The best arguments for cutting taxation...

At 9pm yesterday ConservativeHome spotlighted the headline findings of an ICM poll for the Taxpayers' Alliance which showed that 20% of Britons were seriously considering emigrating from high tax, high crime Britain.  Up until now the Tories have been very cautious about promising lower taxes but George Osborne, according to The Sunday Telegraph, is now considering abolishing stamp duty on share trading.

Throughout today and beginning now we'll be examining some of the more detailed findings of the ICM/ TPA poll.  The TPA researched the arguments most likely to whet the appetite of Britons for lower taxation.  Here are the top five arguments:

1. "Lower taxes would allow you to spend more of your hard-earned money on your own priorities."  81% agreed with this argument and only 10% disagreed.
2. "People have to pay 40% tax if they earn just £32,500, which captures many people like average teachers who aren't rich.  This threshold should be raised significantly so that only the really rich pay 40% tax."  79% agreed and 10% disagreed.
3. "Too many poor people struggle because they have to pay taxes.  If we raise the personal allowance theshold significantly from £5,035, a couple of million of the poorest taxpayers will not have to pay any taxes and average earners will pay less tax too."  78% agreed and 11% disagreed.
4. "Politicians waste money and lower taxes would force them to spend more wisely - we have to budget, so should the politicians."  76% agreed and 12% disagreed.
5. "It's morally wrong that politicians take so much of our money then waste it.  We should cut taxes to force them to budget better."  73% agreed and 15% disagreed.

Somehow the Conservative Party needs to abandon its economically questionable argument that tax cuts endanger economic stability (a proposition rejected in the ICM poll) and start making the case for economy-boosting tax relief.  If the Tory leadership team fails to make that case the Taxpayers' Alliance is determined to make it for the hard-pressed taxpayers of Britain...

Under its young and dynamic leadership of Matthew Elliott and James Frayne the TPA is planning to run adverts online and in cinemas and is creating a Web TV news programme in order to bypass the old media.  TPA also plans to send direct mail to 100,000 businesses and a million homes in the next few months.  It already has 14,000 supporters but is building a grassroots national network with important regional campaigns from the autumn.

AT 10AM CONSERVATIVEHOME WILL PUBLISH A LIST OF THE TAXES THAT VOTERS MOST WANT CUT.

Comments

[Dave J]

Not only should you be pushing for as much tax reduction as possible, but also tax simplification. The drain on an economy of compliance with a staggeringly complex tax regime can't be overstated, and the examples in parts of Eastern Europe of the benefits to be had from a flat tax mean it's no longer some weird academic flight of fancy.

[Richard]

http://www.reform.co.uk/filestore/pdf/negativeimpact.pdf

The negative impact of taxation on economic growth.

[Deputy Editor]

Dave J, I think the Conservatives proposing flatter taxes is at least as likely as proposing to simply lower taxes, and I hope the likelihood of either has risen after today.

[Denis Cooper]

There must be some easily comprehensible and defensible rationale underpinning the prioritisation of taxes to be cut or reformed. If it seems that the taxes at the top of Osborne's hit list are just those which impact most heavily on his circle of friends and acquaintances then not only is that likely to be harmful for the country as a whole, but he'll be very vulnerable politically. "I am particularly keen to look at stamp duty on shares" suggests that he's way out of touch with the concerns of the average voter. There are some good arguments that stamp duty on share transactions should be abolished, but it should be nowhere the top of his list.

[Ted]

Denis
I post on the other thread stamp duty is not about tax cuts its about pensions - BBCi picks that up "Of all the damaging things Gordon Brown has done to the economy, the single most destructive has been the attack on personal pensions," Mr Osborne said. Repairing that damage "has got to be a top priority", he said. "Sadly, simply reversing the pensions tax he imposed in 1998 wouldn't work, as many final salary schemes have closed."We need to look at new ways of repairing the damage and that is why I am particularly keen to look at stamp duty on shares."

He also says he wants to raise thresholds and look at IHT.

I also (sorry Tim) am getting tired of this fake conflict between "economic stability" and tax cuts. There are times when tax cuts are fiscally irresponsible and no Chancellor wants to be stuck as Ken Clarke was by need to reverse tax cuts to bring public finances back into balance. Saying to the electorate we will put economic stability first is saying you can trust us - it doesn't say tax cuts damage economic stability; that is a wilful misreading.

[wicks]

come on now, these questions are just ever so slightly loaded don't you think.

[Denis Cooper]

Yes, Ted, I saw that Osborne was relating it to pensions, and claiming that the average pension fund would be enhanced by £8000. However I would question whether abolishing stamp duty on share transactions would benefit pension funds as much as it would benefit "churners". The more direct method of benefiting just pension funds would be to remove the tax on dividends which Gordon Brown introduced, which I think costs them over £5 billion a year, cf the £4 billion a year from stamp duty on ALL share transactions apparently. Osborne's argument that "Sadly, simply reversing the pensions tax he imposed in 1998 wouldn't work, as many final salary schemes have closed" is a red herring - a pension fund is a pension fund, whether it's a final salary scheme or not, and it's likely to be losing far more in tax on dividends than it would gain by the abolition of stamp duty.

