A Liberal Party Policy Statement
The Liberal Party has long advocated a change to the Tax Credit System. This system reduces administration and eliminates the “poverty trap” whereby people on low incomes can be worse off if they earn more due to losing means tested benefits. By combining the tax and benefits system it makes both easier to understand and provides a mechanism for a minimum wage, which the Liberal Party supports.
The main features of the Tax Credit System are that:
The Liberal Party fully supports the principle of progressive taxation whereby those on higher incomes would pay a larger proportion of their income in tax. We believe that National Insurance contributions now function as a form of secondary income tax and distort the distribution of the tax burden.
For some time The Liberal Party advocated a system of tax credits in order to assist people off benefits and into work. The experience of the past few years has highlighted the practical difficulties with such a policy. The Liberal Party recognises that the various tax credit schemes have resulted in horrendous levels of over and under payments. Liberals also recognise that such systems of taxation have raised overall levels of taxation as a result of increased administration.
Liberals also recognise that such systems have acted as a disincentive for families working additional hour sand/or undertaking training and/or additional responsibilities.
In view of these difficulties The Liberal Party calls for a tax system which is both simple and reduces the burden of taxation.
Liberals therefore advocated a tax system where all earnings under £10,000 are tax free and thus the need for compensatory tax credits and other forms of benefit is reduced, and that this should be balanced by increasing the rate of taxation to 50% for earnings over £100,000 of taxable income.
Liberals call for the wider spread of private ownership of wealth, as demanded by the constitution of the Liberal Party, to give greater equality of opportunity for all and to help make poverty history, both in the UK and internationally.
The Liberal Party believes that the current scheme of Baby Bonds is basically a Savings Incentives Scheme for the wealthy and middle classes and that they are deeply flawed from the point of view of ‘Opportunity for All’ by not being part of a reform of the exemption ridden 40 per cent Estate Duty type Inheritance Tax.
Liberals believe that the only way to ensure wealth ownership for al UK -born citizens is to give it to them as a British Universal Inheritance at a financially responsible age and then to claw it back from those who do not need it, and to finance it by a progressive tax, starting at a marginal 10 per cent instead of the present 40 per cent, and remaining at 10 per cent for most beneficiaries, on cumulative lifetime receipt of the payment itself and of all other capital gifts and inheritance.
The Liberal Party, therefore, noting that the average wealth of every adult and child in the UK at the end of 2002, according to the Office of National Statistics, was £85,000, calls for a £10,000 British Universal Inheritance to be paid to all UK – born citizens at the age of 25, to be clawed back by a marginal 10 per cent tax from a further £90,000 of capital gifts and inheritance received from other sources, thereby giving a net personal tax free lifetime allowance, above which progressive inheritance tax rates above 10 percent would start to apply.
Capitalist democracies already have universal suffrage – votes for all. Universal Inheritance – capital for all- is also required, to spread more widely the private ownership of wealth in each new generation.
VAT, like most taxes on spending, tends to be regressive. The Liberal Party therefore finds merit in a higher rate of VAT for luxury items and extension of the zero rate.
The Liberal Party believes that the community should enjoy the benefits of publicly-created land values and, to ensure this, supports the Taxation of Land Values.
Liberals also believe that those who have a conscientious objection to the use of their taxes for military purposes should have the right to register their objection and to divert that portion of their taxes into a non-military security fund.
We believe that tax incentives have a role to play in the promotion of sound environmental policies by businesses. We suggest that tax incentives could be offered to companies which use recycled materials and special duties added to goods produced in ways which are environmentally damaging.
Liberal Party proposals include: