Congratulations – you, and the rest of the UK, have collectively paid off your taxes for the year, and it only took you 150 days to do it.
Every year, the Adam Smith Institute calculates Tax Freedom Day – the first day of the year when the average person stops working for the government and starts earning for themselves. This year, that was yesterday, 31 May.
Of course, there is no “average earner”. Lower earners will hit this landmark much earlier in the year, while many higher earners will be taxed for weeks more to pay off their bill. But our calculations measure the entire tax take. So even if you exclude the variability of direct taxes like income and National Insurance contributions, we are all still burdened by day-to-day taxes, like VAT, and stealth taxes that keep prices high throughout the year, like air passenger duty.
The purpose of Tax Freedom Day is not to calculate to-the-penny what one personally is paying out in tax, but rather to illustrate just how burdensome the tax system really is. The UK has one of the most complex tax systems in the world, and the government is in no hurry to reform its 17,000 pages of tax code; as such, the true cost to the taxpayer often goes unnoticed or underappreciated.
This year’s Tax Freedom Day fell one day later than it did in 2014, and has fluctuated in late May since the early 2000s. The last time Britons were free from their tax burdens in April was in 1964 – that’s right, not in the 1980s.
Though the coalition failed to bring Tax Freedom Day forward, the chancellor deserves some credit for trimming a bloated state that demands five months’ worth of our income. This year’s Cost of Government Day, which measures how much of the UK’s income is spent by the government, falls on 29 June, three days earlier than last year. While many of us will find it deeply uncomfortable that the government continues to spend a month’s worth of funds it does not have, it is a substantial improvement from 2010, when total spending went on until 12 July.
Now that David Cameron holds the keys to Downing Street with a small, yet workable, majority, there is no excuse for tax reform to remain ignored. Cameron’s five year tax lock is a welcome effort that will help stop Tax Freedom Day from being pushed further backwards. But that should not stop the government from making tax cuts, especially for the lowest earners, a major priority.
From morning till night, the government levies a tax on almost every activity Brits take part in – no promised benefit or gift from the state makes that acceptable.