The Clegg is cheerleading the approach to raise the income tax threshold to £10,000 which your humble correspondent can only applaud. Taxing anyone who receives a significant amount of benefits is demented.
But how to pay for this munificence? Sadly, Clegg is less innovative in this regard: "tax increases for the wealthy" seems to be the order of the day. I've got news for you, Nick; the wealthy (over £100,000/year gross income) are already being taxed pretty hard. They don't even get the benefit of the tax allowance, so all their income is taxable.
As the Inland Revenue itself notes:
From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 - by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.So start with a salary of £100,000 p.a. Gain an extra £15,000 and how much of it do you see? You're taxed at 40% plus 1% employee NI (let's ignore employer NI for now) so that's £6,150. You lose all your £7475 allowance, so suddenly you have £7475 income liable for taxation at your rate of 40%, so that's £2,990. You lose £9140 of that £15,000, or a little short of 61%. Surely that could be regarded as a sufficient tax rate; do you really want to lower the 50% tax band entry point? The 50% rate itself is starting to tip over the top of the Laffer curve and you'll be pushed to sustain its revenue increase as it is, let alone what would happen if you upped it to 60%.
No, I have a better idea. The higher rate (40%) applies from £35,000 of taxable income. Let's phase in a reduction that results in applying it from the median income of £26,000, which is £18,500 with the current tax allowance. That should (finger in the air) more than compensate for the loss of tax income from the lower band. You can't argue that the poor are being hit; by definition, it's the top 50% who pay. What's not to like?
Of course, the effect of this might be to make the taxpayers look much harder at where their money is going...