Monday, October 02, 2006

Will we cut taxes?

Just thought I would clear up some confusion, as some people are being deliberately confused.

We will not promise to cut taxes yet, because we do not yet know what the public finances are. Government borrowing is a bit of a concern at the moment, as it seems to be growing whilst the economy is also. We may have to start paying it back.

What we have said is that "We will share the proceeds of growth", and "We put economic stability before tax cuts".

What that means is that if the economy grows by 2.5% we won't just sit back and rake in all the tax, we will reduce the tax a bit and increase public spending a bit, which means that over a parliament both public spending and tax will drop as a percentage of GDP.

I appreciate John Redwood may appear to some to have a different position but he would not put tax cuts ahead of economic stability either. He argues that if taxes are lowered then you get higher growth, more self dependence and ultimately more money for public services. He is right.

The only debate is not so much when to reduce the tax burden, but when to start naming the taxes we will cut. The sensible answer has to be in a manifesto.


Ellee said...

It sounds good to me, there certainly has to be action on inheritance and corporation tax.

Benedict White said...

Well, actually I would prefer raising tax thresholds, but there you go.

On corporation tax, I here where you are coming from, but again I would prefer to cut red tape either first or at the same time, as I think that would boost tax revenues very well whilst making the corporate sector more competitive.

Mark Senior said...

I confess that I completely fail to see the obsession that many Conservatives gave with Inheritance Tax . It affects such a small % of the population . IR figures for 2004/2005 show that with around 600,000 deaths only about 34,000 would be liable for Inheritance Tax . If , as it is , scope for cutting taxes is limited , there are many more worthy candidates .

Mark Senior said...

Oops line 2 should read have not gave or I suppose it could read give to .

Benedict White said...

Mark the reason for this perceived dislike of inheritence tax is that the rich don't pay it, becuase they can get around it, so it falls mostley on middle class people who have not planned. It then tends to be double taxation.

That said I have more of an issue with the lower tax bands, and making business more competative first. I do think that making the family home xcempt would be good at some point in the future.

Mark Senior said...

I have always thought the double taxation argument a fallacy . Every tax except Income Tax is double taxation even for example VAT as they are paid out of taxed Income . The answer to the point that the rich are able to avoid IT so it falls on the middle classes ( but only 34,000 of them in 2004/2005 ) is to close the loopholes so that the rich pay it as well .

Benedict White said...

Mark, if you are right about there only being 34,000 people involved, and it raised £3.3 billion, it measn taht each estate paid an average of £97,000 soon after a loved one died.

Personaly I think that can make life very difficult for some people in that they have to handle both the death and paying taxes.

Yes lots of things are double taxation, but also this is a tax on wealth building as well.

As I said though, I would look elsewhere first.

Mark Senior said...

As the first £ 285,000 of Inheritance is tax free and the tax rate is 40% then the average estate inherits a minimum of £ 400,000 net after IT still a substantial sum of money unless divided into numerous siblings .