Making our tax system fairer….

This is the challenge that Nick Clegg and Vince Cable have set themselves and it’s a laudable aim. Taking the lowest paid out of tax and rebalancing the horrible imbalance that sees them take on a disproportionate amount of the tax burden is something that should be done and is the genesis of redistributive taxation. How it is done is however a key question; at the conference Vince Cable landed himself in hot-water with his proposed ‘Mansion Tax’ on homes worth over a million pounds.

Although the ‘Mansion Tax’ has stayed it will now only apply to those homes worth £2 million or more. The rise in the threshold will be compensated for by an increase of 0.5% levied to a full 1% on those homes though quite how that compensates for a reduction from 250,000 homes affected to 70/80, 000 is a little beyond me.  What isn’t is that this is an attempt to recapture radical positioning on taxation which appeases both the social justice minded left and tax cutting right. The famous penny on income tax has been replaced with a per cent on your mansion tax.

Taxing property over income is slightly problematic (as both the poll and council tax have shown) partially because it is based on a subjective judgement about the valuation (rather than the objective fact of what you actually earn).  However, in terms of ‘taking people with us’ it will most likely be successful and will find favour with both the aforementioned wings of the party.

 It also gives the party a positive door-step message as The Spectator recognises. However, if that message is coupled with a slash-and-burn attempt to cut the budget deficit then it will quickly become muddled and easily caricatured and it will be hard to avoid the problems associated with what Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, calls “trying to face both ways”. Fairness has to mean more than rebalancing the tax burden; although it is a part of it (something the Labour left needs to recognise over its fascination with the 50p band) it is not the entirety and low-income earners will judge us just as much on other proposals as they do these ones.

 

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About darrellgoodliffe

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