Tax and Labour timidity

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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!