spending, which would not only harm economic recovery but would expose them as a party that supports the richest 10%, instead of the 90% majority.