Tax cuts don't need to be taxing

Yesterday I suggested that the Tories were missing an opportunity to side with taxpayers against the government at precisely the time when the polls show that people felt stifled by ever higher levels of tax.

I advocated the raising of nil rate band to, say, £10,000. This dramatic tax cut would benefit all taxpayers but it would particularly benefit those of low incomes, including pensioners. It would thus be socially just as well as electorally popular. Unlike tax cuts for businesses or higher earners (who are also, I hasten to add, overtaxed) an increase in the nil rate band to, say, £10,000 would be much easier to sell to voters.

My proposal has encountered resistance on both sides of the aisle from some who say the economy cannot afford a tax cut. I argue that, on the contrary, the economy cannot afford NOT to have taxes cut. This time in the economic cycle is exactly the time to cut taxes, not least because tax cuts actually increase government revenues (as well as stimulating the economy).

I have also been criticised for jeopardising public services - as if every penny spent by the government is spent wisely and there is no waste in the system.

As an example of the absurdity of our tax system, consider the millions of public sector employees paid for out of our taxes. They are paid out of our taxes. And then other public sector employees called tax collectors collect taxes from their salaries. Surely a way could be found to pay those public sector employees net of tax thereby reducing the number of tax collectors working at HM Revenue & Customs whose job is to monitor the taxes paid by their fellow public sector employees?

This is what the blogger Wat Tyler refers to as "fiscal churn" and it is the inevitable by-product of governmental schemes by the dozen. It was because of such schemes, beset by the law of unintended consequences, that Ronald Reagan memorably said that the most feared words in the English language are: "I'm from the government - and I'm here to help". It's precisely why I am a small government conservative - the smaller the government, the better. I would like to hope that this is what separates Tories from those who support the LibDems or Labour.

UPDATE: Ben Brogan points out that Lady Thatcher cut taxes and signalled her intent in 1979 - the assertion that she did otherwise is false.

Read my lips: cut my taxes

Philip Hammond must hate David Cameron and he has no desire to be a cabinet minister. Why else would the Shadow Chief Secretary to the Treasury - on the same day the Tories are shown to be 16 points ahead in the polls after a grim budget statement this week - announce that the Tories won't offer tax cuts until their second term of office?

Poll after poll shows that voters believe they are overtaxed. This week's budget has hiked taxes yet again - and still the economy struggles. The impending recession is used as an excuse NOT to cut taxes when, in reality, it is the precise time that taxes SHOULD be cut so as to stimulate investment and spending. 

Taxes can be cut in such a way as to tie into David Cameron's desire to show the Tories are being pro-family and compassionate. If the nil rate band were to be raised to, say, £10,000 each and every taxpayer would benefit - but the greatest benefit would be felt by the lowest paid. It would therefore be socially just as well as electorally popular. It would also be philosophically the right thing to do. 

We can only hope that David Cameron and George Osborne haven't forgotten the lessons of the October Party Conference when the Tories returned from the dead by announcing electorally popular cuts in inheritance tax. 

It's time for the flat tax

The Daily Telegraph has published a plea for a simpler tax system on its comment pages this morning. The paper highlights that stamp duty now brings in £6.75 billion a year - nine times the amount brought in by this tax in 1997. It rightly highlights how so much of the money we pay in tax is wasted rather than being spent in the manner wanted by taxpayers.

After Labour's re-election in 2001, Gordon Brown interpreted that victory, perhaps rightly, as giving him the green light to spend, spend, spend. Labour had said that if the party was given a second term in government, it would invest heavily in Britain's "underfunded public services" and the country would finally benefit from the best schools'n'hospitals in the developed world.

Billions of pounds of extra taxes were levied and billions of pounds of our money was poured into the health and education budgets. We were promised growth and growth we have seen.

In health, we have seen the growth of the number of medical professionals earning six-figure salaries. We have seen a growth in the number of people dying from MRSA and treatable diseases. We have seen a growth in the number of foreign doctors and nurses while qualified British medical professionals are left to rot.

In education, we have the growth of GCSE and A-level pass rates when everyone bar the students and their blinded parents know that these exams get easier year on year. We have seen the growth of the chav culture and lawlessness on our streets. exacerbated by weak discipline in schools. We have seen a growth in the number of students studying worthless courses, all paid for by the rest of us.

In 2008, the British public must surely now realise that the money it consented to invest in public services in 2001 has been wasted and a new way is called for. The US-based campaign group, Freedom Works, has a flat tax calculator to show you how easy it is to calculate your tax liabilities under a flat tax system when compared to our onerous self-assessment returns. Closer to home, the Adam Smith Institute has a guide to the flat tax too.

Is it too much to ask that those who govern us look at making our lives easier, spend less of our money and spend the money they do take properly?