Lower tax equals a worse life

Let’s be clear, lower tax means lower prosperity, worse public services, worse health and worse education.

The evidence is in the data. The graph below (updated 2017-06-08 following suggestions in the comments) shows outcome measured using the UN’s inequality-adjusted human development index (IHDI) as a function of input measured using tax as a percentage of national income (GDP) using data collated by the Heritage Foundation. IHDI is a number that measures income, life expectancy and years in education.* The higher the score the better. Top of the IHDI league table (see here) is Norway (which despite its oil wealth also has high taxes), bottom is the Central Africa Republic. The UK (in colour) is currently 13th, better than the US, but not as good as Germany, Australia or any of the Scandinavian countries. Included are all countries where data is available which includes more than 95% of global population.

The line assumes a diminishing return with increasing tax. However the exact form of this line is a bit arbitrary as we do not know what kind of correlation to expect. We could argue that countries above the line are getting relatively good value for money whereas those below the line could do better although there is a large country-by-country variation that depends on individual circumstances, such as Norway has oil as well as high taxes.

A simple linear fit gives a Pearson correlation coefficient r = 0.77. This tells us that prosperity outcome is roughly proportional to government input – the size of the governments spend and tax circuit. The more you spend and tax, the better the quality of life, the better your life expectancy and the better your education.

The conclusion is clear. A vote for a tax party of low tax is a vote for a worse life, worse health and worse education. On Thursday, why not vote for prosperity instead?

* IHDI also includes a correction for inequality but in most cases there is not much difference between the HDI and IHDI.