Published:


Madsen PirieMadsen Pirie
is President of the Adam Smith Institute.

In fact, we
all work for the government because the taxes we pay support its
activities.  For most of us that includes
income tax and National Insurance.  For
some it includes tobacco duty, alcohol excise duty and fuel tax.  For all of us it includes VAT, and for most it
will include council tax.  The list of
the different taxes we pay to fund government is mind-bogglingly long, but the
Adam Smith Institute has painstakingly listed and costed them all, as it has
done for 25 years in order to calculate how long we spend working for the
government.

The good
news is that the average person in the UK ceases to work for government from
today.  In other words, today, May 30th,
is Tax Freedom Day, after which people start working for themselves.  The concept is a simple one.  We add up all the taxes, direct and indirect,
visible or stealth, and work out what they amount to as a proportion of the
UK's net national income.  This year it
comes to 41.5 percent.  That same
percentage, expressed as a proportion of days in the year, comes to 150
days.  So, if we had paid everything to
the government since January 1st, it would have taken 150 days before the
average person had paid the amount the government takes from them each year.


It might be
good news that today is Tax Freedom Day, but the bad news is that it falls a
day later than last year.  This means
that for all the talk of austerity and spending cuts, the government is
spending more of our money this year than it did last year (after correcting
for the extra day that a leap year brings).

Gordon Brown
used borrowing to conceal his big spending, and this coalition government is
still borrowing.  If you add that
borrowing to what government spends from tax receipts, the picture is even
worse, with the “cost of government” day not being reached until July 13th,
another month and a half away.

Tax Freedom
Day has always been deeply unpopular with the Treasury, with successive
Chancellors of the Exchequer, and with those whose ideology calls for big
spending.  The reason for this animosity
is straightforward.  Politicians like to
conceal how much of our money they are taking and spending, but Tax Freedom Day
exposes them by revealing the total amount we all pay.  By revealing the total we bring to people's
awareness just how big a burden they are supporting.  And that, in turn, makes it more difficult
for the big spenders to increase that burden without incurring public
hostility.

My
colleague, Eamonn Butler, points out that a mediaeval serf had to work only
four months a year for their feudal overlord, whereas government today demands
five months of our year.

Taxation
undermines growth and wealth creation. 
Every time the government takes a cut it makes an activity less
worthwhile.  Whether that activity is
trade an exchange, or earning and spending, it is made more expensive to do
because of the tax, and people respond by doing less of it than they would
otherwise have done.  Taxation makes the
economy grow less that it otherwise would, and it means that people become less
wealthy than they otherwise could.

Things could
be worse, in that at least we don't have to wait until mid-July as the French
do, but they could also be much better if, like our Australian and US
counterparts, we stopped working for government by mid-April.  The lesson is clear: government should cut
spending and cut taxation, and allow people to get on with the business of
working for economic growth instead of working for government.

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