The Daily Telegraph thinks the ‘squeezed middle’ begins at more than twice the ninetieth percentile of earners, writes Left Foot Forward’s Daniel Elton.
In yesterday’s Daily Telegraph, head of personal finance Ian Cowie echoed Ed Miliband’s concern for the squeezed middle:
“Most people imagine that only people paid over £150,000 a year suffer tax at more than 50pc but many members of the ‘squeezed middle’ earning much less than that pay marginal tax rates of 62.5pc.”
From the use of the political phrase du jour, you might think Cowie was referring to people in the middle of the income spectrum who are being squeezed.
He is not:
“The explanation is a combination of income tax at 40pc, National Insurance Contributions (NICs) at 12pc and the clawback of personal allowances at the rate of £1 for every £2 of income in excess of £100,000 a year.
“That clawback – initially announced by Labour Chancellor Alistair Darling but upheld by his Conservative successor George Osborne – means the personal allowance, which enables everyone else to earn £7,475 before they must pay tax, has been lost altogether before earnings reach £113,000 a year”
The ‘squeezed middle’, for Cowie, refers to people who are earning salaries more than twice as much as those comfortably above the ninetieth percentile of earners, that is among top ten per cent of earners in the country:
Cowie also falls back on the Laffer Curve to attack the idea of progressive taxation altogether:
“There is nothing theoretical about the Laffer Curve, which demonstrates how tax revenues fall when tax rates rise; it is based on a common sense appraisal of human nature.”
The Laffer Curve, in its purest form, argues that although raising tax rates from, let’s say 0 per cent to ten per cent, will increase revenues, if you keep on increasing it, at some point revenues fall as individuals refuse to work as an increasing proportion of salaries are allocated to tax.
However, by arguing there is such a curve, Cowie finds himself in agreement with such rabid free-market capitalists as Nikolai Bukharin, designer of the New Economic Policy under Lenin.
What Right and Left really disagree about is where the peak of the curve is. In reality, conservatives often believe in a ‘Laffer Slope’ and not a curve at all.
38 Responses to “In Daily Telegraph-ese, the “squeezed middle” means the very rich”
Leon Wolfson
Yes of course, if you’re a government unilaterally imposing pension changes while pretending to negotiate, of course he’s going to be “disruptive” – that’s his job after all.
Moreover, I notice you haven’t addressed the housing issue.
Ed's Talking Balls
Nonsense. He indulged in spurious strikes during a period of unprecedented (and ultimately unsustainable, but less of that for now…) growth. He’s just a Trot agitator and is rightly regarded with disdain by hard working Londoners. The only problem is the power he harbours but if ever there was anyone who could turn public opinion in favour of stringent striking laws, it’s him.
I wasn’t consciously trying to ignore the point you were making about housing. I was merely saying that I thought social housing was meant to be there for those who need it; given that Crow and Dobson no longer do, perhaps they could vacate and make room for the many that do?
Leon Wolfson
Ah yes, the trotting out (pun intended) the attacks on trade unions. At this stage, I’m quite willing to call for closed shops again because of the Tory attacks on perfectly reasonable concepts like wanting to negotiate terms for pensions.
And again, the concept that people who are successful should have to vacate social housing creates sinks of failure, where you get large concentrations of low paid and unemployed workers. Mixed neighbourhoods are better for all concerned.
The key is, of course, building more social housing, which has been neglected for decades.
Ash
Just a note of caution: given the way the Tories have justified cuts to child benefit and tax credits, it’s worth remembering that individual earnings and household incomes are two different things. A single-earner, two-adult, three-child household (e.g.) on £46,428 wouldn’t be anywhere near the 90th percentile of the income distribution. In fact they’d be close to the 50th percentile, and have an excellent claim to the title ‘squeezed middle’.
(Doesn’t affect the central point about £100k + earners though.)
Richard
“I guess what sticks in the throat with Crow is this man of the people act, when he’s supping champagne on the sly in Mayfair restaurants.”
Just like Call me Dave then.