FT.com: Will taxpayers end up in a jam tomorrow?

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28 May 2010

The Financial Times reports on our findings that increases in CGT rates would do damage to the economy.

Article published in full in FT.com here. 

Tax Freedom Day 2010 is May 30, but budget deficit means tough times ahead for UK taxpayers

28 May 2010

Tax Freedom Day 2010 will fall on May 30, according to the Adam Smith Institute (ASI), which has been calculating Britain’s Tax Freedom Day since 1991.

That means that for 149 days of the year – from January 1 to May 29 – every penny earned by UK residents will be taken to pay for government spending.

This year’s Tax Freedom Day comes three days later than in 2009, when Tax Freedom Day was May 27. The most significant driver of this change was the rise in VAT which came into force on January 1: this alone pushed Tax Freedom Day one-and-a-half days further into the year.

But what about the deficit?

Tax Freedom Day is only based on tax receipts, and takes no account of the government’s budget deficit. According to the ASI’s executive director, Tom Clougherty, this can be misleading:

‘Since all budget deficits eventually have to be financed, borrowing should be viewed as deferred taxation. Our government relies so much on debt to fund their spending, that our traditional Tax Freedom Day measure makes them look more virtuous than they actually are. In reality, all they are doing is piling up obligations on future taxpayers.’

According to the Institute’s research, if all the government’s 2010 expenditure was financed by taxes rather than by loans, Tax Freedom Day would not come until July 8 – some 38 days later.

That gap points to Britain’s worst fiscal position since 1976 – when Britain had to be bailed out by the IMF – and suggests that Britons will face savage tax rises unless public spending is urgently brought under control by the next government.

Which taxes are the biggest?

The biggest part of the UK tax burden is income tax, which Britons will have to work 41 days to pay in 2010. They will work another 27 days to pay National Insurance Contributions, and 21 to pay VAT. Thereafter, various excise duties account for 13 days, corporation tax for 12, and council tax and business rates for another 7 days each. Britons will work for 3 days to pay stamp duties, and 18 more days to pay a range of miscellaneous taxes. This includes inheritance tax, which takes 15 hours to pay.

What might have been?
According to the Institute’s research, things could have been radically different if public spending had been kept under control since 2000, the last time the government managed to balance their books.

In 2000-1, three years into the Labour administration, government spending was £367.1bn. For 2010-11, the government is forecasting a figure of £704bn: nearly twice as much. If it had grown in line with inflation since 2000, public spending would now be £440.8bn – £263.2bn less than current estimates. That saving would be enough to wipe out the £163.8bn deficit, abolish all National Insurance contributions, and get rid of inheritance tax.

Dr Eamonn Butler, the Institute’s founder, said:

‘It really is pretty galling to think about. After all, if someone offered you a choice between today’s public services, today’s taxes, and government debt that will take generations to pay off, or 2000’s public services, with no debt and a massive tax cut, which one would you go for? Gordon Brown shouldn’t just be remembered for his irresponsibility, but also for a decade of squandered opportunities.’

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The Times: Hammered: the savers who did the right thing

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26 May 2010

The Times reports on our finding that increasing CGT rates in other countries has led to falling tax revenues.

Published in The Times here.

John Redwood's Diary: Tax the rich by cutting the rate

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Old Teaser

25 May 2010

John Redwood MP writes on our findings that higher CGT rates do not mean higher tax takes at his personal blog, John Redwood's Diary.

Published in John Redwood's Diary here. 

ConservativeHome: Madsen Pirie on Platform on why the Coalition should rethink its plan to raise capital gains tax

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25 May 2010

Madsen Pirie argues at ConservativeHome that the Coalition's plan to increase CGT rates is poorly thought out and should be dropped immediately.

Published in ConservativeHome Platform here. 

Georgian Times: WSJ exmplifies Georgia as reformer in economic sector

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25 May 2010

The Georgian Times reports on Eamonn Butler's praise of Georgia as a model of reform.

Published in the Georgian Times here.

City AM: Do these cuts go far enough?

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25 May 2010 

Eamonn Butler argues that the cuts packaged announced is a step forward, but what is really needed is a reform of government at large in City AM.

Extract from City AM published here. 

Madsen Pirie on Reuters TV

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24 May 2010

Dr Madsen Pirie appeared on Reuters TV discussing the £6.2 billion of spending cuts laid out by the coalition government.

Published on Reuters TV here.

Reuters TV: Madsen Pirie on government spending cuts

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 24 May 2010

Dr Madsen Pirie appeared on Reuters TV discussing the £6.2 billion of spending cuts laid out by the coalition government.

Published on Reuters TV here.

Sunday Telegraph - Letters to the editor

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23 May 2010

ASI fellows Tim Worstall and Sam Bowman both had letters published in the Sunday Telegraph on Capital Gains Tax and DFiD. 

Published in the Sunday Telegraph here.