Tax Freedom Day 2012 will be 29 May

·     Tax Freedom Day falls two days later in 2012 as UK re-enters recession

·     Austerity measures cut the Cost of Government Day back to 23rd June, seven days earlier than in 2011

The UK's Tax Freedom Day – the day when Britons stop working for the Chancellor and start working for themselves – will fall on 29th May in 2012.

The Adam Smith Institute has calculated that, for 149 days of the year, every penny earned by the average UK resident will be taken by the government in tax. This year’s Tax Freedom Day falls two days later than it did in 2011. (Note: TFD was 28th May in 2011, and this year’s date includes the extra day for the leap year).
 
Tax Freedom Day falls later this year down to a number of factors. The double-dip recession, the VAT increase from last year, our high personal taxes, as well as fuel duty and stealth taxes, all mean that the government is taking a larger share of our hard-earned income. Britain’s tax burden is still too high and tax cuts are desperately needed to boost economic growth.
 
This year’s corporation tax receipts are a good example of how tax cuts can pay for themselves. There were large increases in tax revenue from onshore corporation tax, coinciding with the government’s cuts to the headline rate of corporation tax. Reductions in the corporation tax rate have brought the government higher revenues as more companies choose to invest in the UK. By stimulating growth and investment, tax cuts really can pay for themselves.
 
However, our Tax Freedom Day still falls long after the USA’s, on April 17th and Australia’s, on April 4th. Our only comfort is that our tax burden isn’t quite as high as France’s, which will have to wait until July to celebrate its own Tax Freedom Day. With Hollande now in power, that day could get even later in years to come.
 
Cost of Government Day

Tax Freedom Day only measures the money actually raised by the government in taxes, not the full amount it spends. The government borrows one pound for every four it raises in taxes, so if the full cost of government is considered the Cost of Government day, this would fall on 23rd June.
 
Last year’s Cost of Government day fell on 30th June, meaning that the government’s austerity measures have reduced the cost of government by 7 days. But, when we take into account the extra two days tax burden, the net effect of George Osborne’s austerity measures is a measly five days net cut in the burden faced by taxpayers. “A lot of work still needs to be done,” says the Institute, “ to bring down government borrowing and the Chancellor must make more tax cuts to allow greater economic growth.”

ASI's Director, Dr Eamonn Butler, says "Tax Freedom Day, which the Adam Smith Institute has been calculating for 25 years, is the plainest way to show what the tax burden really is. That is why the Treasury hates it. They of course want to conceal how much tax we pay, which is why they are so keen on stealth taxes."
 
"But we put in every tax, including stealth taxes  – income tax, national insurance, council tax, excise duties, air passenger taxes, fuel and vehicle taxes and all the rest – and show just how long the average person has to work to pay their share of them all. The stark truth is that this burden costs us all 149 days of hard labour every year. That's not how long a rich person has to work – it is the time the average person must labour for the tax collectors."
 
“In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.”
 
"An increasing number of economists believe that Britain's taxes are too high and are choking off recovery. Some politicians say they need to keep taxes high in order to balance the government's books. But the trouble with governments is that they always spend everything they raise in tax – and then as much more as they can get away with through borrowing. Just as the rest of us have had to cut back, so should the government. The UK economy would be a lot healthier for it."
 
Steve Baker, Conservative MP and member of the executive of the 1922 committee, adds: “Many congratulations to The Adam Smith Institute for making transparent the cost of government and just how far government lives beyond its means. It's time to ask whether society is well served by such a huge state or whether we wouldn't all be better off with institutions which know their limits. A wealth of evidence is currently emerging which suggests we should stop fibrillating and make a near-revolutionary commitment to ending crony capitalism and embracing social cooperation through business.”

