Tax is Evil, isn't it...?

One of the enduring legacies of the 1980s is the Thatcherite focus on cutting or lowering taxes. According the her doctrine, if governments take less of our wages as tax income, the economy will flourish and all will be for the best in the best of all possible worlds. Not that Mrs Thatcher ever achieved her Holy Grail of lowering taxes. The percentage of the countries wealth taken in taxes by the UK government (the "tax take") has varied in the 35% - 40% range for the past 100 years, only going above or below in exceptional circumstances (war, depression). The monetarist initiatives of the '80s did nothing to alter that fact: the tax take actually rose during the Thatcher era.

Even so, it has somehow become an orthodoxy, particularly among Conseratives, that not paying taxes is a "good thing", and a goal to be pursued by governments and individuals alike. 

Yesterday I was intrigued to come across two references on the web to the payment of taxes, and why it might actually be a good thing to pay our taxes. This poster tells a simple truth...

... a truth that seldom gets broadcast. The poster is from the website of Tax Research UK, which is dedicated to explaining what taxes are and why it is beneficial to us all to pay our share of the taxes imposed by society. The website has a number of similar posters, but even more interestingly it promotes a philosophy of fair taxation and "Tax Compliance". Among many other things, it explains why "Tax Compliance" is a good thing and "Tax Evasion" and "Tax Avoidance" are bad things for the economy, society and democracy. 

These are truths, truisms even, that many of us have always adhered to, but which get precious few airings in today's political climate, so I think it is certainly worth a visit. Or two.

At the same time I read this excellent article by Zoe Williams in the Guardian on Tax Avoidance and how it is not just illegal and unjust, but how the procedures used by the HMRC favour the rich, giving them more license to escape paying legitimate taxes than those less well off.  In other words, not only are the rich better off by definition, but they have more scope to avoid taxation, and have less likelihod of being pursued by the Revenue if they do attempt avoidance. In fact it is more likely that the poorer actuall overpay, while the rich underpay.

 In the coming years we can be sure that theTory philosophy will to cut services rather than raise taxes. The approaching war for our schools and hospitals demands that we have the ammunition to fight the instinctive Conservative bias against proper levels of taxation to fund public services. IMO, the information on these sites is  a valuable contribution to that debate.

All changed, changed utterly, a terrible beauty is born....or is it?

UK politics, we are being told, has changed beyond recognition. The coalition of Tories and Liberal Democrats is historic and things will, if we believe the commentators, never be the same.

Whether you buy that analysis, and whether you think that the Tory/Lib Dem alliance is a good or bad thing, or if it will work, is a matter of choice. At the moment nobody really knows what is going on, how the arrangement will work out, and what impact it will have on the parties and the country.

But one thing hasn't changed, and that's the ability of our Liberal Democrat friends to fool themselves and the public about their "caring" policies. During the negotiations with David Cameron the Lib Dems made a big thing about protecting their policy of raising tax thresholds above £10,000 "to help the very poorest", which is, on the face if it, a laudable aim.

But it seems that they have got their sums wrong, or their policy. Tim Horton and Howard Reed of the Fabian Society have conducted an investigation into the policy and its effects for the blog "Left Foot Forward".  

Horton and Reed conclude that the policy fails by;

- Ignoring the poorest

- Giving less to poorer households and more to richer households

- Increasing inequality between the bottom and the middle

According to their report;

the Liberal Democrats’ proposed tax cut fails the fairness test.

Spending £17 billion on increasing the personal allowance is a very poor way to help those on low incomes. It could actually harm the welfare of low-income households by increasing inequality and relative poverty

In fact the Fabian team conclude that the policy, which costs around £17 billion, is really a mechanism to distribute money from the well off to those on middle incomes. The bottom 10% of earners will benefit least of any earnings group.

Left Foot Forward has a more detailed report ....

£17 billion pounds is not peanuts, and already the Conservatives admit to having a problem about how to find the cash to pay for the Lib Dems promise.

I suspect the Tories will be quite happy that the policy is not nearly as redistributive as is claimed. It's the low earners (and those who care about them) who voted Lib Dem on the strength of this promise of improvement in their finances that are bound to be disappointed when they open their pay packet after the first coalition budget and find that, in fact, not a lot has changed.