Nick Clegg on Monday outlined Liberal Democrat reform of the tax system to increase the income tax threshold to £10k a year, meaning that 3.6m people will be taken out of taxation and a tax cut of up to £700 a year for most working people and £100 for pensioners.
The proposals will make a huge difference to many people, especially those on low incomes, our proposals will make a bigger difference to ordinary hardworking people than the Conservative scrapping of the National Insurance increase and their marriage tax allowance. The Conservative proposals would give c. £300 back a year, or £450 a year per couple, compared to £1,400 per couple under the Liberal Democrats (married or not).
The change to the tax system will help to remove the poverty trap (which can be removed further in the long run with a local income tax to replace the council tax) encouraging people to work, as well as a great assistance to young people first starting work. The £10k income tax threshold has been welcomed by Lord Digby Jones and Norman Tebbit, not usual Lib Dem supporters, but policies which get cross party support is always good.
The policy will cost £17bn a year, but will be funded by a mansion tax on properties over £2m, aviation tax on flights not per passenger, changes to the pensions tax relief for higher rate tax payers, aligning Capital Gains Tax with Income Tax to reduce the rich from tax avoidance and anti-avoidance measures.