Home What's New Speeches & Articles Newsletter - Nov 2008 Biography Diary Contact Information Photo Album Parliamentary Highlights Publications Links MEPs' Transparency   Conservative Party Latest News from Conservatives.com Conservative Party Website
		Higher Income Taxes - The Way Forward By Chris Heaton-Harris MEP Bizarrely there seems to be a drive from various parts of British "civil" and political society to get the government to raise taxes. Actually anyone looking at the British government's books at the present time would see that the wish of these trendy-lefty do-gooders is almost certainly going to have to become a reality in the next eighteen months, as this government is borrowing and spending way beyond its means. But casting these future economic woes to one side for a moment, how come it seems no one is challenging those calling for higher taxes to pay for our public services in a more rigorous manner? In fact, how come no one is reminding the British public of the well proven economic fact that the higher taxes rise, the more people will avoid paying them? So many people seem to have forgotten that when Mrs Thatcher became Prime Minister back in 1979 and set about reducing the higher rate of tax, she found herself benefiting from greater than expected tax revenues. When President John F. Kennedy cut taxes across the board in the 60s, the result was the longest, sustained economic expansion in American history until President Reagan was installed in the Oval Office. It is dead simple: lower taxes generate more revenue for government and stimulate economic growth. There are always those that will try to avoid paying any tax, but most people will not go all out to avoid the Inland Revenue if they believe the difference between their gross and net earning both reflects the level of services they receive as a citizen, but also leaves them enough of the earnings they created in the first place to live the way they want to. In the book "Taxation: The People's Business" by Andrew Mellon, a man who was Secretary of State under the US Presidents Harding, Coolidge and Hoover, this theory is well documented and discussed. The book states: "The history of taxation shows that taxes which are inherently excessive are not paid." "The high tax rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business and invest it in tax-exempt securities or find other lawful methods of avoiding the realization of taxable income." It seems that over the past thirty years people have come to understand there is a need for taxation and are generally comfortable with paying tax at a reasonable level; but at what point does this reasonable level become "inherently excessive" - at what point is it worth people trying to find different methods of reducing the tax they have to pay? We should never forget that one of the best and easiest ways of limiting overbearing, excessive and expensive government is to keep a tight hold of its purse strings, to limit the amount of money it can spend by reducing the amount of money it receives - by cutting taxes. Its only recourse then, if it wants to increase its budget, is to increase borrowing. This option is becoming politically less acceptable as each year passes. It seems that the voting public has become aware that government borrowing simply equals deferred taxation. It seems daft to argue against the proven theories that show us the benefits that lower taxes can bring; but there again, perhaps in Great Britain in the 21st Century things are changing. It is fair to say that when people give answers to opinion pollsters, they very much try to tell the truth, but they always see themselves as having a slightly better social conscience than is actually the fact. In a recent poll asking people to place themselves on a scale of left to right in political terms with zero being in the middle, people rated themselves as minus 2 on average. Other polls seem to suggest that there is a body of people out there across the UK who say they would be happy to pay higher taxes for our key public services. Well in these times when nearly everyone has to fill out a tax self-assessment form for the Inland Revenue and where we now have the technology to maintain up to date tax records on every economically active person in the country - why don't we let those who want to pay extra tax? Think about it. We Conservatives believe in all sorts of freedoms and we most certainly believe in choice - so if someone is of a mind where they decide voluntarily they would like to pay an extra 1%, 5%, 10%, etc. in taxes to the government, who are we to stop them? As these people are voluntarily contributing to our public services, why not allow them to indicate on their self-assessment form not only the percentage of extra tax they would like to be collected from them, but also which (if any) public services they would like to see this extra money hypothecated to? So how could this work? Well, in theory at least all adults in the UK fill out a bulky "self assessment" form for the Inland Revenue each year. For many this is the opportunity to try and prove to the IR that they should actually be paying less tax - but why not have an extra page entitled "Voluntary Contributions?" Here people could tick boxes that would allow the IR to adjust their tax code and make extra deductions throughout the following year. People could also tick boxes to hypothecate part or all of these extra monies to individual government departments. The government could then, in December publish a list, by department, of the extra amounts - on top of those already agreed in that year's spending review - that each area can expect from voluntary tax contributions. Personally, I am not sure as to how many people would choose to take up this option and there would no doubt be an extra administrative cost associated with dealing with those that choose to pay extra tax in this way; but surely voluntarily paying extra tax should be welcomed with open arms by modern day society. And perhaps allowing this group of people to do this would also be good for the democratic health of the nation. Let's say we know a 27 year old dentist, working in Surrey called Alice. She is dedicated to the NHS and has a strong belief in the benefits that well run public services can bring to society and so takes up her option to voluntarily allow the Inland Revenue to take an extra 10% of her salary - and states that she'd like half of this to go to the NHS and the other half into the general taxation pot. Would she now, as someone who is paying extra, not be more interested in ensuring that her money is not being wasted? Surely, having contributed extra, Alice would be more interested in asking her elected representatives questions about the ways they have voted and directed her money to be spent? If Alice saw money being wasted within the NHS would her reaction change from "well it has always been like that" to "hey, that's my money!" and push for reform to make her money count? In fact would Alice become more inclined to vote, to attend meetings where those who manage her money are being questioned (like Health Trust AGMs) and perhaps even more involved in "civil society?" Almost certainly there would be two types of people who would tick the box and pay extra taxation. The younger reforming type, who would almost certainly follow Alice's example and become more involved trying to make sure that their money actually made a difference and the slightly older "feeling guilty" type who could simply and easily ease their consciences by paying that bit more. Probably, having voluntarily paid extra tax for a couple of years, the reforming and/or guilt pangs would wear off and the bulk of people who exercised their right to pay extra tax would stop; but this group would always be replaced by others. Certainly for the past thirty years there has been a decent chunk of people who have indicated to pollsters that they would be comfortable with paying a bit more tax. For a long time now Conservative thought has rightly been focused on simply cutting taxes. Our focus has been fixed because in our recent political history we have had to battle with monolithic government badly run by left of centre politicians. Such governments have often meant Conservative administrations take over an economy in the doldrums and as we have seen proved again and again, lowing taxation boosts the economic fortunes of a nation state. So we have been right to try and reduce taxes whenever and wherever we can and we should also always aim to reduce the level of general taxation in the future. But surely, in these more modern times, where the public only occasionally find themselves aroused by the taxation debate, where we have the technology to facilitate the offering of such options, we should let those who really want to pay extra in our society get on and be generous. It is their money, it is their choice - what do we have to lose? Chris Heaton-Harris MEP Chris was first elected MEP for the East Midlands in June 1999 and currently serves on the Internal Market Committee and as a substitute on the Budgetary Control Committee. Chris was responsible for bringing the case of Marta Andreasen, the European Commission's Chief Accountant, to public attention back in August 2002 and has been at the forefront of fighting fraud, mismanagement and waste within the European Commission and other European Institutions. He was the Chief Whip for the Conservatives in the European Parliament from 2001 to March 2004. He is a founder member of the "Campaign for Parliamentary Reform", set up by nine younger MEPs in 2001 to attack the waste and bureaucracy within the European Parliament itself. He is Chairman of the UEFA sponsored "Friends of Football" group of MEPs and President of the European Parliament's "Sports Intergroup". Chris is a Grade 5 qualified soccer referee and is married with two children.