Stealth Tax
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A stealth tax is a
tax A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...
levied in a way that is largely unnoticed, or not recognized as a traditional tax. The phrase was generally used in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
by
Conservatives Conservatism is a cultural, social, and political philosophy and ideology that seeks to promote and preserve traditional institutions, customs, and values. The central tenets of conservatism may vary in relation to the culture and civilizati ...
against the New Labour government's behaviour and has been used in British politics since the 1990s.


Origins

On 16 September 1996, the National Association of Pension Funds (NAPF) demanded a reverse to a tax on UK pension funds' dividends. Anne Robinson, the director general of the NAPF said pension funds are being "taxed by stealth". The exact phrasing "stealth tax" has been in British political use since 1998 when it was used to refer to tax increases that apparently circumvented the 1997 New Labour manifesto commitment that "over the five years of a Labour government ... there will be no increase in the basic or top rates of income tax". Anne Segall of ''
The Daily Telegraph ''The Daily Telegraph'', known online and elsewhere as ''The Telegraph'', is a British daily broadsheet conservative newspaper published in London by Telegraph Media Group and distributed in the United Kingdom and internationally. It was found ...
'' claimed on 17 January, 1998, that "taxes will rise by £7 billion this year ... as a result of a variety of measures introduced or extended by the chancellor Gordon Brown. Mr Brown's 'stealth' taxes are directed mainly at middle-class voters and in particular at middle-class professionals and those with savings". On October 19, 1998 Francis Maude, then Shadow Chancellor (the opposition finance minister) claimed the Chancellor
Gordon Brown James Gordon Brown (born 20 February 1951) is a British politician who served as Prime Minister of the United Kingdom and Leader of the Labour Party (UK), Leader of the Labour Party from 2007 to 2010. Previously, he was Chancellor of the Ex ...
was imposing "stealth taxes ... designed to conceal their effect". Former Prime Minister
Tony Blair Sir Anthony Charles Lynton Blair (born 6 May 1953) is a British politician who served as Prime Minister of the United Kingdom from 1997 to 2007 and Leader of the Labour Party (UK), Leader of the Labour Party from 1994 to 2007. He was Leader ...
only made occasional references to stealth taxes, such as on 1 November 2001 in relation to Company Car taxation, 9 November 2000 in relation to Fuel prices, and on 21 October 2002 in reference to Pensions. On 22 May 2001, the expression ''increasing taxes by stealth'' was extensively used by former Prime Minister
Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013), was a British stateswoman who served as Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party (UK), Leader of th ...
on her address to the Conservative Party's rally in
Plymouth Plymouth ( ) is a port city status in the United Kingdom, city and unitary authority in Devon, South West England. It is located on Devon's south coast between the rivers River Plym, Plym and River Tamar, Tamar, about southwest of Exeter and ...
.


Examples

One form of stealth taxation occurs when deductions or exemptions are reduced based on income level resulting in more taxable income, but the same tax rate for a higher total tax. Under 2007 US tax law 1040 Schedule A itemized deductions and the $3,400 personal exemption are phased out (reduced) at higher income levels ($234,600 for married filers). Stealth taxes might be recognized as taxation but remain largely unnoticed, as with
Value Added Tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...
(VAT) in the UK between 1979 and 1991, during which period it rose from 8% to 15% (compensating for a large reduction in the higher and basic rates of income tax) and then to 17.5% (when the
Poll Tax A poll tax, also known as head tax or capitation, is a tax levied as a fixed sum on every liable individual (typically every adult), without reference to income or resources. ''Poll'' is an archaic term for "head" or "top of the head". The sen ...
was replaced by a council tax), shifting the burden of taxation away from
income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. F ...
onto consumption.


Taxation policy


Regressive stealth taxation

Stealth taxes can be viewed as regressive, as more affluent people are less affected by VAT, for example. State lotteries may also be viewed as a form of taxation, and there is evidence that they are played more by poor people than by the affluent. In January 1999
Conservative Conservatism is a cultural, social, and political philosophy and ideology that seeks to promote and preserve traditional institutions, customs, and values. The central tenets of conservatism may vary in relation to the culture and civiliza ...
culture spokesman Peter Ainsworth described the National Lottery's New Opportunities fund as a "stealth tax". and Conservative leader
William Hague William Jefferson Hague, Baron Hague of Richmond (born 26 March 1961) is a British politician and life peer who was Leader of the Conservative Party and Leader of the Opposition from 1997 to 2001 and Deputy Leader from 2005 to 2010. He was th ...
claimed "The Labour stealth tax amounts to £1,500 for every working person". In Parliament on 3 November 1999 William Hague accused the government of levying a £500 million 'stealth tax' that would hit IT companies.Wednesday in Parliament
Ros Taylor
The Guardian ''The Guardian'' is a British daily newspaper. It was founded in Manchester in 1821 as ''The Manchester Guardian'' and changed its name in 1959, followed by a move to London. Along with its sister paper, ''The Guardian Weekly'', ''The Guardi ...
3 November 1999


See also

* Hidden tax


References

{{DEFAULTSORT:Stealth Tax Political terminology Tax incidence