Monday, September 21, 2009

5 steps to an acceptable tax hike ... but can it actually work?

Want to raise tax? Want to avoid the unpopularity that comes with wanting to raise tax? Follow these easy steps and you won't go far wrong!!

1. Only tax the "rich"
2. Define "rich" as anybody with a "million" of something
3. Make the tax rise sound small; only do things in demonination of "1%" or "2%"
4. Say the cash is for something very important indeed - so rich people are supporting good projects
5. Completely over-value the tax rise to make people think it is a great way of raising money

The trouble is that even if you do all 5 of these, most tax plans of this ilk tend to fall apart quite easily. Unless, of course, you think people will believe anything you say and do...

Obviously St. Vince of Cable has been taking the advice but already there are concerns about it. Even some LibDems are worried about this - they are worried because the people it hits live in some of their marginal seats in the South West and also South West London, and others remember the fate of Guildford in the 2005 over the "local income tax" policy (which shared a number of the criteria 1-5 too).

However I worry more that policies like this tend not to work. This one will hit house prices and independent financial experts have already said it won't raise anywhere near the figure that Cable claims. Houses that fall into the tax band will suddenly fall just under it - that is just one way to get around it. Many more will no doubt will be worked out later.

Cable has a position in politics where he feels and acts like he's untouchable. I think this may be a policy too far and not even his soft press can cushion the blow if it all falls apart in the wind.

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