“It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man’s fears and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we call The Twilight Zone.”
- Rod Serling, introduction to the TV series, 1959 [our comments in ( )]
Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for utopia with bubbles called ‘growing markets’ and greed termed ‘good valuations’. The twilight zone economy is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying housing debt due to missed rent and house payments.
Policymakers Disconnected From the Real Economy
Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates surge to 3 – 4 % by year end. Does all this monetary and fiscal stimulus result in a healthy solid economy or the most catastrophic inflationary bubble in modern times? Our post identifies the dimensions of the Twilight Zone Economy.
Astronomical Public Debt Drags Growth
The country is drowning in low-interest debt. But, this liquidity ‘soma’ drug is putting investors to sleep, thinking everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.
Source: CBO, The Daily Shot – 3/15/21
During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort. When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment in productive industries increased the standard of living for most Americans.
Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21
Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart, by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.
Source: RIA, Lance Roberts, 3/17/21
Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to finance debt service and transfer payments will likely result in economic stagnation or worse.
Negative Yielding Debt Triggers Speculation
Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader speculation in Bitcoin and other cryptocurrencies.
Sources: Daily Feather, Bloomberg – 3/22/21
Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in value at some date in the near future.
Equity Markets Are In An Alternate Reality
Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry’s total market capitalization? Isn’t Tesla’s valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in 2022, matching Tesla’s total output. VW has now taken over the dominant market share in Europe and is opening EV plants in Asia and North America.
There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in 2000.
The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!
Sources: Charles Schwab, Bloomberg – 12/31/20
Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals don’t support this extreme valuation case.
This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales growth of 42% and GDP growth at 22% since 2007.
Source: Real Investment Advisors – 3/20/21
Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time will come when the zero-interest economic drug won’t work anymore, and withdrawal sets in spiraling into a market crash.
Bubbles Bubbles Everywhere
Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie’s just sold a digital work of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just $100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is authentic. Beepi knows he’s riding a soaring market, observing, ‘Absolutely it’s a bubble, to be honest.”
An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace, StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey’s first tweet sold for $2.9M. Venture capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:
Andreessen: “A big part of the entire point of life is aesthetics. The way that we live and the design of things around us and artistic creativity.”
Horowitz: “It’s a feeling. You’re buying a feeling. And what’s that worth?”
Writer Ben Carlson notes in his analysis of bubble markets that:
“We’re emotional. We lead with our feelings. We’re superstitious.”
Superstition is a characteristic of the Twilight Zone Economy.
Core City Life Is Changed Forever
Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity, millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city offices.
Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization, further flattening the reporting structure for improved performance and business agility.
The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales. Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will bring back visitors crucial for the leisure and hospitality sectors.
Millions of Workers Are Long Term Unemployed
About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 % from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory of employment post COVID showing a lingering decline in the labor force.
Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21
The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects. Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently unemployed will slow the recovery.
Corporate Executives Join In the Party
In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.
Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.
Sources: Fitch Ratings, Vuk Vukovic – 9/22/20
A significant default storm looms in the coming years as interest rates rise.
Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far faster than corporations can raise end customer prices in the following chart.
Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot – 3/19/21
Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to be strengthening.
Policy Makers Are Missing Solid Economic Landmarks
To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons. Our policy – captains are in a twilight zone fog. Many key economic indicators do not actually measure what policymakers tell us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment rate is more like 12.6%.
The Fed’s inflation consumer price index figures exclude ‘volatile energy and food prices, which are expenses consumers experience every day. Since the federal government in 1999 changed to a ‘consumer lifestyle buying pattern’ approach rather than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics shifted to an ‘owner equivalent rental cost’ for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.
Industry Research On The Real Economy Is More Accurate
Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500 consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of 2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from their example.
The Way Out of the Twilight Zone
To leave the Twilight Zone grip requires policymakers to recognize financial and real economy fundamentals. They need to drop the no economic pain utopia model. Policymakers need to get real with their statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.
To avoid the inevitable market crash, these programs need to be phased in over several years to allow for investors, executives, and consumers to make adjustments to their portfolios. It is as if economic leaders have sent investors up an infinite ‘wall of price’ like a free solo climber, with no safety rope leaving them to the inevitable fate of fundamental economic gravity.
Former Project Veritas & O’Keefe Media Group operative and Pfizer formulation analyst scientist Justin Leslie revealed previously unpublished recordings showing Pfizer’s top vaccine researchers discussing major concerns surrounding COVID-19 vaccines. Leslie delivered these recordings to Veritas in late 2021, but they were never published:
Principal scientist at Pfizer, Kanwall Gill in 2021:
“We had no idea how it’s going to look like. MRNA vaccines have been there for 50 years, but nothing went to clinical trial because MRNA have been known to have side effects.”
