Summary of March Debate on Taxation
The debate coincided with Budget Day, appropriately.
To introduce the topic, I handed out a sheet of paper showing 2 pie-charts - one showing government annual expenditure and another showing the sources of taxation. It was taken from the same day’s Budget document.
We noted that expenditure was forecast to exceed taxation revenue by £36 billion during 2006/07. (This will generate extra National Debt that would generate extra interest payable to add on to the current £27 billion per year).
I also picked out some statistics from a recent Sunday Times article entitled “Taxes hit all-time high”.
Various people expressed surprise that tax revenues had risen from £271 billion in 1997 to £490 billion now – surely significantly more than the inflationary increase!
We generally agreed that taxes seemed to have risen in real terms by much more than inflation, and also that other measures of the cost of living had also risen by more than inflation – such as housing costs, power, etc. The official inflation measure does not (it was felt) really reflect increases in the cost of living.
We felt that the subtleties of taxation were difficult issues to communicate with the public, and that there was not much public debate about the right level of taxation to maximise government revenues and the wealth of the nation. For instance, it might be that a lower rate of taxation is optimal because it incentivises wealth-generation and therefore maximises government revenues in the medium term. There is also not much public debate about what government is for, and why we pay taxes in the first place.
Opinions included:
"Government should be there to provide basic services, but in reality we get enhanced services and pay much more for it than it would cost to provide basic services".
The most basic services of all are food, shelter and clothing, and yet the government does not directly provide any of these – so why should it provide other services?
We discussed that council tax is used by central government to manipulate voters’ perceptions of their local governments (which are clearly run by various different parties, not all by Labour), and therefore to shift the blame for taxation, by reducing the bundle of services paid for by central government, and effectively forcing local government to increase council tax and “look like the bad guys”. But this is a difficult message to get across to the electorate, especially when council tax is one of the few taxes which voters actually get a bill for, so they are more conscious of it than of other forms of taxation.
Perhaps it would be interesting if everyone got a “personal tax statement” and could see what taxation they personally paid. This might make people more conscious of the tax implications of the policies they vote for. This is obviously quite difficult, but instead it might be possible to launch a website (similar to the Carbon Emissions websites) where you can answer a few simple questions about your personal circumstances (eg your salary, how much you drive, how much you smoke/drink, where you live, etc) and you can see how much tax you currently pay, and how much you would have paid in 1997 (for comparison). This might be quite a good pre-election tool for the Conservatives to promote?
We discussed the personal impact of the taxation system on our own life decisions and those of our families. One of our group was a recently-retired man who considered returning to teaching in his late 50s, but decided that the extra workload was not worth the after-tax salary, compared to the benefits he would get otherwise.
The fact that some of the English tax burden effectively goes to Scotland and Wales was also discussed. Cynically, this could be seen as Conservative constituencies subsidising Labour constituencies to ensure that they remain Labour constituencies!
We raised the possibility of a flat rate tax with no other taxes, like some Eastern European countries, but this was thought to be too big a change to be possible in any short term timeframe, and also it would not allow the opportunity for government to influence behaviour (eg smoking, drinking).
A final suggestion was that the government should not be providing services directly, but should leave much more to “the market” whilst spending taxation on giving voters access to choice and good advice about how to use the market and make the best choices for them.
Sadly the debate was not as well attended as previous debates since it clashed with an important council briefing on electioneering for the local elections. There were 8 attendees for the first part of the debate, plus a further 6 attendees who arrived later.
To introduce the topic, I handed out a sheet of paper showing 2 pie-charts - one showing government annual expenditure and another showing the sources of taxation. It was taken from the same day’s Budget document.
We noted that expenditure was forecast to exceed taxation revenue by £36 billion during 2006/07. (This will generate extra National Debt that would generate extra interest payable to add on to the current £27 billion per year).
I also picked out some statistics from a recent Sunday Times article entitled “Taxes hit all-time high”.
Various people expressed surprise that tax revenues had risen from £271 billion in 1997 to £490 billion now – surely significantly more than the inflationary increase!
We generally agreed that taxes seemed to have risen in real terms by much more than inflation, and also that other measures of the cost of living had also risen by more than inflation – such as housing costs, power, etc. The official inflation measure does not (it was felt) really reflect increases in the cost of living.
We felt that the subtleties of taxation were difficult issues to communicate with the public, and that there was not much public debate about the right level of taxation to maximise government revenues and the wealth of the nation. For instance, it might be that a lower rate of taxation is optimal because it incentivises wealth-generation and therefore maximises government revenues in the medium term. There is also not much public debate about what government is for, and why we pay taxes in the first place.
Opinions included:
"Government should be there to provide basic services, but in reality we get enhanced services and pay much more for it than it would cost to provide basic services".
The most basic services of all are food, shelter and clothing, and yet the government does not directly provide any of these – so why should it provide other services?
We discussed that council tax is used by central government to manipulate voters’ perceptions of their local governments (which are clearly run by various different parties, not all by Labour), and therefore to shift the blame for taxation, by reducing the bundle of services paid for by central government, and effectively forcing local government to increase council tax and “look like the bad guys”. But this is a difficult message to get across to the electorate, especially when council tax is one of the few taxes which voters actually get a bill for, so they are more conscious of it than of other forms of taxation.
Perhaps it would be interesting if everyone got a “personal tax statement” and could see what taxation they personally paid. This might make people more conscious of the tax implications of the policies they vote for. This is obviously quite difficult, but instead it might be possible to launch a website (similar to the Carbon Emissions websites) where you can answer a few simple questions about your personal circumstances (eg your salary, how much you drive, how much you smoke/drink, where you live, etc) and you can see how much tax you currently pay, and how much you would have paid in 1997 (for comparison). This might be quite a good pre-election tool for the Conservatives to promote?
We discussed the personal impact of the taxation system on our own life decisions and those of our families. One of our group was a recently-retired man who considered returning to teaching in his late 50s, but decided that the extra workload was not worth the after-tax salary, compared to the benefits he would get otherwise.
The fact that some of the English tax burden effectively goes to Scotland and Wales was also discussed. Cynically, this could be seen as Conservative constituencies subsidising Labour constituencies to ensure that they remain Labour constituencies!
We raised the possibility of a flat rate tax with no other taxes, like some Eastern European countries, but this was thought to be too big a change to be possible in any short term timeframe, and also it would not allow the opportunity for government to influence behaviour (eg smoking, drinking).
A final suggestion was that the government should not be providing services directly, but should leave much more to “the market” whilst spending taxation on giving voters access to choice and good advice about how to use the market and make the best choices for them.
Sadly the debate was not as well attended as previous debates since it clashed with an important council briefing on electioneering for the local elections. There were 8 attendees for the first part of the debate, plus a further 6 attendees who arrived later.
posted by Helen at 5:14 PM
2 Comments:
What an interesting blog - wish I was at the debate!
I have never thought of the government as providing the essentials of food, clothing and shelter from our tax but I suppose this is what they do through unemployment benefit,pensions etc. However, I do think taxation has gone too far when people use the system to get the maximum benefit for themselves first instead of being encouraged to take responsibility for themselves and their families first.
I understand Gordon Brown wants a fair distribution of wealth but by constantly taking more and more of what we earn we begin to think 'Why should we bother, let's have a slice of the pie ourselves and just not bother to work'
I am really beginning to see this happening to many hard working people now and I feel it is such a shame to encourage this taking mentality which is exactly the opposite of what was intended.
How do you find the balance?
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