The brief on Tax Policies prepared by Michael Webster and discussed during our study group session last night can be found under Pages/Study Groups/Tax Policies in the right hand column index. Michael Barker who participated has added the following comments:
I thought the evening?s discussion went well though one thing we did not really explore was recouping public money thrown at banks to bale out their naked speculative greed and incompetence nor a possible taxation vis.à.vis joint-stock banks, investment banks, hedge funds and the like, and the huge quantity of daily transactions. I feel sure that there is scope for a small % take on such transactions, small % enough not to cause too much of a fuss from the money-makers but when the public see how huge profits are again being made by Goldman Sachs and the like, it would be popular with the electorate and seem like a move to make capitalism generally more fair for the common good and contribute to the pot. Given my ignorance of economics, I am probably the least useful member of the group to contribute to the debate, it is mostly my gut reaction.
I do think that there is a case for raising the lowest band of income tax to encourage people either on low incomes or on welfare support to move on to self reliance, small entrepreneurship and so on, and it would have a beneficial knock-on effect enabling them to climb up the ladder AND there should be made available a system of small ?seeding? loans which conventional banks avoid. Sadly it is too often not the indigenous British ? feather-bedded by the long-standing system of too-freely-handed-out benefits – but the immigrants, seeking to better themselves, who seem to have taken the initiative (though of course there also the free-loaders who take advantage of lax systems ? much in need of tightening up). If the ingrained British distaste latterly for being servants can be overcome (odd really, we all serve some master or other), the idea of giving tax breaks to not only well-off employers – but also the comfortably off – to seek staff, that seemed to me a good idea BUT given that many retired people who would probably be available but are on pensions though active and healthy (and probably a bit bored) – they would need to be not unduly penalized by the tax system, otherwise the incentives to resume working would be completely lost.
Clearly the Conservatives will have to bite the bullet at an early date – making it absolutely clear – without fudging the issues as the Socialists have ? and spell out the depth of the problem of debt in which Britain is mired and encourage a back-to-the-wall spirit ? the will to pull together and make some sacrifices ? promoting a new mood of freeing the people from state interference and nannying. It worked in the last war, this time the enemy is not Nazi aggression but a financial mess which affects us all and needs to be resolved with firmness. Not an easy task, there will be lots of backlash and whining. One can only hope that Cameron has the backbone to weather the forthcoming storms.
I am also convinced that the income tax system should be much more evenly graded (like the French system) to be put into a much higher bracket which reduces the incentive to succeed. As for inheritance tax, I rather agree with Michael Webster that the threshold should be raised substantially. It does not bring in that much revenue and is seemingly expensive to manage; philosophically it is perhaps a socialist-envy issue and I dare say rather outdated.
What does seem to me important is that there should be a sort of National Plan (albeit it sounds rather like Socialism) ? clearly laid out:- this is the problem we all face, these are the proposed solutions. Put to the people ? probably best in a Referendum ? they will respond positively I think to the need for belt-tightening. If not there will have to be another election and another mess. What does need to happen in my view is that systems should be made simpler and bureaucracy reduced.
Voilà – my thoughts for whatever they are worth.
Best wishes,
Michael
I also see that it is the intention (of the new government) to raise Capital Gains Tax more to the level of Income Tax to eliminate arbitrage between the two. This was the point I was trying to make during our debate.
Michael
Whether or not inheritance tax brings in much revenue, is expensive to manage in comparison with its tax take or indeed is a socialist -envy issue, the Conservatives in coalition government have now seemingly decided, given the budget deficit presumably, to go back on their former commitment to raise the inheritance tax threshold.
For completeness, I have tried to summarise the conclusions we drew from our discussion on Tax Policies:
1. Raising the tax threshold on the first £10,000 of earned income as proposed by the Liberal Democrats was considered fair to protect low earners and encourage others to move off benefits and find paid employment.
2. Given the state of the economy it was felt premature to reduce the recently introduced top rate tax of 50% on incomes but to plan to reduce at a later date to encourage top earners.
3. There was support for a tax reduction on mortgage interest to encourage home ownership and particularly first time buyers. This could also apply for a mortgage on a second home, where the owner in fact lived in but rented his or her primary residence (common on the Continent).
4. Corporate taxes should remain at market competitive levels with e.g. no harmonisation across the EU. Such tax policy should encourage profit re-investment to develop export business and R&D.
5. VAT or sales tax is a very efficient way of increasing tax revenue from consumption and should be increased given the state of the economy and the current lower level compared with the Continent. Lower income earners consume proportionally more of their income but at least would have more in their pockets to start with from their first £10,000 of earnings being tax free.The wealthy capitalists, bankers and so-called non-Doms choosing London as their home and already generating around a quarter of government tax revenue are also major consumers.
6. Capital gains tax should allow for accumulation of inflation and ,therefore, be calculated in real terms.
7. A majority of participants (but not all) were in favour of raising the controversial inheritance tax threshold to £1 million (or even £10 million), with concern over the increasing concentration of wealth in the hands of the few.
8. A Tobin tax to discourage short term financial transactions from destabilising the economy would only make sense if applied globally but seemed difficult to control/apply in practice given the huge volume of speculative and hedge fund movements.
9. Taxes on alcohol and cigarettes do not seem to alter social behaviour and remain an effective way of raising revenue.
10. Not everyone was impressed by the fairness or effectiveness of the London congestion charge although others saw benefits from its application of the capitalist principle of price vs (traffic) demand to generate revenue whilst reducing overall traffic and the associated pollution.
Rodney
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