Taxes can still rise after the election

April 29, 2015 11:06 AM

Have you heard of this magic trick?

Someone puts a ping pong ball under an upside-down mug and then says to you:
"I can remove the ping pong ball without touching the cup."
"Really?" You ask.
"Yeah, I've done it. Check now!" They reply.
At which point you pick up the mug and they grab the ping pong ball.

Technically, they did manage to remove the ping pong ball without touching the mug. The unspoken promise was it would be done through magic.

Technically, both Labour and the Conservatives have now pledged that there will be no increase in VAT, National Insurance or Income Tax for 5 years. The unspoken fear is that we'll pay the same amount in tax then that you do now.

Fiscal drag or regressive taxation are both possible after the election

But, as my colleague Alex Wild recently wrote in his article for ConservativeHome you can't be fooled into thinking that this means your tax contributions wont go up. Income taxes, National Insurance and VAT only account for 60% of total tax revenue. There's plenty of room for 'regressive' tax increases, ones that take no account of your income, or how able you are to pay.

For example, fuel duty:

Despite fuel duty being frozen over the last few years, taxes still make up almost 70 per cent of the cost of filling up. The poorest 20 per cent of households spend almost 4 per cent of their income on motor fuel taxes and vehicle excise duty compared to 2.3 per cent for the richest 20 per cent.

(Alex Wild for Conservative Home)

There's also the very real fear of 'fiscal drag'; people being sucked into higher and higher rates of income tax bands through inflation, as has happened in the past 20 years.

In summary, if we find out in 5 years time that citizens are paying more in taxes than before we shouldn't be surprised. There's plenty of other taxes that might increase.

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