TAX, FAIR?

Owners of “high-value” houses will be made to pay more tax. Nick Clegg also insisted that the Lib Dems’ plans to cut taxes for low-paid workers must come before Tory moves to ease the tax burden on “people at the very top”. George Osborne, the Chancellor, has suggested that the 50p tax rate is “economically inefficient” and senior Tories want to abolish the higher rate as soon as next year. However, Lib Dem ministers are arguing that if the 50p rate of tax is scrapped, another tax on owners of expensive homes must be introduced to replace the revenues the Treasury would lose.

The Treasury is expecting to take in £3billion from the 50p tax this year, and £2.6 billion next year. Under the Lib Dem’s so-called “mansion tax” plan, revenue lost by reducing the 50p rate, perhaps to 45p, would be recouped by imposing higher taxes on property owners. Vince Cable, the Business Secretary, has previously suggested that a mansion tax could apply to all properties worth more than £2 million. Mr Clegg said the Coalition was studying plans to ensure that people paid their “fair share”. He said, “Of course we should review how the 50p tax rate works."

He added, “We will also review how people at the very top seek to avoid taxes and to make sure people at the very top, owners for instance of high-value property, cannot avoid paying their fair share.” There is no agreement among ministers on how property tax rules might change, but options could be an increase in stamp duty for high-value sales, and a new council tax band for the most valuable property. Both options would be complex and controversial and are being resisted by Conservative ministers.

Treasury officials are studying the wider economic impact of the 50p rate, introduced by Labour. Senior Conservatives suspect that the tax could be costing the Treasury money by encouraging high-paid people to move their financial affairs out of Britain. They believe that scrapping or reducing the rate could increase tax revenue, meaning there would be no need for the money a “mansion tax” would raise.

Mr Clegg also suggested that any Tory plans, including scrapping the 50p rate and giving married couples a tax break, must wait until the Lib Dems’ preferred tax changes have been made. The Coalition agreement commits the Government to increasing the basic rate threshold to £10,000, while reducing the 40p threshold. The effect is a tax cut for millions of basic-rate taxpayers.

Mr Clegg said, “The coalition agreement is clear that what takes precedence, if you have got money and the ability to provide tax relief to people, is tax cuts for millions of people on middle and low income.” He said it was right to prioritise help for those who needed it most and not to a “very, very small minority of people who don’t need as much help, in other words, the people at the very top”. (Source: Daily Telegraph, Aug/11)

During the past century there has been an unprecedented interference by government in everyday life, with the creation of structures and attitudes that were not dismantled with the passing of the total wars that justified them. The socialist assumption that people should be "looked after" from cradle to grave so penetrated the body politic that many are now incapable of seeing state welfare as merely one of the roles of government, albeit an important one. They think it is what government is for. The pre-Budget revelation that we are taxed so much more than necessary that the Government had a £40 billion budget surplus provoked no riots. Downing Street was not stormed because nearly 40p out of every pound is taken in tax (perhaps as much as 53p gross), which means that, in a working year, you now toil until early June for them.

Because of the culture of shoulder-shrugging resignation in the UK - governments do what they like, there's nothing we can do about it, they're all the same anyway etc. And so Tony Blair's pre-election pledge - "We have no plans to increase tax at all" - is not thrown back at him in every interview, as it should be. After all, his government averaged about one tax increase every month in its first three years, and has been pretty close to that since. But there is another reason for our meekness in the face of the tax gatherers. The expansion of state welfare has created three large groups of citizens, only one of which has any serious interest in halting or reversing the process.

First, there are welfare dependants who receive more in state benefits than they contribute in taxation. Second, there are those who, though taxpayers, make their living either from administering and encouraging welfare provision or from being servants of the state or local authorities - teachers, NHS staff and the various kinds of civil servant. Third, there are non-state funded taxpayers, both individuals and businesses. These are the milch-cows that keep the whole thing going but their ability to do so declines as state provision increases. Yet they have no more say over how money seized from them under threat of criminal sanction is spent than do those upon whom it is spent.