Low tax means we all win after the election
Theresa May called this general election to win a stronger mandate to negotiate a Brexit deal with the EU. But the campaign is inevitably settling around the more familiar themes of tax, spending and social policy. Labour plans higher taxes on the “wealthy”, by which they mean any household earning more than £70,000 a year. John McDonnell, the shadow chancellor, said this was a “fair” system that would not penalise the majority of workers.
What it would do, however, is hit the people who create the most wealth and pay the most tax, eventually reducing the amount available to spend on public services by suppressing aspiration and ambition. Labour’s Left wing has never understood this basic economic reality.
But the Conservatives are also being dragged onto this territory. Mrs May declined yesterday to say whether her Government would honour the tax freeze pledge given by David Cameron, her predecessor. There is, therefore, a strong possibility that whoever wins on June 8 will put taxes up.
Mrs May was keeping her tax cards close to her chest yesterday, insisting we all must wait for the manifesto to see the full details. There have been rumours that the Tories might propose a wealth tax on house sales over £5 million, though these are being played down. Rightly so. Such a move would affect so few people and raise so little money in the great scheme of things that it could only be justified within the context of Labour’s determination to demonise the wealthy and scapegoat individuals such as Sir Philip Green. As the British Chambers of Commerce argues in a paper today, the election rhetoric needs to be focused much more on maximising wealth creation by reducing taxes.
The Conservatives have traditionally been the party of low taxes, and need to maintain that position, not abandon a long-held political tenet for short-term electoral gain. Moreover, as we have seen with inheritance tax, pension contributions and stamp duty over the years, if new rates are brought in designed to hit only the very wealthy, they soon expand to draw in millions of middleincome earners. The Conservative campaign message is that without strong leadership, there will be no strong economy and no money to fund public services. This is true. But if the tax system is set up to punish wealth creators, there will be no wealth.