It seems as though I'm really enjoying Centre Right, mainly because it truly offers the ability to debate some issues...though not on their site. The latest thing to catch my eye is the idea we're being taxed to our limit. Tim Montgomerie has quickly highlighted that some senior official has said we're on the limit, while Charlie Elphicke takes it further by stating taxes are up £10,000 since 1997. So what's my beef here?

My concern is the context, as it usually is on such matters. I'm not going to disagree whatsoever with the idea that taxes are on their limit for most people. I feel the squeeze just like everyone else does, and with a student loan on top of it there is very little opportunity for me to save money while paying my mortgage, bills and food costs. But I'm not going to be naive enough to believe that I am the rule. It is clear that tax being at it's limit is much more to do with the increasing costs of living rather than any increase in tax. It is also clear that not everyone faces the same squeeze. I know other people that have plenty of money to save and potentially to invest that are taking advantage of the scales of economy that come with higher pay while still residing in the middle income tax bracket. We also can't delude ourselves that there are people earning 6 figure sums in this country that are taxed handsomely yet also have a disproportionately better lifestyle than those on lower incomes.

Don't get me wrong, I believe that if people have got themselves to the position that they command that salary (and the bonuses that come with it) then they deserve the bigger house, the frequent holidays, the house help and the luxury that comes from it. But do they feel the squeeze to maintain that lifestyle that a single mother working full time for less than £15k does? No, no they do not. It's a disparity between what tax means to different income levels that allows this limit to be reached, because we have to count to the lowest common denominator. As soon as one group of people are feeling the squeeze everyone's tax levels need to be benched at that level, when in reality there are those that could still provide the fair share into the system that they aren't necessarily giving.

Charlie himself offers no real solutions, only ideas of shifting responsibilities and accountability to try and streamline costs (this happens every time a new government comes in, and rarely does more than create short term savings). What he did highlight is this £10,000 increase is obviously including VAT and other duties. For a start let's get this straight, off the bat you can state quite happily that £2,500 of that is inflation. Rises in wages and costs of living at a basic level cover at *least* £2,500 of this £10k increase over 10 years. The rest of the £7,500 could count towards VAT but if you take a look at this document you'll see that CPI is essentially 16.9% from 1997. So using the governments line on inflation at least inflation will have only added about £1,600 to the tax increase.

The mystery is largely solved when you stop buying in to the governments stance on inflation being based on CPI. With average earnings supposedly 51% higher than in 1997 and the RPI at 31% increases on prices since 1997 it suddenly starts to gain perspective. £5,100 of that extra tax is down to us simply earning more money in the first place, with a further £3,100 coming from increases in goods prices generating more VAT. So in total we can easily attribute and explain away £8,200 due to the simple nature of inflation. What about the rest? Well 11% of our tax also comes from fuel and with duty having risen at to 17% higher than the RPI in around 10 years that adds another £1,300 to the tax. Easily the biggest area, and probably the only area, in which anyone can claim that the government has truly increased taxes is in these area's of duty. With earnings rising while the tax boundaries haven't been redressed (stamp duty, for example), it is not hard to think that these imbalances can account for the remaining £500 that we are paying.

So what does this all mean? Well yes some of us are being taxed to our limit but some of us aren't, and the governments willingness to ignore the RPI which is much more comparable to the rises in cost of living doesn't help the matter. But ultimately the extra tax we're paying is much more attributable to wage rises and simple inflation rather than any government trying to fleece us of our cash. It is all well and good to suggest that the government is getting twice as much tax as it used to but it is also costing the government proportionally more to use it as well, investment in people will be 40% higher than 1997, cost of transport will be 48% higher, and the act of purchasing is 31% more expensive.