Income tax should be a political taboo no longer

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The Independent Online

The past couple of weeks have hardly been a holiday for tax-gurus. Last week, we had the centre-left think-tank, the Institute for Public Policy Research, calling for an all too modest reform of inheritance tax. Yesterday came a report from the Labour-affiliated Fabian Society mooting the introduction of a new, higher, tax band for high-earners.

The past couple of weeks have hardly been a holiday for tax-gurus. Last week, we had the centre-left think-tank, the Institute for Public Policy Research, calling for an all too modest reform of inheritance tax. Yesterday came a report from the Labour-affiliated Fabian Society mooting the introduction of a new, higher, tax band for high-earners.

The significance of the Fabians' proposal lies less in the specifics - they suggest, rather gently, a 50 per cent levy on incomes of more than £100,000 - than in their call for the Blair government to lift its self-imposed taboo on all public discussion of tax, income tax included. And they are right.

Until now, the Government has been able to increase revenue by imposing a variety of so-called "stealth" taxes in the hope that we would not notice how much more we were paying to the Exchequer. But such taxes are fast outliving their usefulness. As the deductions have multiplied, we have started to feel it, and it is the middle-income professionals who are arguably feeling it the most.

Over the past six years, the Government has abolished tax breaks for married couples (except certain pensioners) and for mortgages, introduced top-up fees for higher education, and raised National Insurance contributions to pay for higher health spending. Squeezed between tax thresholds that are lower in real terms than they used to be, much higher house prices, university fees and more means-tested benefits, middle-income groups are feeling the pinch. At the same time, the rewards they hoped for, in terms of better schools, more doctors and better hospitals, have been slow in coming.

If the Government still wants the votes of the aspirational middle classes - the votes that brought New Labour to victory seven years ago - their grievances must be addressed. Raising the threshold at which people pay income tax at 40 per cent and recouping the difference with a higher rate on much higher earners would be a simple and effective way of spreading the burden. It was not Mr Blair who promised: "Read my lips, no new taxes." He can afford to open up the debate.

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