Tax Freedom Day 2012

• The Sun
• The Times
• Daily Mail
• Daily Express: Tax Freedom Day 48 hours later
• City AM: Osborne's U-turn comes as UK celebrates tax freedom day
• The Scotsman: Waking up a little bit richer today...or not
• The Herald
• BBC East Midlands Today
• Radio Five Live, Morning Reports
• LBC
• Eamonn Butler on the Jeff Randall Show
• BBC Radio 2
• Eamonn Butler writing in ConservativeHome: It's Tax Freedom Day today. 
• The Morning Star: Shove off into a corner
• Money Morning: What Tax Freedom Day means for you
• London Loves Business: Raise tax-free allowance and stop minimum wage
• Telegraph.co.uk: If ever we get out of this economic mess, it'll be the City AM - not the Financial Times

Summary

The Adam Smith Institute calculated that Tax Freedom Day will fall on 29 May. We received widespread coverage for this, including over 100 news websites, most national papers and 20 regional papers. Here's some of the highlights.

Don't ignore the powerful moral arguments against high taxation

WE ALL know the moral arguments for taxation: it pays for police, roads, hospitals and other vital services. But there is a moral case against taxation too – and a surprisingly strong one.

First, while most of us would happily make some voluntary contribution to essential services, it is only the threat of prison that makes us stump up taxes at today’s eye-watering levels. Tax is extracted by force – and the use of force is an evil we want to minimise. That puts an awesome responsibility on governments to ensure that every penny they extract through coercion is spent wisely. Waste and bureaucracy are not just a drain on the economy – they are a moral outrage.

But not only is taxation a form of confiscation by coercion. It is confiscation by groups who believe their values and priorities are superior to other people’s – a breathtaking moral claim. It forces families to pay for things they fundamentally disagree with. People with deep moral objections to abortion or foreign wars or mixed-sex schools have to live with the dismal thought that they, unwillingly, help pay for those things. That should give politicians the utmost discomfort, though I doubt it does.

Tax reduces people’s ability to act morally. They might prefer to spend their money on helping their children become good citizens, caring for their elderly relatives, or supporting good causes. Instead they see it taken and going on bank bailouts or expensive prestige projects. Though we wish to see individuals, families and local groups taking more responsibility for their own lives and welfare, high taxes leave them less able to do so.

And when the authorities usurp our choices, we cease to be morally sovereign and responsible individuals, and become mere agents of the state. A society cannot be considered “generous” or “caring” when its care and generosity is funded on money forced out of people, rather than freely given. Giving that comes voluntarily, through the public spirit of private donors, is far more laudable morally than support that is extracted by coercion.

Americans give almost twice as large a proportion of their earnings (1.67 per cent of GDP) to charity than does the UK (0.73 per cent). In large part, that is because the US government absorbs a much smaller part of its citizens’ income, leaving them space to make their own giving decisions. Within that space, Americans have become the largest philanthropic givers in the world, with libraries, orchestras, hospitals, schools and medical research all funded by private donations.

By contrast, we in the UK pay so much in tax that many of us convince ourselves that we have no outstanding social obligations at all. We are told that our taxes do wonderful work paying for education, welfare and policing. So we see it as teachers’ jobs, not ours, to ensure our children are literate and well behaved. We see the duty to help others as a matter for the welfare state rather than accepting that duty on ourselves. We even walk blindly past crime, vandalism or neglect, reassuring ourselves that these are things for officials to deal with.

And when people believe the state will provide, they see less reason to contribute to philanthropic causes. Why support good causes when the state already supports them? A classic example was the Royal National Lifeboat Institution (RNLI), which was created independently in 1924, but later fell on hard times. In 1854 it started accepting government grants. But for every pound the government put in, the RNLI lost thirty shillings (£1.50) in voluntary donations. So in 1869 it cut loose again – and has flourished ever since.

Remember too that our politicians and officials have their own interests, which inevitably colour how they spend our money. Ruling politicians steer tax revenues to their own supporters and pet causes. Interest groups vie against each other for grants and subsidies. The only group not represented in this carve-up of taxpayer funds is, unfortunately, taxpayers themselves.

