Tuesday, April 25, 2006

Local Income Tax - its still Minging


It takes a certain type of political mind to create a local government policy that would screw up the National economy. And not realise despite a mountain of evidence, and 20 years, that its fundamentally flawed.

The best estimate for the Local Income Tax is an 8.5% rate. So it would increase marginal tax rates in the UK from 22% and 41% to 30.5% and 49.5%. Yet study after study shows that higher marginal tax rates reduce economic growth, even Lib Dems should have the sense to know that less reward means less effort. The inevitable consequence - less growth, hence less tax revenues - a local income tax would make the National government short of cash, let alone local authorities.

The LibDems are in the middle of a review of tax policy. If the review wants credibility, it will conclude as the OECD and IMF do that taxes should have a broad base and a low rate. Which cancels out the rate hike their local income tax would effect ......... the Clause 4 of the Orange bookers?

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