Free Life 31, June 1999, Tax Freedom Day, Reviewed by Sean Gabb
From Free Life, Issue 31, June 1999
ISSN: 0260 5112
Tax Freedom Day 1999
Adam Smith Institute, London, 1999, 23pp., np (pbk)
(ISBN 1 902737 02 4)
Tax Freedom Day is arrived at as follows: take all direct and indirect taxes paid by the average British family, and then turn the percentage of income taken into an equal fraction of the year. The result can be regarded as the time spent working for the government, the rest of the time spent working for oneself. The last day of the first period becomes Tax Freedom Day.
Commissioned by the Adam Smith Institute, Gabriel Stein has made the necessary calculations for Britain in 1999. His conclusion is that we work an average of 147 days for the Government, and therefore that our Tax Freedom Day fell on the 27th May this year. This is somewhat earlier in the year than was in 1982 (11th June), and indeed lower than in any other of the whole years during which Margaret Thatcher was Prime Minister. Even so, it is later than the 2nd May on which it fell in 1965, and it has been rising since 1993, and it is expected to continue rising throughout the term of this present Government.
But whether we talk about May or June, a Tax Freedom Day so late in the year is a scandal - an outright burning scandal. Though with the great progress of wealth in the past two centuries, we are able to bear weights of taxation that would once have reduced millions to eating grass, what we now bear is still an immense and damaging burden. On page 21, Mr Stein suggests that the Americans are more dynamic in the economic sense than we are because their Tax Freedom Day comes 18 days earlier, and that the inhabitants of Euroland are less so because theirs comes 24 days later. This must be true. Nevertheless, a far greater harm is done to the less easily measured social and political structure of our country.
If we want to enjoy the levels of consumption that we now consider acceptable, most of us are left with almost no financial surplus. What little we do accumulate can only amount to anything substantial if we give up control over its investment to skilled persons to one more correctly to be seen as trustees than agents. We have no control over the use made of our savings. Those who have control look mostly - and rightly - for the best combination of security and high return, and pay no attention to other considerations.
The result is a corporatised and cautious pattern of investment, combined with much personal insecurity. Because we have so little left after living expenses and contractual savings, we are not able on average to take risks for ourselves or be generous to those who do take risks. There is also a sad but natural tendency to look on life as a zero-sum game - where one person can rise only by treading on others - and to take pre-emptive action against those whose opinions or general behaviour might somehow result in their rising higher than the average.
There are times, I grant, when far heavier weights of taxation might be justified as on balance in the public interest. But we are neither in a war of national defence nor trying to avert some great natural disaster. Our money is taken from us and is then used in ways quite obviously against the public interest.
We have all been exposed to the whining propaganda about how the old, the sick and the poor would suffer unendurable hardships if we were to keep more of our own money. Even supposing it were a good reason to collect taxes, this would be a lie. During the past two decades, the Adam Smith Institute alone must have published over a hundred reports on how to deliver public services to better standards and lower costs. It has been shown repeatedly that we do not need the National Health Service to ensure medical treatment for those unable by themselves to afford it. We do not need a vast educational bureaucracy if we want the children of the poor to be sent to school; nor a vast local government sector to do what local government does for us. Yet these reports have been subjected to hysterical abuse by those whose salaries come out of our pockets; and the recommended reforms - privatisation, contracting out, internal markets, and so forth - have been systematically corrupted in the few cases where they could not be prevented altogether.
The natural conclusion must be that the purpose of our taxes is not mainly to provide public services, but to provide salaries and status for a class of parasites. Such public services as are delivered comes simply as a by-product. That is why services are the first and often the only victims of the few budget cuts ever applied. That is why in places like Lambeth and Hackney pensioners die for lack of home visits and the roads fall into potholes, yet neither the salaries nor the numbers of the town hall officials are ever reduced.
This last point being so, I would suggest that Mr Stein has been actually rather optimistic in his calculation of Tax Freedom Day. He takes into account only the admitted taxes that we pay. He overlooks the hidden taxes that have been imposed over the past 20 years.
In 1979, I remember that most dental and much optical treatment was free at the point of use, that public transport was heavily subsidised, that the public libraries were filled with useful and interesting books, that university tuition fees were paid automatically by the State, and that full grants were paid to the majority of students, that the value of state pensions was linked to average earnings, and that other welfare benefits were almost equally generous. Today, all has changed. These entitlements have been either reduced or withdrawn. I will not lament their loss. I have always supported and still desire a more thoroughgoing purge of government spending on welfare. But these reductions of service have not been balanced by reductions of taxes: Tax Freedom Day fell on the 25th May in 1979 - two days earlier than in 1999 - and I pay £2.50 to swim in Eltham Baths, rather than the 30p in today's prices that I paid in 1979.
I have not Mr Stein's skill at finding and interpreting economic data; but I do strongly suspect that Tax Freedom Day falls not near the end of May, but some time in July or August. We are comprehensively ripped off by our masters; and I am not surprised that they have been so eager in the past generation to take away our guns. Revolutions have started over tax rates far lower than the ones we now live with.
But none of this is to deny Mr Stein any of the gratitude that he deserves for having gathered up and written so valuable a pamphlet. And the Adam Smith Institute is to be congratulated and thanked for having published him. I have sometimes written in very harsh terms about the Adam Smith Institute. But its heart is often in the right place. As I left the reception at which Mr Stein's pamphlet was introduced to the public, I said to a gentleman who was bidding us farewell at the door that it would be nice to see Tax Freedom Day come forward in the year.
"I would have it fall on the 1st January" he replied.
That is not a statement I feel at all inclined to argue with.