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Monday 21 May 2012

TPA – 2020 Tax Commission Speaks (4)

So now the full report from the joint effort of the so-called Taxpayers’ Alliance (TPA) and Institute of Directors (IoD) has been released, and the proposals are very much as I outlined yesterday. Centrepiece of the analysis is what is proclaimed as a “Single Income Tax”, which is a flat tax. This will benefit those who bankroll the TPA significantly, as I predicted.

The comfortable of Tufton Street speak

It is claimed that all earners will benefit from the proposals, but pensioners, who are not at present subject to National Insurance contributions – having paid in for their state pension by the time they reach age 65 – would find their tax bill increased significantly. But they wouldn’t have to pay Air Passenger Duty (APD), which the Commission would very generously abolish.

No doubt there will be the usual fog of spin in the full report justifying this, and also a cut in fuel duty, both of which give the impression of being included for purely populist reasons. All of these changes, together with a single 30% tax on capital income, would initially increase the borrowing requirement – something the TPA has said is not A Good Thing – but this would change over time.

How would this be done? Ah well. The “optimum size for the state”, which I mentioned yesterday, has been calculated at no more than 35% of income – no doubt also to be justified by the usual smoke and mirrors, along with giving the impression that the TPA and their pals are considerably cleverer than yow – and that would entail a lot more spending cuts.

These would, as I outlined, mean less in benefits for the least fortunate, and less from the state at both national and local level. How much is tucked away in the proposal to make local Government fund 50% of its spending itself, and, given that at present that level is just 20%, this would mean a budget cut of a whopping 60%, all other variables remaining as before.

Individuals would pay less in income tax, but unless local services were to be all but wiped out, would end up paying far more in Council Tax, local income tax, sales tax, or a combination of all three. What would be cut most? Well, think of it this way: the single largest part of local Government spending goes on education, with the emergency services also being funded this way.

That would not affect the TPA’s overmonied, greedy and cowardly backers to the same extent, as they can afford to go private. The largest items in central Government spending – the benefits system and the NHS – also don’t affect them. As I predicted, this report is dressed up as an exercise in “fairness”, while in reality it is a charter to enrich the well off and shaft the weak and vulnerable.

That is what the TPA and IoD are proposing. And that’s not good enough.

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