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September 24, 2011

Cross-Party progress on Tax Shifting

As the Party Conference season progresses, it is becoming clear that many see part of the solution to the stagnation in our economy lying in shifting taxes off earnings and profits onto wealth and land.

At last week's Lib Dem Conference in Birmingham, delegates overwhelmingly voted for a motion that put Tax Reform at the top of the priority list for policy development. The policy paper Facing the Future says: "We will need to further develop our thinking looking at wealth taxes, land taxes....making the tax system incentivise innovation and enterprise".

The Party is expected to set up a new Tax Commission this autumn. The Chair of the last Tax Commission, Lord (Dick) Newby, writing in The House Magazine this month, says: "For many years, the Lib Dems have favoured introducing site-value rating for residential property, so that all owners of land and property pay a fair share of tax". The Party reaffirmed its support for replacement of Business Rates with a site-value-only tax, within a single Parliament, in 2007. At that time, Council Tax (CT) was to be replaced by a Local Income Tax (LIT), which would leave residential property without any form of tax.

Now, in a local government finance consultation paper that was discussed at an informal session just before the main Conference, Lib Dems propose instead to localise a portion of national income tax - sharing it between the local authority where a taxpayer lives and the one where (s)he works. But at the same time, the Party proposes to introduce a site-value rate on homes, payable by owners not occupiers.

The Lib Dem economic campaign group ALTER, while welcoming these developments, stresses the need for any tax shift to be at a national level, if it is to have a significant impact on the national economy. "Limiting land-value tax to councils reduces the potential impact of the policy to 1/20th of what might be possible if it were levied nationally," says Dr Tony Vickers of ALTER.

Vickers, a member of the Tax Commission from 2005 to 2007, pointed to a piece on the influential ConservativeHome blog, written by Tim Montgomerie, which says "I predict very significant public and Tory support" if we "tax wealth more and income less". However Vince Cable's so-called Mansion Tax, which could be considered a very crude form of wealth tax, seems to have found little favour with the Tory leadership so far - and ConservativeHome's own columnist Anthony Browne has attacked all such taxes vigorously.

However one comment posted in response sums up a more 'common sense' response from 'QP':- "I only promote property (land primarily) taxes in-lieu of taxes on income and VAT. Without taxes on land, you are more likely to [have] booms in the property market and as house prices go up w.r.t incomes, the "tax", or more accurately rent, is pocketed by the banks (in mortgage interest) and anyone who has large property holdings.

"I want my children to be able to buy a house because they work hard and are enterprising not because they can receive any windfall gain I might have picked up and passed on. This is why I think we should shift the burden of tax away from income and trade and on to land."

As Labour begins its Conference in Liverpool, the Editor of New Statesman Jason Cowley is quoted in the Independent newspaper saying: "Labour needs to find new ways of switching the tax burden from earned to unearned income, from punitively taxing wages and consumption to land, property and assets".

Posted by Tony Vickers at September 24, 2011 3:03 PM | TrackBack

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