[John G]

The best argument for tax cuts is that individuals always spend their own money more wisely than governments.

Very disappointed to see George Osborne in the Sunday Telegraph making a rearguard action on his pusillanimous non-policy on tax.

The sooner Mr Osborne is replaced by a radical tax-cutter the better. It's not just what we Tories want. It's what the country needs.

[TaxCutter]

There's a lot to be said for ending stamp duty on shares. The revenues it raises are volatile, it hurts international competitiveness and most of the cost gets picked up by long-term savings vehicles.

Its a small step in the right direction, but nothing will win votes better than cutting income taxes.

[Denis Cooper]

"Davis in pledge to end £5bn pension 'scandal'"

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/10/29/ntory29.xml

"A Conservative government led by David Davis would make it a priority to reverse Labour's £5 billion-a-year tax grab on pension funds."

Chosen the wrong leader, or Shadow Chancellor, or something.

[Richard]

A quick note on IHT - if people know that a significant proportion of their savings are going to be taxed away when they die there's a strong incentive to spend rather than save.

[christina speight]

It says a lot about the Cameroon clique's lack of contact with ordinary people that it takes an opinion poll by a pressure group to make the party talk about ONE tax cut. The party should have been making the case for tax cuts for months now instead of waiting to FOLLOW public opinion. That's not leadership.

The economy NEEDS tax cuts to prosper and without them all will suffer

[Denis Cooper]

And then they pick the WRONG tax cut to start with ... I mentioned it to my daughter and her reaction was: "That won't have a lot of appeal. A lot of people won't even know what it means". It's not the way to help pension funds, either.

[James Maskell]

Why has this particular tax option been selected as a goer by Osborne, when its a not very well known one and upon initial impressions, just sounds like a boost for those with plenty of money to invest in companies?

Osborne has said this tax option will cost about 4 billion. Inheritance tax would cost 3.6 billion. With IHT being the far more prominent and the relatively 'cheaper' option, why pick the share option tax cut?

[Chris Hughes]

The best argument for tax cuts is that individuals always spend their own money more wisely than governments.

Exactly! But surely wealth is a finite thing. Either you spend your own money or the government does - it is a choice - you cannot have both, and yet, that is what our party has always tried to tell the public.

Quite simply, I want to know why then with all ths talk of tax cuts we do not get matching talk of spending cuts? Where is the money coming from to compensate for these proposed cuts?

[Matt Wright]

I think the message that we will not do anything to risk economic stability is essential. Any tax cuts should be carefully thought through and we should also look at reform to simplify tax,

Matt

[Richard]

"Where is the money coming from to compensate for these proposed cuts?"

Waste (estimated at somewhere between 30 and 80 billion), money brought in by economic growth. As tax cuts will boost the economy there will be even more money coming in in the long term. However, we should avoid borrowing.

[John G]

Exactly! But surely wealth is a finite thing

Not at all. Wealth continues to circulate after the initial spend and thereby to grow the economy.

Citizen/state choice relates only to the initial spend, and I say that the citizen rather than the government should be allowed the right to choose the object of expenditure.

If you go back to the golden days of Disraeli you will find precious little government spending. As Tories - believers in freedom - we owe it to the country to reverse the pernicious trend of socialism.

[TomTom]

Wealth is a Stock concept not a Flow.

You have a finite Stock which you can consume or save, if you need more you import capital from abroad as the USA does from Europe and China and Japan.

The FLOW of income which circulates depends upon Credit and Government Borrowing from the Private Sector or Taxation of the Private Sector - it may increase economic growth, it may reduce it; but every factory needs a road and a patent office - the private sector usually provides only the factory

[Fred Baker]

Tax cuts are seen as hitting the softest targets – pensions and teachers.

Beware as to how it is put across.

[TaxCutter]

In response to some of the comments above, cutting IHT will currently benefit no more than 6% of the population, cutting stamp duty on shares will benefit anyone with money in a pension.

[City Unslicker]

Cutting taxes is great but we must learn from the NuLabour tricks. They have not directly raised many taxes, instead allowing fiscal drag to take its toll. It has taken a decade of this for people to cotton on.
We need to take a similar tack, not scrapping taxes here and there and giving easy headlines about clsoing schools and hospitals; but instead reducing fiscal drag and altering tax bands in a socially fair way that can benefit all. I have some further comments re our economic position at
www.cityunslicker.blogspot.com

[Just a guy]

Tax cuts are fine, a winner with any voter. What would be better is a savings account that actually worked in favour of the investor not so much the bank and gave returns more like the investment in second and third propertys.

Investment in property and general spend thrift culture is more in place because of a lack of a workable savings scheme. It doesn't work for the average earner with 5 or 10k sitting built up. It might do for the super rich.

Change that focus and have a healthier income population. "Want it now" culture changes to "can have it soon".
And with some policy in place to stop people doing both you could find the affordable housing market returns from peoples investment portfolio's.