Saturday, 28 September 2013

Get me to the tax office on time

Consider two married couples. In the first partner A goes out to work while B stays at home, with gross earnings of:

A: 40,000
B: 0

In the second both partners go out to work, earning:

C: 20,000
D: 20,000

Currently the first couple is taxed significantly more than the second couple because personal allowances are not transferable. Much as I hate to agree with David Cameron, it's hard to see how this is fair, particularly if the state is in the business of subsidising C+D's childcare costs.

Cameron has however sold his quite reasonable baby step towards transferability in a bizarre way: by saying it is recognising marriage in general. It is certainly not doing that, as anyone living like C+D will not benefit financially at all from the change. What it does do is offer people the choice to arrange their lives either way without being penalised by the tax system. That feels like a win for equality to me. If Cameron wants to wrap it in right-wing bluster, so be it.

Incidentally both Germany and France have a 100% transferable tax allowance for married couples. In France you even get an extra bonus per sprog.