Eoin isn't happy.
According to the OBR (table T4.7 29/11/11) George Osborne is planning to raise more than £300,000,000,000 in extra taxes this parliament over and above what Labour were taxing people in 2010-11. That in itself will shock many Conservatives but since I'd prefer that taxes were raised as opposed to cuts, I will not take him to task for that. My issue is how George Osborne plans to raise those taxes. If you are going to raise more than £300bn in new taxes it is important that the burden falls on the broadest shoulders right? Well, not according to Osborne no.
According to the OBR, Osborne is planning to raise an extra £96bn in Income Taxes, and extra £92.8bn in VAT and an extra £72bn in National Insurance. You remember National Insurance at the last election was referred to as a 'Jobs Tax' by the Chancellor? He then promised that he would cut this so-called 'jobs tax'. You trust a Tory at your own peril. But, to top it all off, George Osborne has opted to only raise £4.5bn in taxes from profit. Yes, that's right, he'll tax consumers and workers to the hilt but profits escape the hit. Osborne is happy for the profiteers to go on raking in large profits and for ordinary people to foot the bill through taxes.
Like so much with Eoin's work, the precise calculations are hard to verify. I found Table 4.7 but no matter how I jigged and poked the numbers, I couldn't get them to add up to £300m, which is, after all, only £60m per year. Put another way, the growth in taxes from2010/11 to 2015/16 is only compound growth of 4.6% per year, or approximately inflation. So portraying this as a giant smash and grab on the working poor is rather over-egging the cake.
Then we can take issue with his hypothesis that taxes on income hit 'ordinary people' whereas taxes on corporate profits don't. This is an idiotic viewpoint. Remember our favourite HMRC table, which shows who actually pays income tax. The 1%, much hated by #occupylsx, actually pay 27.7% of all income tax collected in 2011/12. And the richest 25% pay almost a full three-quarters of all income tax. Income tax is very much a tax whose weight falls on the broadest shoulders. Given the 1% rate of NICs on higher incomes, you would expect the distribution of NICs to be less progressive. But VAT, as we've shown before, is progressive on expenditure. Given that it's a consumption tax, it's silly to try to measure it against incomes.
Similarly, the issue of who bears corporation tax is hotly debated, as Tim Worstall often reminds us. But who are these fat cat owners of UK companies? By and large, it's ordinary working people through their pensions and insurance assets. Even if you believe the incidence of corporation tax is the company's owner, taxing companies more would only hurt ordinary people.
And then there's the logical flaw. Eoin assumes that all increases in tax over the base year of 2010/11 must be due to deliberate tax increases. But there are a raft of reasons why the tax take will increase without such deliberate action, including growth and fiscal drag. Or indeed, any successful attempts to reduce tax avoidance and evasion would also increase the tax take.
Isn't it wonderfully ironic that a possible explanation could be that George Osborne has finally cracked the problem of tax evasion, and left-wing commentators criticise him for it?
HT: Jonathan M