High taxes costing Government support

An interesting piece by Rupert Darwall in today's Wall Street Journal explains how tax has once again become political centre-stage...

"The first signs of a taxpayer revolt came last October. With Mr. Brown poised to call an election to capitalize on his momentum in the polls, the Conservatives announced they would exempt the first £1 million (U.S. $1.95 million) from inheritance tax. It sent an electric shock through the electorate. Mr. Brown called off the election and his poll numbers tanked.

"The tipping point came in March. Through the winter, Labour had clawed back some of the Conservatives' poll lead. Then came the annual budget. Steep hikes in annual car taxes – dressed up as measures to help cool the planet – took the levy on some family cars up to £400 a year. Labour's ratings started to slide. They went into free-fall when people realized that Mr. Brown's abolition of the 10% starter rate of income tax actually had the effect of raising taxes on the lower paid.

"Something big is happening in British politics: Taxation has re-emerged center stage. And as an issue, taxes favor the Tories. Conservative leader David Cameron was quick to exploit the change in the public mood, giving a speech with the Thatcherite theme of making government live within its means. And the policy lessons come more naturally to the Conservatives. Instead of squeezing the tax base and (as the Laffer curve predicts) collecting less revenue than you'd hoped, do the opposite. As happened under Conservative governments in the 1980s, tax reforms that cut people's marginal rates and create far more winners than losers are good for the economy – and for winning elections."

...and gives the Tories some apt advice: avoid green taxes:

"Harder for the Conservatives to square with voters is their support for green taxes. The public is beginning to realize that there is no pain-free path to a low-carbon nirvana. Unlike Labour, though, the Conservatives are in the happy position of not having to reverse tax increases they've already announced. Raising the car tax cost Bill Clinton his first re-election as Arkansas governor. Having been forced to make concessions on the 10% band, Labour will also have to draw the sting of its higher car tax. While politically necessary, such concessions won't help the prime minister. Voters can see the only reason the prime minister is responding to their concerns is because he is unpopular. Reward Gordon Brown with another term, and their leverage is gone."

With the latest polls showing that only 2 per cent think they don't pay enough tax, the political party that sets out a plan to rein in government spending and substantially reduce the overall burden of tax will reap the electoral rewards.

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