The Sunday Telegraph reveals that a tax commission formed by George Osborne before David Cameron became leader may cause problems for the Shadow Chancellor when it reports, probably in the autumn.
The commission, under the chairmanship of former Scottish Secretary Lord Forsyth, is expected to include a chapter on flat taxation. George Osborne appeared to be an enthusiast for flat taxation this time last year – downgraded his interest to flatter taxation at the party conference – and has hardly addressed the subject since.
The tax commission may be more helpful for the Shadow Chancellor in two other areas. It will bring forward many ideas for tax simplification – a key Osborne theme. It may also recommend ways of eliminating the tax penalties that face married families and stay-at-home parents.
The pressure on the Conservatives to find more room for ‘economy-boosting tax relief’ has grown because of evidence from across the Atlantic of the impact of George W Bush’s tax cuts. [Although the words ‘tax cuts’ should probably be banned and replaced with ‘economy-boosting tax relief’ – a ‘Don’t think of an elephant’ expression.] Bush’s tax cuts have produced a surge in growth and tax revenues that are far in excess of even the hopes of his supporters. Since the Bush tax cuts of 2003 the US economy has grown by 20%. This from a leader in today’s Business:
"From a higher base, the United States has achieved rates of growth that in some states are comparable to India and China. Arizona grew by a staggering 8.7% last year – five times the speed of Britain, just a smidgen behind China’s 9% and comfortably ahead of India’s 8.3%. Its experience is by no means unique: Nevada and Florida, which do not levy state income tax, grew by 8.2% and 7.8% respectively; Idaho grew by 7.5%, Oregon 6.7% and Utah 5.8%. An explosion of growth and wealth-creation is happening from the deserts of New Mexico to the shores of Florida – anywhere in America, in fact, where taxes are low. Europe strikes a pitiful contrast: France grew by 1.4% last year, Germany 0.9% and Italy 0.1%. But you do not need not to go as far as America to see a supply-side boom. Ireland started cutting its taxes in 1993, reducing its tax burden from 42.2% to just 34.5% today, the lowest in Western Europe. The Irish government saw its tax haul treble, up 192% in real terms over this period, while it rose 58% in Britain, even though Mr Brown raised British taxes to the highest in history."
The Business accuses David Cameron and George Osborne of know-nothing economics:
"Mr Cameron says he puts “economic stability before tax
cuts”, a phrase which makes explicit the muddled thinking at the heart
of Tory tax policy… The recent performance of the American economy is
now a standing rebuke to the intellectual laziness and pusillanimity of
the British Conservatives. The US president is running a $300bn
deficit, yet the country is not just stable but booming. Tell the
Republicans they should put stability before the tax cuts, and they
will look at you as if you’ve told them to fit a wind turbine atop
their inner-city house. When challenged in private, Mr Cameron protests
that he spent years at the Treasury, suggesting this somehow endows him
with wisdom. On the contrary, it explains both his arrogance and his
error. Just as the Foreign Office converts staff and ministers to the
pro-European cause, so the Treasury infects its inmates with the wrong
principles about tax."
Related link: ConservativeHome Q&A with George Osborne