Claims that tax cuts for basic rate taxpayers are redistributive fall down for those who drive a car or own a home. Use of energy and cars by low income households is disproportionate in relation to their income. So a major difficulty with domestic environmental taxes is they can hit the poor the hardest.
The polluter pays principle for green taxation responds to a developing consensus. But there are limits, especially in rural areas with no public transport, a car is more necessity than choice. So plans to tax Mondeo man £850, or a 4x4 driver £2,000, will not attract voters in rural Shropshire.
For many householders the news from the Lib-Dems was even worse. Not only has their planned Local Income Tax been increased to 4%-4.5%, but they are also planning a new House Price Tax, an annual levy based on the value of your home.
Another problem is the presumed quadrupling of Capital Gains Tax receipts to fund the tax package. Lib-Dems fail to grasp that capital is mobile, gains often do not have to be realised. If there was any serious prospect of these plans coming into effect, people would change behaviour. This could blow a yawning hole in Lib-Dem public finances.
