Tax changes of the wrong sort

The coalition has a total of 119 tax cutting measures either planned or implemented, but this number is dwarfed by that for tax rises - an eye-watering 299

by Rory Meakin on 31 January 2013 10:59

On Tuesday the TaxPayers’ Alliance published a report detailing every change to tax policy since the 2010 general election, both planned and already implemented. The figures are startling. While the Coalition has a total of 119 tax cutting measures planned or implemented, this number is dwarfed by that for tax rises -- an eye-watering 299.

These figures show for the first time how the tax system is actually changing, looking beyond the simple totals for the amounts raised by the various taxes. They do not account for inflation and they represent the number of policy changes. A rise in National Insurance, or a cut in Corporation Tax, for example, involve much larger sums of money and affect a much larger numbers of taxpayers than changes such as the exclusion of certain car security enhancements from Company Car Tax, if they are required by a job.

But taxpayers will recognise the unpleasant sensation in their pockets, that feeling of the Chancellor’s wandering fingers taking something away more than twice as often as they leave something in.

Economists, too, will spot the parallels with the steady increase in the total tax take, up from £513 billion in 2009-10 to a projected £671 billion in 2015-16. Even after adjusting for inflation that’s an increase of 15 percent.

Draining all that extra money out of the economy isn’t costless, as the up-down-up-down economic data of the past few years has shown. As well as leaving less money to spend in the pockets of taxpayers and less for businesses to invest, high taxes cripple incentives. High taxes are the Government’s way of telling people to work less and scale back their investment projects.

The tax system isn’t the only thing throttling the economy and holding it back from recovery. But it’s arguably the most important. We’ll continue to suffer from lacklustre growth as long as taxes remain as punitive and complicated as they are today.

The case for lower taxes has been comprehensively detailed in the 2020 Tax Commission’s recommendations, which show the way out of the current quagmire with a thorough root-and-branch rethink of the whole tax system.

Once the TaxPayers’ Alliance reports that the number of tax cuts is bigger than the number of tax rises, we’ll probably be moving in the right direction and the overall burden will probably be easing off.

But with 45 coming tax hikes already planned for before the next election, against just 10 cuts, it looks like we’ll be waiting a long time for that.

blog comments powered by Disqus