One of this Government's most pernicious fictions is that it is possible to "Target" tax at people who are unfairly avoiding tax, not paying enough, are politically unpopular, like Private Equity Barons, or in the case of Climate Change Levy (0.15% of revenues) or Landfill tax (0.2% of revenues), not paying externalities associated with the business.
Leaving aside the administration of the tax, who actually pays?
Starting at the top:
- 33% of tax receipts are from income tax, paid for funnily enough by individuals who have a job - despite the Government's best efforts, this remains most of us, for the time being.
- 21% from NI contributions. As far as the employee is concerned, this is another income tax. The employer nets his contribution against the budget for employing that individual. Employer's NI contributions are therefore paid by the employee in the form of lower wages.
- VAT, 18% of receipts is paid by the consumer either at the point of purchase, or in the form of higher priced goods as companies can pass any taxes they incur on to their customers.
- Corporation tax, 10% of receipts, is paid by employees in the form of lower wages. Lefties for whom a stick wasn't grown they couldn't grasp the wrong end of, believe it is a tax on company profits. It is not.
- 6% come from fuel duties, paid either by the consumer at the pumps or in the form of higher priced goods.
- 3% comes from stamp duties. Those on shares are paid by share owners: your pension fund for example, and property owners. It also serves to reduce liquidity in the property market, especially for 4 bedroom family homes because of the pernicious Slab approach to SDLT bands.
- 2% comes from Tobacco Duties, disproportionately paid by the low waged.
- Capital Gains tax, 1% of revenues, is the first tax paid exclusively by the asset rich. It is very distorting to capital markets, raises little and punishes the ill informed because it is often easily avoided by simple planning. It certainly does not encourage long-term share ownership.
- Inheritance tax raises about .9%. This is paid by the unlucky, the unwise and those who are unwilling to plan. It does not hit the rich: it hits anyone wealthy enough to die in their own home, if they live in the southern Britain.
- The remaining 4% is made up lots of little taxes, including 0.05% from cider and perry duties, which for example is paid mostly by teenagers in bus stops.
Because the same people, i.e. us, end up paying all significant taxation, the only statistic worth looking at is the total tax take of government as a proportion of GDP. On this measure Gordon Brown as Chancellor, and now Chancellors puppet master has taken tax from Around 25%, one of the lowest in the OECD to nearly 40%, one of the highest. Near to Germany and France. Yes, we are still below the EU average, but there's no doubt which way we're heading and if you think the EU average is something to aspire to economically, you're a loon.
Now high tax rates, whatever Polly Toynbee may believe, are bad for economic growth. Lefties may think that Government "investment" in public services pays returns by making the place a better one in which to live, but they're wrong. Governments spend, and spend inefficiently making poor use of scarce resources and therefore slow the growth of the economy by diverting much needed capital to activities which generate lower value added. I'm not saying spending on health or education should be cut, but that private sector provision would spend the resources so directed better. In any case, health and education make up a small fraction of Government expenditure: Direct payments in benefits to idle chavs form by far the biggest proportion of Government expenditure (about a third). So much of the tax take is wasted subsidising the 20% or so of the workforce to watch Jeremy Kyle whilst we pay for their council house, their frozen pizza, special brew and Lambert & Butler. The welfare state costs us roughly 10-15% of GDP in unnecessary taxation. This couldn't be cut immediately, but could easily translate into an extra 10% growth over a decade, if this was managed properly.
What I'm saying here is not new, nor is it particularly surprising, except to Labour politicians. But Gordon Brown has taken a country with great public finances, spending under control and a strongly growing economy in which the fruits of that growth were filtering down to people in the form of rising disposable incomes, into one in which peoples' post tax disposable incomes are FALLING despite continued economic growth, as ever more money is sucked into the Government's inflationary maw. Basically about half of the economic growth the country has seen on Labour's watch has been eaten by the Government's wasteful spending spree. The interest on Government borrowing, for example is now roughly the same as the defence budget (yes, while we're fighting two wars).
Have you seen a major improvement in public services? The Hospitals are still a bit rubbish, roads are in disrepair, your bin only gets emptied every other week, the Police have decriminalised burglary, and the Army still hasn't got the kit it needs (yes, even though we're fighting 2 wars). All that money has been spent instead on creating a Labour-voting client state, rather than improving your public services. Disagree? How much of the extra Money the NHS has received has gone into wages? Most of it. This is deliberate and political, and once the electorate see this, they (apart from those suckling at the teat of tax-payers cash) will turn against the perpetrator of this vast confidence trick. Every time you see a council tax demand, or a landfill tax charge, or even a speed camera or parking fine, you should mentally add it to your income tax bill and think "what could I do if I was allowed to spend my money myself?" Then you should take a step towards getting that money back by voting Conservative at the next election. Better still, double the electoral benefit: find someone who votes Labour and kick them in the head until they stop twitching.
The sad thing is it was all so predictable. Labour always spend like a drunken sailor in port, until the money runs out. Gordon Brown: Comfortably the worst Prime-Minister in Britain's history. Labour: constitutionally economically incompetent.