David Laws calls for tax cuts

November 25, 2010 3:47 PM




Former Chief Secretary to the Treasury, Liberal Democrat MP David Laws has called on the Government to cut taxes toward the end of the Parliament. Mr Laws was replaced by Scottish MP Danny Alexander when he resigned after becoming embroiled in an expenses scandal related to a claim for rent on his second home. In an interview with the Daily Telegraph he argued that although the deficit is the priority now, the tax burden will seem increasingly unacceptable as public finances recover:
“Once the £10,000 personal allowance is delivered, there will be a strong case for looking at the burden on those in employment on low and middle incomes. After tax, national insurance, graduate contributions, and pension payments, some of these individuals will face marginal deduction rates of almost 50 per cent. That may be necessary in the tough times, but it will hardly be acceptable once the deficit is eliminated.”

He’s right to highlight the unacceptability of such high marginal tax rates. As our paper by Dr Jonathan M Scott and Matthew Sinclair shows, high tax rates choke off entrepreneurialism and destroy jobs and wealth, just the things we should be encouraging to help strengthen the economy and secure the recovery. So high tax rates should be cut now, not in the future: it’s still doubtful whether the 50 per cent tax band has raised any money at all once you include the individuals who have worked less, rearranged their finances or simply emigrated to avoid it.





Former Chief Secretary to the Treasury, Liberal Democrat MP David Laws has called on the Government to cut taxes toward the end of the Parliament. Mr Laws was replaced by Scottish MP Danny Alexander when he resigned after becoming embroiled in an expenses scandal related to a claim for rent on his second home. In an interview with the Daily Telegraph he argued that although the deficit is the priority now, the tax burden will seem increasingly unacceptable as public finances recover:
“Once the £10,000 personal allowance is delivered, there will be a strong case for looking at the burden on those in employment on low and middle incomes. After tax, national insurance, graduate contributions, and pension payments, some of these individuals will face marginal deduction rates of almost 50 per cent. That may be necessary in the tough times, but it will hardly be acceptable once the deficit is eliminated.”

He’s right to highlight the unacceptability of such high marginal tax rates. As our paper by Dr Jonathan M Scott and Matthew Sinclair shows, high tax rates choke off entrepreneurialism and destroy jobs and wealth, just the things we should be encouraging to help strengthen the economy and secure the recovery. So high tax rates should be cut now, not in the future: it’s still doubtful whether the 50 per cent tax band has raised any money at all once you include the individuals who have worked less, rearranged their finances or simply emigrated to avoid it.


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