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Thursday 12th July 2007
The Liberal Democrats have said that they would slash the basic rate of income tax by four pence if they were elected to form a government.
Unveiling the proposals the party stressed that the tax cut aimed at low and middle income earners would be paid for by fiscally targeting the rich and those with "environmentally damaging lifestyles".
Plans to cut income tax from 20p to 16p will take the basic rate to its lowest level since 1916, claim the Lib Dems, who stress that it will also make the system fairer.
The party, which says that the poorest people in Britain pay a higher proportion of their income in tax than the richest, stresses the plans would be funded by scrapping £13.5 billion of tax breaks for high earners and introducing new green taxes on cars and flights.
Other Lib Dem proposals outlined in a new policy document, entitled Reducing the Burden: Policies for tax reform, includes the party's long-time plan to scrap council tax and replace it with a local income tax.
Plans to raise the thresholds for stamp duty and inheritance tax are also revealed, along with a proposal to simplify the tax code by removing over 500 pages of unnecessary regulations.
The central proposal to cut the basic rate of income tax stems from previous plans passed by Lib Dems at their annual conference last year, when the party's leader Sir Menzies Campbell secured support to abandon a flagship 50 per cent top rate tax policy despite opposition from some members.
Commenting today Sir Menzies said: "Our new proposals will put fairness at the heart of the tax system.
"Low and middle income earners in this country shoulder too heavy a tax burden," he added.
According to the Lib Dems, households earning up to around £68,000 would be better off under the proposals.
However some analysts have queried the income threshold, the Daily Telegraph reports.
Grant Thornton accountant Maurice Fitzpatrick told the paper that as many as two million households could be worse off by the Lib Dem tax plans.
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