Ahead of the Budget on 30 October, Rachel Reeves is being bombarded by lobbyists urging her to loot their enemies. The New Economics Foundation wants a ‘jet-setter tax’ on frequent fliers of €100 per flight. Action on Smoking and Health wants a levy on tobacco companies. Greenpeace reckons it can raise at least £26 billion a year by levying a wealth tax on the ‘super-rich’. An assortment of think tanks and pressure groups linked to the Labour donor Derek Webb think they can squeeze another £3 billion out of the gambling industry by doubling gaming and betting duties. Meanwhile in Scotland, the neo-temperance lobby are demanding a ‘levy’ on alcohol retailers who, they claim, are getting rich off the back of minimum pricing (a policy that only exists because they lobbied for it).
The appeal of these taxes lies in the old adage ‘Don’t tax you, don’t tax me, tax that fellow behind the tree’. They will, supposedly, only affect faceless corporations and ‘those with the broadest shoulders’, and who cares about them? Alas, it is more complicated than that and the Labour party is starting to realise that if there were billions of pounds lying on the pavement, the last government would have picked them up. Putting VAT on school fees and taxing non-doms were the closest thing Labour had to a magic money tree before the election, but it is now widely recognised that they will raise little if any revenue and the overall impact on the public finances could well be negative.
It is a reminder that before you hike up taxes, you should give a little thought to the unintended consequences, and yet the wider economic consequences of windfall taxes on industries that have not been the beneficiary of any obvious windfall are rarely considered. It is probably fair to say that the New Economics Foundation does not have the best interests of either the airline industry or business travellers at heart. For anti-alcohol, anti-gambling and anti-smoking groups, creating unemployment in the industries they attack is not so much an unintended consequence as the whole point.
Read the rest at the Spectator.
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