Yippee! Wednesday 28 May is Tax Freedom Day. Groan! The average person in Britain has to work 147 days of the year solely to pay taxes. Only then do we start earning for ourselves.
This year Tax Freedom Day falls three days earlier than in 2013. But we still labour nearly five months solid just to meet the Treasury’s demands. Even then, the government borrows another £1 for every £5 it collects in tax – borrowing which future taxpayers will have to repay. Add that in and the total Cost of Government Day does not arrive until 26 June!
The deductions on your payslip show only a small part of your total tax burden. Your employer pays the bulk of your national insurance, and when you start spending your pay you will find yourself paying value added tax and various other levies on alcohol, tobacco, cars, fuel and much else.
A billion here, a billion there all adds up. The Treasury hates Tax Freedom Day precisely because it shows the bottom line so clearly. They try to conceal the take by cooking up stealth taxes or by making the tax rules so complex that nobody can work out what they are really paying. And that has made the UK’s tax code one of the longest and clumsiest in the world.
But we should be told what we are paying. Only then can we see whether we are getting good value for money from our government apparatus. (Do you have to ask, though? That apparatus has grown in size by about a half since Gordon Brown became Chancellor in 1997. Are we really getting half as much benefit again?)
High spending and high taxes stifle economic growth. There is even a graph which economists use to illustrate that point, called the Rahn Curve. A bit of public expenditure seems to help growth – basic infrastructure, policing, defencd and justice have a cost. But when government spending tips over 40% of GDP, growth tends to slow. And we are well past that tipping point.
The message of Tax Freedom Day is simple. We are paying much more tax than we imagine. The lesson for politicians and tax authorities is to accept that, and to reduce and simplify Britain’s taxes.