Aug 2008 20

Equality – the right way and the wrong way4

George Osborne made some interesting comments on the Today Programme this morning about equality and tax. Further to Ivan Lewis’ misguided article in the Sunday Times arguing for higher taxes on the wealthy, he made the very good point that the way to help the poor is not to drag down the rich.

All too often the debate about equality, be it financial, social, educational or anything else, is twisted into a forum for what is at best over simplistic, poorly thought out ideas and at worst old-fashioned jealousy.

Osborne is right to say that if you want to help improve the lot of an office cleaner, you do so by cutting his or her taxes, not by beggaring the directors of the office the cleaner works in. If you start slapping extra super taxes, windfall taxes, private plane taxes, capital gains taxes, inheritance taxes and all manner of other taxes on those directors, they will either lose their ability to invest in the company or move the company abroad to find a country that actually wants their industry and profitability. Result = the cleaner is out of work.

Unfortunately, the tax raisers in this country have time and again set out to do what they think is the right or "progressive" thing by hiking taxes, and turned a blind eye to the fact that the people who suffer most, lose their jobs quickest and are let down as a result are the poorest. They might have had the best of intentions, but they have been doing the wrong thing – and some of the most vulnerable people in our society have suffered as a result.

If you cut taxes on goods, income and basic living essentials, which are the factors that contribute to the poor paying such a higher percentage of their income in tax, then you would genuinely make a difference to peoples’ lives. Increasing the basic allowance for income tax would be a great way to start.

Osborne’s clearly starting to warm to the theme that tax cuts can be used for social good and to help people – let’s hope he follows it through into genuine tax cuts, tax simplification and a reduction in the overall burden of tax. With the Lib Dems recently starting to talk about the harm done by the excessively high tax burden, it could be a very interesting competition to watch between the two.

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  • Hardeep_Singh

    The simple keyword in the above article is “jealousy”, how very telling.

  • http://www.inheritancetax.uk.com Grumpy tax payer

    This article hits the nub of the problem with so much of our tax system. Knee jerk reactions to apparent injustices offer terribly simplistic solutions that almost always suffer from the law of unintended consequences. This results in an ever more complicated tax system that actually adds to the many different ways people can mitigate their tax bill using “loop holes” or the fallout from the “unintended consequences”. Alternatively added tax burden stifles initiative and investment. Both the media and politicians get caught up in producing emotional that catch the eye, but do not address the problem. If life was that simple the problem would have been solved before.
    We do need tax cuts and a simpler tax system, the only benefactors at the moment are politicians, the Treasury, tax lawyers and accountants.

  • Hardeep_Singh

    “politicians, the Treasury, tax lawyers and accountants.” – the new priesthood, ah!

  • Tim

    It would be nice if people working full time on the minimum wage didn’t find their already far below average income greatly exceeding the tax-free allowance (which is subject to NI, anyway, I believe).