Many politicians think of taxes as being a way to tax behaviour they do not support, or to tax people they dislike. There is a competition in the Commons to think up more and more groups of people – bankers, fat cats, the rich,polluters, company directors, etc – that ought to be taxed because they are not liked. It’s also popular to think up conduct MPs dislike in others. Drinking, smoking, travelling by car, getting on a plane ,creating carbon dioxide,dumping waste,living in a big house, are also thought by many MPs to be a good case to justify higher taxes. This does not stop many MPs themselves liking a drink, driving, getting on planes whenever possible, or even living in a big house.
So I thought it was time to ask how are the enthusiasts for tax getting on? Are they now taxing the “bads” enough? What do they think is bad that ought to be taxed?
On this analysis, which I understand has its limitations, the results are very surprising. The biggest bad according to the tax system is going out to work. If you dare to work hard and be successful you are commiting the biggest crime of all. Income Tax and National Insurance on employment accounted for 46% of all taxes raised in 2011.
Next on the hit list is spending. Almost 19% of tax raised comes in the form of VAT on purchases. Do not be a shopper.
Third on the list is property, accounting for 10.5% of tax raised. The taxes are higher if you dare to buy a bigger home or live in a favoured district.
Fourth is making a profit by running a company. Corporation tax pulled in 8% of the total.
Fifth was going to work or the shops by car, or flying to sell goods abroad or take a holiday. This accounted for nearly 7% of taxes raised.
Drink is sixth, at just 1.8% of tax levied in 2011, and tobacco seventh, at 1.7%. Environmental taxes including the climate change levy came well below 1%, though this popular source is destined to go up in the years ahead. There are also plenty of surrogate taxes in the form of higher consumer prices to tackle people’s love of “bads”.
Some will respond by pointing out that tax has additional aims to stopping bads. Its main aim, in my view, ought just to be to raise necessary revenue to pay for public services. Others will say the central aim of taxation should be to make people more equal. Nonetheless, many who like taxes see them as a way of influencing conduct and admit they do just that. If they think higher taxes on drink deters drinking, higher taxes on tobacco deters smoking, and higher taxes on motoring deters driving, why don’t they see that higher taxes on earning and working hard deters working, and higher taxes on profits and enterprise deters job creating investment ventures?