People spend their money more wisely than politicians, only politicians would disagree. Therefore we must leave the electorate with more of their own money. Government is only a facilitator for growth. Low tax, few regulations and small government are the recipe for a successful economy - UKIP Economic spokeman, Godfrey Bloom MEP.
Preamble to Tax Briefing
•Taxation is, of course, as old as civilization itself. No one wants to pay it and the state either in the shape of the old monarchies or modern democracies have a voracious appetite for it.
In the United Kingdom nearly 50% of GDP is spent by government. 18 pence in the pound goes on servicing government debt. Inclusion of private funding initiatives and public sector pensions rarely accounted for on budget day (illegal in a Plc) would bring the national debt to 215% of GDP, far higher than Moody’s estimate, and in line with Greek numbers which are internationally regarded as disastrous. The national debt cannot be reduced without economic growth. The last two years has demonstrated this in spades. Debt increases by 10% per year. In 2015 the national debt will be 50% higher than when the coalition took office. We cannot tax our way back into solvency. High taxation kills economies, so the UK economy falters but not for the reasons most people believe.
The coalition boasts it has cut the annual deficit by 25%, yet any school boy with a calculator can work out to reduce national debt the reduction needs to be 125% otherwise it continues to grow. Taxation needs to be drastically reduced but only alongside equally drastic cuts in public spending. A Public Spending Review is not the object of this paper but UKIP can show how to reduce annual expenditure by £90 billion at a stroke without reducing major public services. This paper will shortly be available in detail.
What is the major difference between taxation in days of yore and today? There is a significant one, today most taxes are political. Not designed to raise revenue for defence of the realm, the maintenance of the Queen’s peace or highways they are part of a social engineering programme. A programme which has patently failed in the western democracies. People spend their money more wisely than politicians, only politicians would disagree. Therefore we must leave the electorate with more of their own money. Government is only a facilitator for growth. Low tax, few regulations and small government are the recipe for a successful economy. The Pacific Rim has demonstrated this in the last 30 years, beyond reasonable doubt.
Historically, time and again, it has been proven that reduction in tax rates boosts the economy and paradoxically does not reduce the tax take. For the economic student there are many examples but for the history buff the Calvin Coolidge administration in the United States nearly 100 years ago is worthy of study.
Political taxes raise very little revenue, the main thrust of UKIP tax policy will be flat tax with high thresholds, for too long the tax entry level has been too low. In an over generous welfare state this creates massive diversion from the original safety net concept of Beveridge to welfare life style choices. There is also astonishing complex tax administration. Flat tax is simple to administer and more importantly fair to everyone. Progressive tax rates mean regressive incentives.
Tax is a form of confiscation of money from one group of citizens to arbitrarily give, by politicians, to another group. Much of this revenue is wasted. Doctors and nurses we need, quangocrats and fat cats at the Town Hall we do not. The very wealthy pay very little tax because rates are so high they are worth putting significant resources in to avoid. Inheritance tax is largely voluntary. Capital Gains Tax is easily avoided. High income tax is avoided by going offshore. Big corporations pay no tax, the high street retailer and successful small companies are driven out of business by crippling VAT, Business rates and corporation tax. The tax system is complicated, expensive and the burden always falls on the wealth creating sector.
Income tax is the first port of call for radical reform. The tax free allowance pitched at £13,000 per year offers all workers a fair chance of keeping a significant amount of their own money. (N.B A further proposal to ensure pensioners are not disadvantaged the tax free allowance is £15,000 for pensioners.) The allowance should be transferable between couples recognising that if one spouse remains at home to bring up a family they are an equally valuable member of society as a working partner. The flat rate of 25% ensures people are motivated to work as hard and as long as they wish without seeing confiscatory levels of government tax. Many in the professions do not earn very much money until they are in their early 30s. They have trained for years to attain high earnings in a relatively short window earning opportunity. Entrepreneurs need to know that 12 hour days, seven day weeks and risk capital will be rewarded later.
‘Fairness’ is subjective but under this system an individual earning £30,000 will pay a little over £4,000. A high earner on £113,000 will pay a little over £25,000. Each therefore according to their means. This is of course still far too much and the goal of UKIP post national debt crisis would be to see tax further drastically reduced and entry levels significantly raised.
The burden of taxation must be lifted from the middle Britain wealth creators or we can expect a 30s style long haul depression. I thank Emile Woolf, possibly one of the foremost international government tax advisers for his help and support in compiling this briefing.