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is-it-time-to-introduce-a-labour-tax

People who recognise that incentives matter generally oppose taxes on work. Confiscating a fifth, two fifths or even a half of each further pound that a person earns is a great way to encourage them to spend more time in the garden.

Yet the inescapable truth is that the government needs money. Whoever wins the next general election, the new government will be faced with outstanding debts of £173bn. Assuming that it does not have the courage to introduce the swinging cuts needed to pay these off quickly, taxes are going to have to rise. And because the only tax increases that really yield the desired amount of revenue are those on immobile factors of production, and because taxes on land (the most immobile factor) remain politically impossible, this means that taxes will have to fall on immobile labour; aka. basic rate taxpayers.

In the absence of sufficient public spending cuts, therefore, I propose a labour tax. And in the interests of transparency, it should be called The Labour Tax. Though it would effectively be an increase in the basic rate of Income Tax, it would appear separately on people’s wage slips: an additional line below Income Tax and National Insurance.

This tax would have two unique and vital features. Firstly, by being distinct from Income Tax and hypothecated to the repayment the national debt, it would clearly demonstrate to taxpayers how much Labour’s reckless borrowing and economic incompetence was costing them, month after month. And it would remind people every month exactly who ran those debts up in the first place.

Secondly, it would be a part of the enabling legislation that the tax automatically expired upon the final repayment of the national debt. Once the country was back in credit and Labour’s profligacy was paid off, the tax would cease and every taxpayer would automatically be substantially better off. And they would know why.

The government of the day might then want to declare a national holiday, a one day rest for people to sit about and contemplate how long and how painful was the burden of debt left to them by Labour. And if the government also chose to hold a General Election on that day, the electorate might carry that thought with them to the ballot box. If so, one could be sure that the instigators of this financial mess never saw office again.