Taxation, then, rests on force. It undermines morality, crowds out charity, rewards power, undermines personal responsibility, promotes group conflict and turns governments and the public into cheats. Taxation may be a necessary evil – but it is still an evil.

Eamonn Butler is director of the Adam Smith Institute and a contributer to the 2020 Tax Commission.

You can read his article on CityAM here. 

Summary

Dr Eamonn Butler makes the moral case against taxation in City AM's The Forum section. 

No easy solutions for Greece and the euro

He argues that the costs of staying in the Euro for Greece would exceed the costs of a possible recession. He argues that public finances and business certainty would be improved by getting the pain of transition over sooner rather than later.

Read the article in full on The Guardian here. 

Summary

Dr Eamonn Butler writes a letter in The Guardian arguing that the costs of Greece staying in the Euro will be far higher than it leaving the Eurozone now. 

Banking mafia

Sam Bowman talks on Russia Today on how banks should be reformed, why they should be allowed to fail and how we can open up the sector to more competition. 

Watch on Russia Today here. 

Why don't we start privatising the police?

He argues that British law and order is not just dependent on the police, but also on those who work in private security. He argues that where police are failing residents, they should be able to pay for private services to improve their security.

You can read the article in full in the Evening Standard here. 

Summary

Dr Tim Evans, ASI senior fellow, writes in The Evening Standard on the need for a radical reform in policing. He says Theresa May doesn't go far enough and suggests a number of measures that could be intorduced in London to involve more private security forces in policing. 

Lost work ethic and the welfare state

Sam Bowman talks on BBC Radio Scotland on the importance of further cuts to the welfare state. He argues we have an issue with dependency, with too many people now reliant on benefits rather than seeking self-sufficiency.

He also argues we need to scrap the minimum wage and introduce various supply side reforms, including cutting employment regulations, in order to allow more jobs to be created.

You can listen to the interview on BBC Radio Scotland here (from 1hr11 in).

Coverage on our sin taxes and minimum alcohol pricing report

Chris Snowdon's report 'The Wages of Sin Taxes' was released following Scotland's announcement on a 50p per unit minimum alcohol pricing. The report and our comments on the policy received widespread pick up with over 140 websites featuring our report and responses. Our comments featured on Radio 4's World at One and on nearly every national and regional Scottish paper. Below are some of the coverage highlights:

Radio Five Live: interview with Sam Bowman (listen here from 54mins)

The Scotsman: Chris Snowdon's analysis of minimum alcohol pricing

The Sun: Kicking no butts

Press Association, The Times, Daily Telegraph, Scottish Metro, Daily Record, The Herald, Press & Journal and Daily Express featuring our comments.

Guardian Comment is Free: Minimum alcohol pricing? Blame those vomiting girls

You can read the full report here and press releases here and here. 

Taxes on alcohol and cigarettes don’t discourage consumption and hit the poor hardest

·     “Sin taxes” on cigarettes and alcohol are designed to boost revenue, not improve public health

·     Minimum alcohol pricing will exacerbate poverty and entrench inequality without discouraging binge drinking

·     Most of the costs of drinking and smoking fall on individual consumers, not the public. There is no economic justification for increasing taxes on smokers and drinkers.

In a report released today, “The Wages of Sin Taxes”, the Adam Smith Institute condemns the government’s decision to increase taxes on cigarettes and alcohol this year and to introduce minimum alcohol pricing.

The report argues that ‘sin taxes’ (taxes on commodities seen as harmful to health) are ineffective in reducing consumption and are not necessary for recouping lost revenue. The taxes are highly regressive and force the poor to pay for the government’s mishandling of public finances.

The taxes don’t work

Cigarette taxes are now so high that increases drive smokers to the black market instead of discouraging consumption or raising more revenue. Sin taxes are more likely to deter moderate users than heavy users, whose demand for cigarettes and alcohol is relatively inelastic.

