Stuff ain’t free: has the time come for higher taxes?

Dishonesty is an unfortunate characteristic of most politicians. Famous for breaking promises, the profession struggles with an image of untrustworthiness. That is however no hindrance for the electorate to readily applaud suspiciously generous policies, as long as they themselves are the beneficiaries. Look no further for evidence than the Labour manifesto: a list of generous giveaways with the promise of no tax increases for anybody except the reviled 5% richest has helped to dramatically close the gap to the runaway election favourite Tory party. The spending proposals were accompanied by a preposterous ‘comprehensive costing’ analysis which at best can be described as naïve, at worst as outright misleading.

What Labour refuses to tell a gullible public is the simple truth that if you want more stuff, you will have to pay for it. Disregarding the moral bankruptcy of a pitch to the 95% that they can have free goodies if the money is just taken from the 5%, it is simply misleading to present such a profligate programme alongside a claim than hardly anybody will have to fork out to fund it. A supposedly austere Tory government is after 7 years in power running a deficit of GBP 69bn (2015/16) and government debt to GDP stands @ 89.3%. More revenues or more austerity, not more spending, is obviously what is called for.

But the sad truth is, of course, that it works. A credulous electorate has unsurprisingly shown itself ready and willing to believe the promise of a free lunch. Since the launch of their respective manifestos, the Tories have seen their lead shrink by up to 15 percentage points, putting Labour back in with a (small) chance of victory. A giveaway is popular and taxing the rich appeals to the envious, vindictive sense of so-called ‘fairness’ that many voters unfortunately share.

Of course it won’t work. Taxing big business and the rich is an easy message to sell, but rarely works out as planned. The fact is that corporations don’t pay tax, people do. Tax is just another cost to business; it reduces incentives to invest and is passed on to consumers in the form of higher prices. And raising taxes on the rich incentivises tax avoidance and dis-incentivises investment, hard work and success. Revenues to the treasury may nudge up, but not in line with the naïve, mechanical, linear calculations the Labour Party seems to rely on.

In short, raising taxes is destructive and counterproductive as well as immoral. But the only way of funding new, large-scale government programmes is by taxing the middle class. That’s where the money is. Every politician knows it, including Jeremy Corbyn (though to be fair, maybe his astonishingly incompetent Shadow Home Secretary Dianne Abbott is unaware). The electorate has once again shown an insatiable appetite for more government spending. But stuff comes at a price and the UK has for a long time been living way beyond its means. It’s time to be honest with the voting public: if you keep falling for the promise of ever more things provided by government, the time has unfortunately come to call for higher taxes for all.

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