The UK’s pasty (PASS-tee) tax battle is a good story. But, moving beyond the humor, it has considerable significance.
First the story:
Taxing the pasty has created a major flap in the UK. The pasty looks like meat in a pastry pouch, high in fat, maybe more than 500 calories, a take-out hand held basic. Because pasties cool before people buy them, they had been exempt from the 20% hot take-out sales tax. But not any more.
Part of the uproar relates to the current British government’s “upper crust” image as people who would view a pasty with distain. Pasty supporters say the Conservative government is out of touch. Pasties are the working man’s lunch.
Really though, the story is about…
- How to generate revenue. The UK has .7% economic growth for 2011, 8.4% unemployment and a massive deficit. Hoping to maintain London’s allure as a financial center, they have lowered recently elevated tax rates for the most affluent. Called the granny tax, pension exemptions have been diminished. The pasty tax is expected to raise $167 million.
- Whether you want a regressive tax. Defined as taxes that take a higher per cent of the earnings from those who earn less rather than those who earn more, a regressive tax is usually a sales tax. As a percent of the price, it is a different proportion of each purchaser’s income. By definition, the pasty tax is regressive.
- And, KISS (Keep It Simple, Stupid). This is the law: “the tax now applies to food ‘heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and which is above that temperature’ when purchased.” One news article asked if “the buyer could ask to have it cooled to get it tax-free?”
A final thought: The National Federation of Fish Fryers was delighted.
My sources: An AP article on the pasty tax. BBC articles here and here on UK economic stats. A Telegraph article on the granny tax.