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Wednesday, 6 October 2010

Are you doing your bit?

There has been a lot of discussion in the media, the internet and down the pub about whther £44,000 is a lot of money or whether somebody who earns that much should be getting benefits, or more importantly, whether somebody earning £15,000 a year should be subsidising the children of someone else earning 3 times as much.

SoI did what I usually do in these circumstances, and got out a metaphorical envelope to do some sums on the back thereof.  It trurns ot that there are about 60 million of us give or take a cargo ship of illegal immigrants and the government plans to spend £680 billion this year, but there is an additional £30 billion or more of tax xcredits that the gobvernment calls "negative taxation" and lopps off the tax receipts number but should really add onto spending, so let's do that.  That gives us an average spend in central and local government of £12,000.

Now I know that we all receive different amount at different times in our lives, and some of us are perfectly healthy until we drop dead while others make the localhospital a second home, but bear with me and let us just assume that we all draw the same average figure throughout our lives, and let's call that figure £12,000.

Well the good news for Mrs £15k Shop Assistant is that she isn't subsidising any one.  On the back of my envelope I made some broad brush assumptions about council tax and VAT, based on income and then came up with a figure for the total amount of income tax, NI, council tax, VAT and other duties that someone would spend according to their income (assuming it was all spent). Quite horrifically for Mrs Assistant about 40% of her gross income ends up in the government's maw, but that means she is only paying half of the value of services the government says she receives, and none of the cost of any dependent relatives.

To come close to breaking even for her ow account she would have to earn £30,000, and for 2, 3 and 4 people she would have to earn £55,000, £75,000 and £96,000. The situation would be slightly more in her facvour with a second earner earning rougly the same salary, because the government would be spending as much on them as they paid in tax for 2, 3 and 4 people if they both earned £16,000, £48,000 and £58,000.

Or to pu it another way, anyone with 2.4 kids who earns less than £125k is living off the state.

And who is picking up the tab for that?  Your grandchildren.

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