I have always believed that a low tax economy is always going to be more successful than a high tax one. We now seem to be in a period where all three main political parties seem quite happy to be entering a competition to see who can come up with the whackiest ideas for imposing new taxes on a population which is heartily sick of ever higher, more complicated taxes. Some have even bought the case for higher taxes, which, when you think about it, is hardly surprising. Why? Because there is virtually no one putting the case for simpler, lower taxes.
Even ConservativeHome’s Tim Montgomerie has today come out in favour a Mansion Tax. To say I am shocked is an understatement. Apparently imposing a Mansion Tax would demonstrate that the Conservative Party has moved on. Toby Young has defenestrated Tim’s arguments in a very strongly argued (and worded) blogpost HERE.
But this goes wider than whether you support a mansion tax or not. We now hear that the LibDems want a Mansion Tax Plus, which would levy a tax on anyone who owns multiple properties with a cumulative value of £2 million. Great idea. Let’s kill off the Buy to Let market in one stroke. Remarkably the LibDems now also believe that one’s cumulative wealth should also be taxed annually. Jewellery, cars, book collections, art. The taxman would be given the right to enter your home to see if you were on the fiddle. How very liberal.
Stamp duty is licensed robbery. Air Passenger Transport duty is a tax on the aspirational poor. Council tax has become totally unreasonable. Business rates are threatening the viability of all sorts of businesses. Inheritance tax is a tax on death and a pernicious form of double taxation and success. It acts as a punishment for not spending all your money while you are alive and disincentivises people from handing it down to their children.
Green taxes, fizzy drink taxes, obesity taxes. Will it never end? One day we really will wake up and find that it is just not worth getting out of bed. We already have high marginal tax rates. Let’s not kid ourselves, National Insurance is a tax in all but name. We now tax people who earn £34,370 or more at 40%, with NI being charged at 13% up to a £40,070 limit. So if you are earning between those two figures you are paying 53% of your income to the taxman. It was never meant to be like this.
Far from simplifying income tax, this government has overly complicated it. Few people could tell you how the system works. Gordon Brown’s tax code amounted to 10,000 pages. Great for accountants who make huge amounts of money out of those of us who simply can’t get to grips with it ourselves. Has it been reduced much over the last two and a half years? I’m not so sure, but I am sure someone will tell me.
Rich people should indeed be taxed fairly. I would happily see a reform of council tax with the bands adapted to reflect modern day property values, but if you tax the rich until the pips squeak, as Denis Healey delighted in doing, you suddenly find that the goose has flown away to lay the golden eggs elsewhere. I do not want to live in a society which thinks that the taxman can have my grandmother’s jewellery in his sights. How much tax do we actually think the rich should pay? More than 7% stamp duty on house purchases? Really? And then we expect a further £30,000 a year? This is madness. The top 1% of earners now pay nearly 26% of the total income tax take – that’s more than double what it was when Margaret Thatcher came to power. When will the left be satisfied? When it is over 30%? 40%? Higher?
I regard it as deeply immoral for the state to take more than 50% of anyone’s income. We are getting to a point where that will be seen as the norm.
On the plus side, It is a great thing that by 2015 anyone earning £10,000 or less will be taken out of the income tax system altogether, but what isn’t generally known is that anyone earning above £7605 will still be paying National Insurance. Wouldn’t it be better to rectify that anomaly rather than create a rather cumbersome 10p tax rate which will, according to Mr Miliband, only cover a £1,000 band. It may not be politically sexy, but it would be the right thing to do if we want to help the low paid.
People on the right need to start evangelising about the benefits of lower, simpler, flatter taxes, because we are in a political period where those arguments are largely going by the board. I’m not a tax flat earther who believes in no tax, but I am certainly of the view that individual tax payers are better at making informed spending decisions than the man in Whitehall is.
UPDATE 4.50pm: And as if on cue, the New Statesman now suggests a Land Value Tax.
Any others, while we’re at it?