Is this from Damian Green – on raising National Insurance Contributions to fund dementia care – a good idea? dailymail.co.uk/news/article-5… THREAD
Well, it depends on what you think this 'call' is really for. If you think it is a way of making political noise about the need to fund social care you might look on it sympathetically. /1
But as a tax raising measure? As a way of raising money – which would be hypothecated to social care – does it make sense? It does not. /2
First, what’s special about social care that it needs a special tax to fund it? Why can’t we just fund it from general taxation? Damian hasn’t answered that question. /3
Second, if we do need a special tax to fund it, is a levy on NICs the right way to go? It absolutely isn’t. After council tax NICs might well be the most regressive tax we have. /4
(1) NICs kicks in earlier (£8,164) than income tax (£11,500) – so raising NICs hits the poorer harder than raising income tax. /5
(2) You don’t pay NICs on earnings above £45,000 per annum – so raising NICs won’t even be noticed in the after tax earnings of high earners. /6
(3) Once you get to state pension age you don’t pay NICs at all. So raising NICs rates might be good for the Conservative Party base but it isn't for anyone else. /7
(4) there are no NICs on unearned income – dividends and interest and rents – which are disproportionately enjoyed by the wealthy. So, again, this measure is good for them. /8
(Query why we tax those who don’t have to earn their income less than those who do – but that’s a different thread.) /9
(5) The best way to pay for social care would be to tax the huge pools of - very often entirely untaxed – house price gains. /10
Third, Damian Green’s numbers don’t add up. We raise £120bn pa from NICs. There is no way at all we can raise £20bn more with a 2% levy on those above 40. We’d raise in the order of £10bn. /11
And all of this is before you look ‘under the bonnet’ and wrestle with the very considerable problems of making hypothecation to social care work. /12
So. It would (a) hit the poor (b) leave alone the wealthy, the elderly, those who don't earn their income, who have enjoyed massive house price gains (c) raise much less than he says and (d) raise huge technical problems. /ENDS
(If you'd like to hear me say all of that again - only in person - I'll be on @LBC with @clivebull just after 6.30pm.)
(2a) I am reminded by @SELCTAX that we have a lower rate of NICs above the Upper Earnings threshold so my point (2) is wrong. Apologies.