A heavy smoker or an alcoholic is unlikely to reduce consumption because of a price rise, making sin taxes an unreliable way of reducing consumption or improving public health.

The victims of cigarette and alcohol duty

Sin taxes hit moderate and heavy users alike. Research has shown that previous rises in cigarette tax have made only 2.3% of smokers quit, with the other 97.7% just paying more in tax.

Taxes on cigarettes and alcohol are regressive and hit the poor hardest. The average smoker spends £1660 a year on cigarettes – 20% of the bottom 10%’s income. Sin taxes are the most regressive indirect taxes, as they tend to target products that are disproportionately consumed by the poor.

Minimum alcohol pricing is also deeply regressive, only affecting the cheaper drinks consumed by the poor. Punishing poor people for enjoying a drink or a cigarette exacerbates poverty and treats the poor like children who need to be controlled by the state.

The public cost of smoking and drinking

Taxes on cigarettes and alcohol have often been justified by studies that claim to estimate the “social cost” of these vices. These studies include intangible costs borne by individual consumers, such as “emotional distress”, lost years of life, and individual expenditures on cigarettes and alcohol. These are personal costs, not social costs. They also fail to include the economic benefits the alcohol and cigarette industry gives to the UK in terms of employment and government revenue. Most of these studies should be relegated to the bin of junk statistics.

In fact, smokers and heavy drinkers do not cost the state more. Though smokers may cost more during their working lives, but non-smokers require greater expenditure in pensions, nursing care and welfare payments. Chronic diseases associated with old age are far more expensive than the lethal diseases associated with smoking and alcoholism. Smokers and drinkers are not a burden on the state, and the myth of saints subsidising sinners should not be used to justify tax rises.

The appeal of ‘sin taxes’

Despite the fact they hurt the poor and do not change consumer consumption, sin taxes have always been popular with governments as a source of revenue.

Sin taxes and minimum alcohol pricing should be recognised for what they really are - stealth taxes and paternalism designed to control the poor.

Chris Snowdon, author of the report and Adam Smith Institute fellow, says:

“Campaigners for sin taxes and minimum pricing often claim that “healthy citizens” are forced to bear the cost of other people’s lifestyles. In fact, the evidence shows that smokers take less from the communal pot than the average Briton and the money raised from alcohol duty comfortably pays for any burden drinking places on public services. If the aim of policy is to make individuals pay their way, the government should slash the beer tax and subsidise cigarettes. We are not seriously suggesting the government does this, but if politicians insist on increasing taxes on these products, they should admit that the purpose is to raise revenue. Essentially the government is forcing the people who are least likely to live to extreme old age to pay for the escalating costs of an ageing population.

“As we show in the report, amongst EU countries there is no relationship between alcohol prices and alcohol related harm, nor is there an association between cigarette prices and smoking rates. The only significant effects that sin taxes have are to make the poor poorer and black marketeers richer.”

This shared parental leave thing: my fault, I'm afraid

He first advocated the idea in his blogs on the Adam Smith Institute, where he highlighted that there isn't a gender pay gap but a motherhood pay gap. 

He highlights how non-party political groups like the ASI find practical solutions which address the problem. However he also argues a better legislative solution would have been to virtually abolish maternity leave itself. He calls into question the misuse of pay statistics. He argues that the real reason for the motherhood pay gap is as a result of attitudes around the responsibility of rearing children.

Read in full on Telegraph.co.uk here.

Summary

Tim Worstall writes on the Telegraph website on government plans for shared parental leave. He first advocated the idea in his blogs on the Adam Smith Institute, where he highlighted that there isn't a gender pay gap but a motherhood pay gap. 

He highlights how non-party political groups like the ASI find practical solutions which address the problem. However he also argues a better legislative solution would have been to virtually abolish maternity leave itself.