Andy Burnham, a Labour leadership contender (albeit one unlikely to win) has argued this morning:
It's time to lose New Labour's timidity in the face of tax and make a moral argument for it playing a bigger part in deficit reduction. It is fairer than sudden and deep spending cuts, which will leave vulnerable people without support and forever change the character of our public services.
He’s absolutely right.
And he’s right that the reform must not be minor tinkering, but structural as well. So he argues that land value taxation should replace stamp duty on property transactions and a health care levy should replace Inheritance Tax.
I support a land value tax when part of a programme of taxes. They’re just, equitable, and so long as provision for the cash poor elderly is made, fair.
I have more problems with a hypothecated levy on all estates for care of the elderly. It’s not because I’m wedded to Inheritance Tax: that’s a tax that has been so gutted it is in need of replacement. That’s obvious. My concerns are firstly that such a levy is not progressive. It should be. We can and should charge larger estates more — and there should be more limited exemptions and with Capital Gains Tax then being chargeable on death, which it is not at present.
Second, hypothecation always worries me. It might help sell the tax — but it also undermines the whole system of taxation by suggesting some things are worthier than others when it comes to paying tax. That’s not true. Tax systems work as a whole, or not at all.
But at least he’s debating the ability of tax to cut the deficit and deliver real reform in society. That’s the Joy of Tax!
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Well, obviously, I shall have to vote for him now, despite his support for WMD, because he has converted to LVT – and I think it was me wot did it!
Note that he is talking about abolishing IHT but introducing an annual wealth tax. I think the hypothecation for care of the elderly is rather good. It won’t be easily avoided. The wealth tax, like IHT, will be easy to avade, I’m afraid, but at least you could employ some extra snoopers to keep the wealthy on their toes and make collection worthwhile.
I used to be against hypothecation for the reasons you give but the Fabian tax review several years ago came out with this as the main idea for change. I certainly think that (part of) NICS should be hypothecated for decent pension provision.