Featured in Leslie’s footage is Kanwal Gill, a principal scientist at Pfizer. Gill was weary of MRNA technology given its long research history yet lack of approved commercial products. She called the vaccines “sneaky,” suggesting latent side effects could emerge in time.
Gill goes on to illustrate how the vaccine formulation process was dramatically rushed under the FDA’s Emergency Use Authorization and adds that profit incentives likely played a role:
Pfizer's principal scientist in 2021:
“It takes 10 year for a vaccine to come out. It takes years of observations... we are doing everything at the same time."
"It’s going to affect my heart, and I’m going to die. And nobody’s talking about that."
Leslie recorded another colleague, Pfizer’s pharmaceutical formulation scientist Ramin Darvari, who raised the since-validated concern that repeat booster intake could damage the cardiovascular system:
Pfizer's pharmaceutical formulation scientist, Ramin Darvari, in 2021:
“They’re engineering it specifically for me to take the next one, so increasing my consumption."
“It’s going to affect my heart, and I’m going to die. And nobody’s talking about that.”
None of these claims will be shocking to hear in 2024, but it is telling that high-level Pfizer researchers were discussing these topics in private while the company assured the public of “no serious safety concerns” upon the jab’s release:
Vaccine for Children is a Different Formulation
Leslie sent me a little-known FDA-Pfizer conference — a 7-hour Zoom meeting published in tandem with the approval of the vaccine for 5 – 11 year-olds — during which Pfizer’s vice presidents of vaccine research and development, Nicholas Warne and William Gruber, discussed a last-minute change to the vaccine’s “buffer” — from “PBS” to “Tris” — to improve its shelf life. For about 30 seconds of these 7 hours, Gruber acknowledged that the new formula was NOT the one used in clinical trials (emphasis mine):
“The studies were done using the same volume… but contained the PBS buffer. We obviously had extensive consultations with the FDA and it was determined that the clinical studies were not required because, again, the LNP and the MRNA are the same and the behavior — in terms of reactogenicity and efficacy — are expected to be the same.”
According to Leslie, the tweaked “buffer” dramatically changed the temperature needed for storage: “Before they changed this last step of the formulation, the formula was to be kept at -80 degrees Celsius. After they changed the last step, we kept them at 2 to 8 degrees celsius,” Leslie told me.
The claims are backed up in the referenced video presentation:
I’m no vaccinologist but an 80-degree temperature delta — and a 5x shelf-life in a warmer climate — seems like a significant change that might warrant clinical trials before commercial release.
Despite this information technically being public, there has been virtually no media scrutiny or even coverage — and in fact, most were told the vaccine for children was the same formula but just a smaller dose — which is perhaps due to a combination of the information being buried within a 7-hour jargon-filled presentation and our media being totally dysfunctional.
Bohemian Grove?
Leslie’s 2-hour long documentary on his experience at both Pfizer and O’Keefe’s companies concludes on an interesting note: James O’Keefe attended an outing at the Bohemian Grove.
Leslie offers this photo of James’ Bohemian Grove “GATE” slip as evidence, left on his work desk atop a copy of his book, “American Muckraker”:
My thoughts on the Bohemian Grove: my good friend’s dad was its general manager for several decades. From what I have gathered through that connection, the Bohemian Grove is not some version of the Illuminati, at least not in the institutional sense.
Do powerful elites hangout there? Absolutely. Do they discuss their plans for the world while hanging out there? I’m sure it has happened. Do they have a weird ritual with a giant owl? Yep, Alex Jones showed that to the world.
My perspective is based on conversations with my friend and my belief that his father is not lying to him. I could be wrong and am open to evidence — like if boxer Ryan Garcia decides to produce evidence regarding his rape claims — and I do find it a bit strange the club would invite O’Keefe who is notorious for covertly filming, but Occam’s razor would lead me to believe the club is — as it was under my friend’s dad — run by boomer conservatives the extent of whose politics include disliking wokeness, immigration, and Biden (common subjects of O’Keefe’s work).
Therefore, I don’t find O’Keefe’s visit to the club indicative that he is some sort of Operation Mockingbird asset as Leslie tries to depict (however Mockingbird is a 100% legitimate conspiracy). I have also met James several times and even came close to joining OMG. While I disagreed with James on the significance of many of his stories — finding some to be overhyped and showy — I never doubted his conviction in them.
