Liberal Democrats propose 4p cut in Income Tax

8.35.45pm BST (GMT +0100) Thu 12th Jul 2007

Only the Liberal Democrats have produced a costed plan to create a tax system that is fair, simple and green.

The Lib Dems have unveiled radical plans that will take the basic rate of income tax to its lowest level since 1916, cutting the basic rate by four pence in the pound to 16p, benefiting millions of people on low and middle incomes.

The plans develop the policy approved by the party members at Lib Dem conference last year, and form part of proposals to lift the tax burden on low and middle income earners whilst making the rich and people with environmentally damaging lifestyles pay a fairer share.

The revised proposals are tax neutral and have been independently evaluated by the Institute for Fiscal Studies (IFS)

The proposals launched in the document Reducing the Burden: Policies for tax reform include:

• Reaffirming the commitment to abolishing Council Tax, replacing it with a tax based on ability to pay

• Removing tax loop-holes exploited by the super-rich

• Radically simplifying the tax code, removing over 500 pages of unnecessary regulations

• Reforming stamp duty to reduce the amount of tax paid on properties worth less than £500,000

• Reforming Inheritance Tax, with the aim of raising the starting threshold to £500,000

"Our new proposals will put fairness at the heart of the tax system," says Liberal Democrat Leader, Menzies Campbell

"Low and middle income earners in this country shoulder too heavy a tax burden. By reforming stamp duty and inheritance tax we will ensure that people who were not originally intended to pay these taxes no longer do so.

"The unacceptable reality is that in Britain today the poorest pay a higher proportion of their income in tax than the super-rich.

"Those on low and middle incomes will benefit from a cut in the basic national rate, and from the scrapping of council tax," says Liberal Democrat Shadow Chancellor, Vince Cable MP

"The national tax cuts [and] the abolition of council tax .. benefit the vast majority of families."

"Under our proposals tax cuts for the majority will be paid for by the wealthy minority, as well as those with environmentally damaging lifestyles," adds Menzies Campbell

"Only the Liberal Democrats have produced a costed plan to create a tax system that is fair, simple and green. I challenge Gordon Brown and David Cameron to back up their rhetoric by endorsing our plans."