Sunday, June 04, 2006

Lib Dem tax policy

Today's Observer reports:

Radical proposals promising a 2p cut in the basic rate of income tax, funded by a green levy on air flights, and tougher tax rules for the wealthy will be unveiled by the Liberal Democrats this week.

Assuming that this represents the verdict of the party's tax commission rather than an attempt to pre-empt it, my initial reaction is favourable.

My worry about environmental taxes is always that they may work too well. If people change their behaviour because of the new taxes, won't that reduce the amount they bring in? How would we fund our spending commitments then?

I expect a Conference row over the end of the 50 per cent rate on higher incomes, but the important thing is the overall effect of any package. It is wrong to make a fetish of any individual tax rate.


Jock Coats said...

I didn't like it particularly...:)

Peter Pigeon said...

I agree with all of that

Ian Ridley said...

Leaving aside the merits of LVT, I think this is a great policy. However, I share your concerns about how to fund a continued 2p cut if the tax on flights works.

My view would be to honest and say that income tax will be cut using the environmental tax revenues for as long as the latter generate enough money to do so.

This policy could be extended to Fuel Duty too. The plan could be to increase fuel duty and use some revenues to further cut income tax for those on low incomes or increase the tax free allowance. However some revenues from environemntal tax need to be invested in micro-generation, public transport and other energy saving measures.

cymrumark said...

The problem with the proposed policy is that the poor end up paying the cost of global warming.

The wealthiest benefit the most from income tax cuts with those on lower incomes not receiving enough of a boost in income to compensate for the increase in indirect taxation.

Hope all the Lib dem tax proposals are as good as this!!!!

neil craig said...

It isn't about changing the total of government spending & it isn't about growing the economy so it seems to be a matter of rearranging deckchairs.