Saturday, 14 July 2007

Your guide to the new Lib Dem tax plans!

Ask people to name a Lib Dem policy and those who don't really follow these things very closely will say "1p on tax for education". And indeed, that was our policy up until about 6 years ago! Since then, the Government has substantially increased spending on public services like health and education, and the focus is much more on how the money is spent rather than on assuming that "another billion" will sort the problem out.

But this week we launched (for debate at our conference) a detailed package of tax plans. The main features were:

a) tax greener - more tax on new purchases of gas-guzzling cars, higher tax on half-empty planes and on air freight etc.;

b) tax fairer - closing tax loopholes on the very wealthy; using the money raised (and from the green taxes) to cut income tax for low and middle income earners, by taking 4p off the standard rate; also, continuing our policy of scrapping the council tax and replacing it with a local income tax;

The overall effect is good news if you are a pensioner, or on low or middle incomes - or if you care about the planet!. The main increases are for those who take advantage of tax loopholes and those who pollute. No doubt (as before) the best ideas will be 'borrowed' by the other parties, but if we continue to set the agenda on tax, that's fine by me.


Jock Coats said...
This comment has been removed by the author.
Jock Coats said...

You don't think the main losers will be those on middling incomes striving to get on the housing ladder, whose income tax bill will change little (4p off national but 3.5p on local) whilst seeing us put house prices up by about 7.5% because we scrap any sort of property tax?

Andrew Duffield said...

Spot on Jock. LIT will all but wipe out a 4p national IT cut and first time buyers will find affordability even harder in the absence of any tax on domestic property.

Meanwhile, yesterday's Times notes that "some 420,000 homes stand empty in a state of disrepair. Surely these should be part of the solution to our housing crisis?"

The mere sniff of an progressive property tax (LVT) would start bringing some of that scandalous waste back into occupation again - and a darn sight quicker than planning auctions for new build could ever solve matters alone.

Anonymous said...

Whilst I have nothing against the LVTers (finding it quite an attractive theory), what I think somewhat puts me off is the somewhat religious zeal of its proponents - keen to do down anything that the party proposes on taxation because their arguments have not (yet?) won through.

The 4p reduction wouldn't be nearly neutralised by LIT because there would no longer be council tax to pay - those with lower earnings would make the biggest gain under these proposals and that's exactly right (as council tax is greater than the 3-4% of income a LIT would be).

Jock Coats said...

Sorry anon...that's just wrong. If you're the kind of thirty-something earning, well, thirty something and still not able to get onto the home ownership ladder, your household is going to see its LIT pretty similar to what the CT would have been anyway PLUS the price of housing rising another half an income multiple because we'll have done away with property taxes.

This is a direct transfer from those who have not got a home to those who do. And we should not be blathering on about helping people with housing affordability on the one hand and putting it further out of reach with the other.

Jock Coats said...

Oh, and I should hope that the whole party understood the need for zealous single-mindedness in rooting out the evil of monopoly, wherever that appears. As our forefathers knew, land is one of the biggest!

James Graham said...

I have to defend Jock here - even LIT's most fervent supporters accept that scrapping Council Tax will lead to an increase in property prices. I recall Ed Davey in a debate a few years ago arguing "but it would only be small" - which may have been a defensible position a few years ago but certainly isn't now.

I've never understood why supporters of LVT are always portrayed as zealots, while LIT supporters avoid that label. There's a reason why the Tories and Labour don't make political capital by supporting something as superficially popular as LIT: they know it is economically responsible. Local Income Tax supporters seem to be completely blind to this, which is far more indicative of religious zeal than basing your opinion on economic argument.

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