The Case For Cutting Taxes

Article written by Nisha Rikhi, BA in Politics and International Relations from University of Sussex, GDL graduate, and current LPC student.

It is clear that middle class families and small business owners have been squeezed by successive governments in relation to tax. When the middle classes are the bulk of the population, and often owners of small businesses, squeezing them with taxes is both unjust and short-sighted.

Inheritance Tax and Capital Gains Tax

Inheritance tax and capital gains tax needs to be abolished immediately. This is because it is grossly unfair to ask people who have worked hard all their lives to earn their wealth to pay the government anything. It is the owners of small businesses and the children of middle class families who deserve to benefit from that hard work, not the government. This strategy for increasing government income is based on the idea that people who succeed in business or who become wealthy due to their hard work should be punished for this. Why should middle class families be punished for their success? It is a backward thinking and regressive policy that will only hurt the economy in the long-term. It is backward thinking policy because it is based on jealousy and the idea that individuals, middle class families, and business owners should be punished for their own success.

It is also a regressive policy because it fails to recognise that small business owners and the middle class will simply sell up and leave the country in order to build lives in countries with a lower tax burden. That means that the government is effectively hurting the economy as their policy is leading to a brain drain of talented and educated people who drive the country’s productivity. The government must recognise that middle class families and small business owners have the right to keep the wealth that they have worked so hard to create for themselves. Therefore, abolishing both inheritance tax and capital gains tax are essential to ensuring that business owners and the middle classes stay in Britain and continue to invest in this country’s economy.

Small Businesses

Small businesses are the engine of the British economy and the majority of employers in the UK are small business owners. Inflation, the rising costs of essentials, and the increased base rate have made already difficult conditions much worse for small businesses. Therefore, it is in the government’s interests to make sure they create an environment in which small businesses can thrive. In a time when businesses are facing rising costs and seeing a fall in customers coming through the door, taxes have become a burden that makes owning a small business unviable. Government could help small business owners by cutting the amount of VAT that all small businesses pay and reducing the amount of tax all small business owners pay on dividends. This would ensure that both the business and the owners benefit as the owners could reinvest the VAT savings in the business while seeing a greater profit from lower taxation on their dividends.

Furthermore, government could cut business rates for all small businesses, which would allow small business owners to make greater investment in staffing, particularly staff training, for example. Allowing small businesses to keep and reinvest more of their earnings will benefit the economy in the long run. This is because they will be able to keep their staff instead of having to reduce hours or make staff redundant to cut costs and they will be able to reinvest the money to increase the earnings the business makes. By cutting taxes on small businesses, government will make it easier for these businesses to thrive and therefore enable employers to employ more staff and better support the staff they already have. This can only be beneficial to the economy.

Taxing Multinational Corporations

Instead of taxing the middle class and small businesses, government should be taxing multinational corporations. These are the companies who can most afford to pay higher taxes. They operate in countries around the world, often benefiting from cheap labour and are often able to pay the lowest tax possible. Government should pass legislation that forces these multinational corporations to pay the highest rate of corporation tax. This would be fairer as it would ensure that the biggest and wealthiest businesses are paying more while the smaller businesses, who can least afford it, pay less.

Government should also extend and increase the levy on the oil and gas industry. This is because the oil and gas industry make millions in profit worldwide and could easily pay higher rates of tax given the excess profits they make. The sugar tax on sugary drinks should be extended so that it encompasses confectionary and junk food. This would increase national revenue as companies would be forced to pay a higher rate of tax on products which contain a high sugar content. Government should increase the excise duties on tobacco and tobacco products, and vaping products that are being produced by the tobacco giants. These are all examples of multinational, global industries that could easily afford to pay much higher rates of taxes.

Government should be targeting multinationals with higher taxes as they can bring in higher tax revenues which could be put to the public benefit. For example, the state could use the proceeds from the sugar tax on funding the health system and social care, and programmes targeted at reducing obesity. The state could also use the proceeds from the levy on the oil and gas industry to fund environmentally friendly reforms, and the state could use the tobacco excise duties to help fund the NHS, and particularly healthcare in areas that cater to those suffering from smoking-related illnesses.

Private Schools

The Labour party, should they enter government, must not tax middle class families on making choices that they do not like. Many middle class families choose to send their children to private schools. There are many people, including politicians, who do not like this, but they forget that it is a choice for families to make with regards to what is best for their children. Given the state of the state education system at the moment, with special needs children not having their needs being met and children struggling with mental health, it is clear that the state school system is failing a large proportion of children. Therefore, families have the right to make decisions that will benefit their children, and if that means sending a child to private school, then that is something that should be encouraged, not punished by the state.

Taxing families on choices they make privately, particularly with regards to their children and how they live their lives is morally repugnant. We live in a free country, and we should not be punishing people for exercising their right to choose. The government, and all political parties, should therefore desist with the implementation of regressive taxes which only seek to squeeze middle class families who make choices that are unpopular with the less fortunate.

Therefore, it is clear that there is a case to be made for cutting taxes. It may not be popular, but it is a case that has to be made and put forward given that the tax burden in the UK is the highest it has ever been and the people who are being squeezed are the middle class.