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IEA - Merging taxes not “tinkering with NI thresholds” would better help low-paid

Editorial and Research Fellow Professor Len Shackleton responded to the Conservative Party’s announcement to raise the National Insurance threshold for workers

“Raising the National Insurance threshold will help relieve the tax burden on those who often struggle most with their finances.

“But even better than tinkering with NI thresholds would be to merge NI and income tax, to avoid sharp changes in marginal rates.

“NI no longer covers the costs of the benefits it was set up to finance. It misleads the public, who in large numbers still seem to imagine state pensions are paid from a fund accumulated from past contributions. It is also costly to administer.

“On grounds of transparency, then, merging NI and Income Tax would be most sensible. It would create cost savings for employers and government. Moreover, if a new consolidated income tax rate was applied, it could be applied to the self-employed, those working after state pension age and pensioners, redressing some inequities and increasing the tax base.”

Notes to Editors: 

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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.

Original article link: https://iea.org.uk/media/merging-ni-and-income-tax-better-than-tinkering-with-ni-thresholds/

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