From City AM:
TODAY is tax freedom day, according to the Adam Smith Institute... The day represents the portion of the UK’s national income needed to pay direct and indirect taxes, collected by central and local authorities. Today, 41.09 per cent of 2014 is over – the same proportion of the UK’s income that is collected in tax.
Despite the day coming earlier than it did last year, “cost of government day” is still far ahead, coming on 26 June. The second day comes nearly a week earlier than in 2013, but the month-long gap between the two events illustrates the difference between what the government collects in tax revenues and what it shells out in spending...
The Taxpayers’ Alliance also weighed in on the findings, saying that the average household spends more on tax than on essential items like fuel, clothing, food and housing. The typical tax bill comes to £9,415 and the essentials run to £7,727, according to the group.
Where on earth do they get £9,415 from?
According to the PSFD, page 22, the UK government spent £640 billion in 2013-14 (of which approx. £540 billion was collected in tax and £100 billion was extra borrowing).
So the average tax paid per household was (say) £21,000 and the median is maybe two-thirds of that, £14,000.
And seeing as extra government borrowing is just deferred tax, the true average is £24,000 and the median is £16,000.
While the TPA are really good when it comes to pillorying government waste and theft, they don't understand the tax system, they say that Council Tax is the biggest single bill paid by households etc. Who pays the piper, I guess.
(As MMTers point out, the government doesn't actually collect tax money and then spend it. The government creates money by spending it and then, to prevent hyper-inflation, destroys a similar amount of money by collecting taxes. But that's another topic.)
UPDATE: Dinero queried the MMT logic and Derek explained it rather neatly:
It's just an accounting thing, Dinero.
You can look at the government as collecting existing pound notes into the Consolidated Fund and then spending them, or as creating new pound notes for spending and destroying the old ones collected for taxation.
Either way works for the accountants but the advantage of thinking about it in the second way is that it makes it clear who creates the pound notes and when.
Wednesday, 28 May 2014
From City AM: