John O’Connell wrote a letter to the Times in response to an article by Paul Johnson of the Institute for Fiscal Studies, who argued that the tax take may need to go up to close the deficit. John said that it would be far better to cut out wasteful spending, and to have a re-think about what the Government does.
Sir, Paul Johnson’s article “Whichever way you cut it, taxes need to rise”, (Nov 7) is right to highlight the limp prognosis for tax receipts but wrong to suggest that this means that rates need to rise. High tax rates are associated with sluggish economic growth; and as labour and capital mobility increase, that relationship is strengthening. Far from being too low, taxes are too high and we need to cut and simplify them to compete not only with the emerging economies that are catching up with us but also with the low-tax economies which have already overtaken ours. For that to happen we need a war on wasteful spending and a discussion about the functions of government. We need to reduce spending, not hike taxes.
Director, TaxPayers’ Alliance