Tuesday, August 15, 2006

Looks like we picked the wrong week to give up taxing the rich

For years, the Liberal Democrats have had a totemic policy to impose a 50p tax rate on the highest earners. Strictly speaking, that remains their policy until their conference agrees the new proposals, which isn't quite the certainty that some think it is. You may have missed the policy launch because it was slightly overshadowed by other events.

Truth to tell, it isn't really exciting anyway - we've had the meatier facts trailed for months whenever Ming needed to relaunch his leadership (currently a weekly event). The biggest problem for me is the shift to environmental taxes to raise revenue. The thing about this kind of tax is that it if it works, the tax take will decrease over time - the idea is to change behaviour by making something into a luxury item though the tax system. Hence, smokers face a huge tax bill whenever they buy a pack of twenty. On the other hand, the LDs are offering an £18 billion tax cut - removing a whole swathe of people from the tax system and even assisting the middle earners facing the 40% tax rate. As they admit that enough money is now being raised for the Treasury, although they may disagree over the spending methodology, they need to raise a similar amount through their own stealth taxes on the top earners' pension funds and business-class passengers on airlines.

Here's the problem with taxing the very rich. They are the ones who can most afford the flashy lawyers and accountants whose sole job it is to find legal loopholes in tax structures and pump as much money from their rich employers through those gaps before the Treasury gets wise and outlaws their latest scheme. When you add in the impact that the green taxes are supposed to have, the likelihood is that the Liberal Democrats won't be able to replace their tax giveaway with other sources of income. The local income tax remains a policy - despite attempts to remove it - and this will drive many Lib Dem voters away, as it promises higher local taxation for many middle-income earners - the very ones supposedly hit hardest by the rise in council tax. I'm also not sure how easy the package is to sell to the voter. Worthy it may be, but the 50p tax rate on the highest earners was a simple flagship policy and I'm not sure that replacing it with a promise to cut taxes for those at the bottom of the pile will be an equally effective rallying cry.

The deeper problem for the Liberal Democrats is that this is yet another attempt to plant their flag on the over-populated centre ground and compete with the big boys - just as we've seen a rightward shift over crime. All this fatally damages the unique selling point of the Liberal Democrats - their individuality and their difference from the other two parties.

Increasingly, the Liberals seem to be pursuing the Tory vote, but the danger of that policy is that they become indistinguishable from the True Blues and that their electorate decides to vote for the real thing, rather than the conscience-salving Tory Lite future that Ming is espousing at the behest of his new, young friends.

1 comment:

snowflake5 said...

Also - and this sounds awful - most of the public arn't that interested in the environment. It never comes up in surveys of priorities. People vaguely agree that "somthing must be done", while at the same time moaning about the price of petrol and wanting cheap but exotic food in the supermarkets (which are delivered by plane and lorry, and would rise in cost if either of those distribution methods were penalised by green taxes).

The green agenda can only be moved forward by international agreements - a new Kyoto, a new worldwide agreement on airline tax (has to be worldwide to create a level playing field), that sort of thing.

I think Labour should leave the hair-shirt green policies to the other parties - only about 20% of the electorate are into green issues enough to vote on that basis. If the Tories and Lib Dems and Greens are fighting over them, it leaves the other 80% to us!