The taxing state: an introduction.

One of the clearest contrasts between Conservative and Socialist policy is in the field of taxation. Conservatives believe that high taxation discourages enterprise and initiative, and so tends to impoverish the whole nation … By contrast, Socialist policy contains little mention of tax reduction and indeed most Socialists welcome high taxation as a means of achieving their aim of universal equality. In 1979, the Conservatives returned to power and Margaret Thatcher became prime minister. Their success in the general election has many explanations, but one important theme was the widespread sentiment that taxes were too high and the public sector too large and unaccountable. The Thatcher government embarked on a campaign to roll back the state, through privatisation and the sale of council houses; it achieved less success in reducing the overall level of fiscal extraction in order to encourage enterprise and initiative. Taxes were 45.9 per cent of gross domestic product (GDP) in 1979, rising to 49.9 per cent in 1984; the figure dropped to 41.4 per cent in 1989, but returned to 46.8 per cent in 1993 (see table 1.1 and figure 1.1). Despite the difficulties in reducing taxation as a whole, the structure of taxation was changed in pursuit of Mrs Thatcher's vision of a dynamic society based on enterprise and incentives. [ABSTRACT FROM AUTHOR]