As for why Leslie’s story was squashed… all my sources told me it was to avoid jail time for Veritas executives.
Feel free to watch Leslie’s full documentary here and decide for yourself.
Fun fact — Justin Leslie was also the operative behind this mega-viral Project Veritas story where Pfizer’s director of R&D claimed the company was privately mutating COVID-19 behind closed doors:
BREAKING: @Pfizer Exploring "Mutating" COVID-19 Virus For New Vaccines
"Don't tell anyone this...There is a risk...have to be very controlled to make sure this virus you mutate doesn't create something...the way that the virus started in Wuhan, to be honest."#DirectedEvolutionpic.twitter.com/xaRvlD5qTo
“[…] our findings support the hypothesis that the intrauterine environment, particularly essential and non-essential metals, affect epigenetic aging biomarkers across the life course.”
Credit: 2024 Bozack et al.
“[…] our findings support the hypothesis that the intrauterine environment, particularly essential and non-essential metals, affect epigenetic aging biomarkers across the life course.”
BUFFALO, NY- March 12, 2024 – A new research paper was published inAging (listed by MEDLINE/PubMed as “Aging (Albany NY)” and “Aging-US” by Web of Science) Volume 16, Issue 4, entitled, “Associations of prenatal one-carbon metabolism nutrients and metals with epigenetic aging biomarkers at birth and in childhood in a US cohort.”
Epigenetic gestational age acceleration (EGAA) at birth and epigenetic age acceleration (EAA) in childhood may be biomarkers of the intrauterine environment. In this new study, researchers Anne K. Bozack, Sheryl L. Rifas-Shiman, Andrea A. Baccarelli, Robert O. Wright, Diane R. Gold, Emily Oken, Marie-France Hivert, and Andres Cardenas from Stanford University School of Medicine, Harvard Medical School, Harvard T.H. Chan School of Public Health, Columbia University, and Icahn School of Medicine at Mount Sinai investigated the extent to which first-trimester folate, B12, 5 essential and 7 non-essential metals in maternal circulation are associated with EGAA and EAA in early life.
“[…] we hypothesized that OCM [one-carbon metabolism] nutrients and essential metals would be positively associated with EGAA and non-essential metals would be negatively associated with EGAA. We also investigated nonlinear associations and associations with mixtures of micronutrients and metals.”
Bohlin EGAA and Horvath pan-tissue and skin and blood EAA were calculated using DNA methylation measured in cord blood (N=351) and mid-childhood blood (N=326; median age = 7.7 years) in the Project Viva pre-birth cohort. A one standard deviation increase in individual essential metals (copper, manganese, and zinc) was associated with 0.94-1.2 weeks lower Horvath EAA at birth, and patterns of exposures identified by exploratory factor analysis suggested that a common source of essential metals was associated with Horvath EAA. The researchers also observed evidence of nonlinear associations of zinc with Bohlin EGAA, magnesium and lead with Horvath EAA, and cesium with skin and blood EAA at birth. Overall, associations at birth did not persist in mid-childhood; however, arsenic was associated with greater EAA at birth and in childhood.
“Prenatal metals, including essential metals and arsenic, are associated with epigenetic aging in early life, which might be associated with future health.”
Read the full paper: DOI:https://doi.org/10.18632/aging.205602
Corresponding Author: Andres Cardenas
Corresponding Email:andres.cardenas@stanford.edu
Keywords: epigenetic age acceleration, metals, folate, B12, prenatal exposures
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About Aging:
Launched in 2009, Aging publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.
Please visit our website at www.Aging-US.com and connect with us:
National insurance, income tax, VAT, capital gains tax, inheritance tax… it’s easy to get confused about the many different ways we contribute to the cost of running the country. The budget announcement is the key time each year when the government shares its financial plans with us all, and announces changes that may make a tangible difference to what you pay.
But you’ll likely be hearing a lot more about taxes in the coming months – promises to cut or raise them are an easy win (or lose) for politicians in an election year. We may even get at least one “mini-budget”.
If you’ve recently entered the workforce or the housing market, you may still be wrapping your mind around all of these terms. Here is what you need to know about the different types of taxes and how they affect you.
The UK broadly uses three ways to collect tax:
1. When you earn money
If you are an employee or own a business, taxes are deducted from your salary or profits you make. For most people, this happens in two ways: income tax, and national insurance contributions (or NICs).
If you are self-employed, you will have to pay your taxes via an annual tax return assessment. You might also have to pay taxes this way for interest you earn on savings, dividends (distribution of profits from a company or shares you own) received and most other forms of income not taxed before you get it.
