'Tax freedom day': The average UK citizen has now started earning for themselves in 2018
Total tax burden could have been paid by 29 May, three days later than last year but still earlier than in much of the 1970s and 1980s, think tank finds
Tuesday is “tax freedom day” when the average UK citizen has theoretically paid off their tax bill and started earning for themselves, according to a new report.
The Adam Smith Institute (ASI) calculates that the total tax burden could have been paid by 29 May, three days later than last year and the latest it has fallen since comparable records began in 1995.
However, tax freedom day would likely have fallen later in the 1970s and 1980s if the data were available to make a direct comparison, the think tank said.
According to the report, tax freedom day has trended later since 1995 and has now surpassed a previous peak in 2008 before the Great Recession.
Under the Conservative/Liberal Democrat coalition tax freedom day stayed relatively stable, increasing slightly at the end of the parliament, ASI calculates
To work out the date, ASI added up the total tax take, including indirect taxes (such as VAT and corporation Tax) and direct taxes (income tax and national insurance).
It then divided the number by the UK’s net national income, a figure which encompasses the income of households, businesses, and the government.
The think tank concedes that the date is somewhat artificial because there is no true “average” person. In theory, it falls later in the year for wealthier people who tend to pay more tax, and earlier for poorer people who pay less.
But, more generally, “since 1995, the trend has been for parties of all stripes to increase the total tax burden,” the ASI said.
The free-market think tank has been a long-term advocate of lower taxes, which it argues spur economic growth and investment.
Conversely, many economists argue that higher taxation or borrowing can spur growth - particularly when an economy is struggling - by being used to fund investment in infrastructure, education and research.
The Institute for Fiscal Studies warned in March that austerity was “far from over”, despite improvements in the public finances this year.
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