VAT remains regressive, so why don’t people care?

They did it. I hoped they wouldn’t. They raised VAT to 20%.

I really wish we could have a serious discussion about tax.

VAT is the easy option to raise. People notice it at the time but quickly forget about it. It isn’t a fair tax, in that it hits the poorest hardest. It has been widely blogged that this tax rise hits the lowest incomes harder as they spend more of their income on VATable stuff. On luxuries like food and fuel.

The problem is that prices go up. Everyone is nostalgic for when you could get change from a penny/groat/schilling/pound/tenner [delete as applicable] when buying something. We accept inflation today, so the hit on what we can buy is small and one off. So prices go up now, and the tax take continues despite no further change, but people won’t notice as prices go up anyway.

The result of this I have no idea how much of my income goes in VAT, but I get reminded how much goes in income tax every month because it is printed on my payslip.

In the States many years ago I saw shops explicitly put sales tax figures on their bills. I hated this as it looked anti-tax and made the costs clear without linking the benefits. However this same charge goes on the tax deductions on our payslip. Would it be healthier to ask shops to make the VAT explicit on more receipts, so we see when we are paying tax?

Of course we’d need to defend the benefits of taxation: health, education and other public services. This needs doing within the coalition anyway (and is why I’m still glad the LibDems are on board: we can be the conscience or handbrake for the Tory party’s natural instincts) and in fact amongst the general public. Noone likes to pay tax, but we should benefit from our society and government.

However until people see how much of their pay goes in VAT it will still be a more invisible hit than income tax. That means that it will hurt less at the ballot box and be the easier option.

Would this transparency help, or would it (like my initial reaction) just make people more anti-tax in general.

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Filed under budget, coalition, transparency, USA, VAT

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