By Kieran Neild-Ali, grassroots assistant
Every year, certain sanctimonious millionaires, celebrities and professional activists demand that people should pay more tax. This January, a group of worthies led by Simon Pegg signed an open letter calling for tax increases. Clamouring to pay more tax gives rise to an obvious question: why don’t rate-risers follow up on their rhetoric with action?
This was put to tax-hike advocate Owen Jones in a debate with Douglas Carswell. When asked whether he would personally give more of his income to the treasury, he failed to put his money where his mouth is. Rather, he insisted that everyone should pay more tax.
But why should personal responsibility be utterly absent? Why should it be all or nothing? Surely, if Jones, Pegg and thousands of others would have us believe the government is in desperate need of more cash (although the record levels of public spending would surely suggest otherwise), every pound would make a difference? They are ‘the rich’ after all, so why not dip into their own pockets? Instead of simply sending a cheque to HMRC, they want everyone else to do it for them.
Residents living in Westminster can choose to pay the council extra funding on top of council tax. A community contributions scheme allows individuals to send off more money to the taxman instead of forcing everyone to chip-in with blanket rate-rises. This option is already available to everyone on a national scale, because HMRC accepts financial donations. But that’s not the point, they say. It should be done through the tax system. Very well. If a simple donation option was added to tax returns or NIC forms, individuals who believe we are not taxed enough already could have their fill of donating more to the Treasury. It would not be too dissimilar to a gratuity option on a restaurant bill, leaving the onus on the individuals to make the transaction. If you think your waiter was excellent and deserves more than his wage, you leave a tip. You don’t run around the restaurant bullying other diners to cough up for you.
When do-gooders ‘ask’ for the people to pay more tax, they do so knowing that taxpayers have no choice - you either pay or you are imprisoned. Voluntary contributions would have two key benefits. Those who think they are able to bear a rise in their tax burden can pay more, whilst those who cannot afford a rise are not forced to contribute more.
Polling makes clear that tax rises would be deeply unpopular. This is hardly surprising, given that the tax burden is at its highest for 50 years, and is likely to increase. It is insulting to assume that the public should be expected to silently stomach any tax rises, especially given the economic hit most will be taking due to the coronavirus crisis. Individuals rightfully want to keep their hard-earned money in their pocket. That’s demonstrated by the lack of people who are willing to donate money to HMRC. Between 2000 and 2017, only two-hundred people voluntarily gave 'gifts' to the UK government. As it turns out, people other than Pegg and co apparently don’t like giving their cash for politicians to waste!
Higher taxes are not a panacea for society's ills, as rate-rise advocates might have you believe. Lower taxes increase tax revenue and drive the economy. Optimal low tax rates allow key services to be paid for while businesses grow and increase the number of people eligible to pay the rate of tax. This is more commonly known as the Laffer Curve. Lower tax rates maximise revenue to pay for public services without scaring away investment and growth. Taxing individuals and business until the pips squeak is not the answer to funding services. This is explained in our paper on tax reforms for the coronavirus recovery, which shows that major reductions in certain tax rates could cut the average wage bill by 38 per cent, put £1,622 in workers’ pockets and boost economic growth, capital investment and the housing market. All of which would be a boom for the recovery and the public finances.
On top of a voluntary tax contribution system, root and branch reform of the existing tax code is also needed. At present, our tax code is a myriad of convoluted regulations, accumulating into a mind numbing 21,624 pages. Tax is a complicated affair, and requires a common sense approach to bring it back down to earth. A single income tax would remedy the existing mess by taxing income at a flat rate. This would mean abolishing eight other taxes and raising the personal allowance; streamlining the tax code and producing optimal returns.
With taxation at its highest since Harold Wilson was in Number 10, the public cannot afford more of their money to be solicited and squandered by the state. Simplifying the tax code and introducing a single income tax would incentivise growth and reduce the burden on millions of Brits. In the meantime, those few virtue-signallers who want higher taxes for purely ideological reasons can step up to the plate and voluntarily donate their own money into the government's coffers.