Tax Burden

May 17, 2017 10:34 AM

Despite some efforts to cut individual taxes, the tax burden is on the rise. Last year the tax burden was higher than it was in any year under the last labour government and is projected to hit levels unseen for half a century by 2021-22.

The Conservatives have been in power for the last seven years (five of them, admittedly, as senior coalition partners) and despite claiming to be a ‘low tax party’ they have shown considerable reluctance to actually cut taxes. Too often political debate is framed in narrow, transactional terms, with many questions asked about how much revenue is raised or foregone by a particular rise or cut. But politicians spend very little time explaining the virtues of a low-tax economy, quite possibly because they don’t believe in them.

There has been considerable variation in headline tax rates since the 1970s. The top rate of income tax has ranged from 40 per cent to 83 per cent, the standard rate of VAT from 8 per cent to 20 per cent, employees’ national insurance from 5 per cent to 12 per cent and corporation tax from 52 per cent to 19 per cent. Despite this, the tax burden in 2017-18 is the same as it was in 1970-71.

Tax pledges so far have centred on cuts, freezes or increases to specific taxes. A more honest approach would be a long-term commitment to cap the tax burden with the long term aim being to keep it under one-third of national income.

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