The Adam Smith Insititute have announced that according to their research, today is ‘Tax Freedom Day’, a milestone which they say has been reached two days later than last year.
‘Tax Freedom Day’ is calculated usiing a hypothetical situation in which initially all of a person’s earnings are initially put towards their annual tax bill, and once the bill has been paid, earnings can be enjoyed in full by the individual. ‘Tax Freedom Day’ is the day on which one starts to receive their pay, if this approach were adopted. The Adam Smith Institute say it provides a reliable, comparable measure of the tax burden upon society, and have been measuring in this way for 25 years.
Last year, ‘Tax Freedom Day’ fell on May 27th. This year it has taken until May 29th to reach this milestone. The ASI claim that downward pressure on earnings from the double-dip recession, higher VAT, increasing fuel duty and stealth taxes have all contributed to the later date. They compare our Tax Freedom Day with those of the USA on April 17th and Australia on April 4th and argue that we need to make fiscal cuts to taxation to stimulate economic growth. In particular they argue :
“This year’s corporation tax receipts are a good example of how tax cuts can pay for themselves. There were large increases in tax revenue from onshore corporation tax, coinciding with the government’s cuts to the headline rate of corporation tax. Reductions in the corporation tax rate have brought the government higher revenues as more companies choose to invest in the UK. By stimulating growth and investment, tax cuts really can pay for themselves.”
The ASI research also looks at the Cost of Government Day which this year falls 7 days earlier as a result of the government’s spending cuts and austerity measures. Last year this date fell on June 30th. This year it is on June 23rd. The later date reflects we continue to spend more than we earn in taxes and borrow the shortfall, but supports the data that the deficit is falling.
Read The Adam Smith Institute Blog in full here.