VAT is progressive - IFS

We believe that increasing the standard VAT rate in the current system is mildly progressive when examined on a lifetime basis. The intuition for this is that, over a lifetime, poorer households spend a higher proportion of their (lifetime) income on goods that are zero or reduced rated in the current VAT system, such as food, children’s clothes and domestic fuel and power, and hence a lower proportion of their lifetime income on items that are subject to the standard VAT rate.


Looking over the lifetime as a whole, what matters is whether the lifetime-rich or the lifetime-poor see a larger share of their lifetime resources taken in VAT, and on that basis VAT is progressive because necessities (consumed disproportionately by the lifetime-poor) are typically subject to zero or reduced rates of VAT.


Thanks to LibDem Voice.

Progressive fees

I didn't quite see who the questioner was at PMQ's (Paul Uppal? according to my Twitter feed) but a graduate earning £25,000 would pay just £30 per month in repaying student fees under the Coalition's proposals. That really is extraordinarily progressive, putting enormous emphasis on higher earning graduates to repay the most substantial rates.

I had not realised just how progressive these measures were designed to be.

Progression & the IFS

Can't believe I agree with Guido Fawkes, but this piece makes sense.

The left defines a “progressive budget” as one that benefits those on lowest incomes most. Since the population decile on the lowest incomes is overwhelmingly composed of those on welfare it means that no tax cutting budget, even if it disproportionately benefits the lowest paid by raising thresholds, can ever be “progressive”. The only way the budget could be progressive would be by raising welfare payments to those who spend their days sitting on the sofa watching daytime TV.