VAT and excise duties are taxes on most goods and services you buy, with some exceptions like books and children’s clothing. About 20% of the total tax collected is VAT.
3. Taxes on wealth and assets
These are mainly taxes on the money you earn if you sell assets (like property or stocks) for more than you bought them for, or when you pass on assets in an inheritance. In the latter case in the UK, the recipient doesn’t pay this, it is the estate paying it out that must cover this if due. These taxes contribute only about 3% to the total tax collected.
You also likely have to pay council tax, which is set by the council you live in based on the value of your house or flat. It is paid by the user of the property, no matter if you own or rent. If you are a full-time student or on some apprenticeship schemes, you may get a deduction or not have to pay council tax at all.
This article is part of Quarter Life, a series about issues affecting those of us in our 20s and 30s. From the challenges of beginning a career and taking care of our mental health, to the excitement of starting a family, adopting a pet or just making friends as an adult. The articles in this series explore the questions and bring answers as we navigate this turbulent period of life.
Put together, these totalled almost £790 billion in 2022-23, which the government spends on public services such as the NHS, schools and social care. The government collects taxes from all sources and sets its spending plans accordingly, borrowing to make up any difference between the two.
Income tax
The amount of income tax you pay is determined by where your income sits in a series of “bands” set by the government. Almost everyone is entitled to a “personal allowance”, currently £12,570, which you can earn without needing to pay any income tax.
You then pay 20% in tax on each pound of income you earn (across all sources) from £12,570-£50,270. You pay 40% on each extra pound up to £125,140 and 45% over this. If you earn more than £100,000, the personal allowance (amount of untaxed income) starts to decrease.
If you are self-employed, the same rates apply to you. You just don’t have an employer to take this off your salary each month. Instead, you have to make sure you have enough money at the end of the year to pay this directly to the government.
The government can increase the threshold limits to adjust for inflation. This tries to ensure any wage rise you get in response to higher prices doesn’t lead to you having to pay a higher tax rate. However, the government announced in 2021 that they would freeze these thresholds until 2026 (extended now to 2028), arguing that it would help repay the costs of the pandemic.
Given wages are now rising for many to help with the cost of living crisis, this means many people will pay more income tax this coming year than they did before. This is sometimes referred to as “fiscal drag” – where lower earners are “dragged” into paying higher tax rates, or being taxed on more of their income.
National insurance
National insurance contributions (NICs) are a second “tax” you pay on your income – or to be precise, on your earned income (your salary). You don’t pay this on some forms of income, including savings or dividends, and you also don’t pay it once you reach state retirement age (currently 66).
While Jeremy Hunt, the current chancellor of the exchequer, didn’t adjust income tax meaningfully in this year’s budget, he did announce a cut to NICs. This was a surprise to many, as we had already seen rates fall from 12% to 10% on incomes higher than £242/week in January. It will now fall again to 8% from April.
While this is charged separately to income tax, in reality it all just goes into one pot with other taxes. Some, including the chancellor, say it is time to merge these two deductions and make this simpler for everyone. In his budget speech this year, Hunt said he’d like to see this tax go entirely. He thinks this isn’t fair on those who have to pay it, as it is only charged on some forms of income and on some workers.
I wouldn’t hold my breath for this to happen however, and even if it did, there are huge sums linked to NICs (nearly £180bn last year) so it would almost certainly have to be collected from elsewhere (such as via an increase in income taxes, or a lot more borrowing) to make sure the government could still balance its books.
There are likely to be further tweaks to the UK’s tax system soon, perhaps by the current government before the election – and almost certainly if there is a change of government.
Wealth taxes may be in line for a change. In the budget, the chancellor reduced capital gains taxes on sales of assets such as second properties (from 28% to 24%). These types of taxes provide only a limited amount of money to the government, as quite high thresholds apply for inheritance tax (up to £1 million if you are passing on a family home).
There are calls from many quarters though to look again at these types of taxes. Wealth inequality (the differences between total wealth held by the richest compared to the poorest) in the UK is very high (much higher than income inequality) and rising.
But how to do this effectively is a matter of much debate. A recent study suggested a one-off tax on total wealth held over a certain threshold might work. But wealth taxes are challenging to make work in practice, and both main political parties have already said this isn’t an option they are considering currently.
Andy Lymer and his colleagues at the Centre for Personal Financial Wellbeing at Aston University currently or have recently received funding for their research work from a variety of funding bodies including the UK's Money and Pension Service, the Aviva Foundation, Fair4All Finance, NEST Insight, the Gambling Commission, Vivid Housing and the ESRC, amongst others.
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