Raising the Income Tax Threshold is an Important Symbol, Not a Sop

The most obvious or high-profile Liberal Democrat contribution to the coalition’s programme for government is the commitment to raise the personal allowance to £10,000 over the course of this parliament. John Rentoul is not impressed by it. He says it is a “sop” that “sounds great” but fails to survive “contact with the reality-based community”. He explains his argument thus:

Raising the income-tax threshold is the only policy that can definitely be attributed to the Lib Dems, and it’s an inefficient way to make the tax system fairer. Raising the threshold benefits higher-rate taxpayers more than the rest, which means that other taxes on the rich have to go up to compensate*.

It is a counter-intuitive point, which is why I should have explained it at greater length: putting up the income tax threshold benefits those on higher incomes more than those lower down the scale. For someone paying 50p in the pound top rate, putting the point at which one starts to pay tax up £1,000 saves £500.