Friday, April 29, 2005

Flat tax

This is probably a subject that I will come back to several times, but I want to state my support for a flat tax in the UK. As a capitalist I do see tax as immoral, however, as a practical person I can see the potentially drastic level of harm that would come from a sudden withdrawl of government spending. Instead what we need is a steady withdrawl of government spending to a reasonable level and increased freedom for enterprise. How we do that is the question, one way would be just to lower the rates of tax steadily as spending is introduced, however, this still leaves the inequality in the present system of bands which would hurt the middle classes the most all the way down (well, most of the way down) and still leave the tax loopholes for the more well off. The proposal of a flat tax allows government spending to be reduced on a much more even level without these inequalities, and it also allows immediate tax relief to minimum wage earners, who are unfairly taxed at the moment*. The case for a flat tax is so easy to see when one looks at the countries which have already adopted it. Instead of plagiarizing the work of others, I will instead direct you to here at the adam smith institute. You will also find the flat tax article by Andrei Grecu here and by Richard Teather here. These articles are just a small selection of the convincing arguements for a flat tax, so why don't the government implement it?
That's an easy one! With a flat tax there are no loopholes for the rich to hide behind, but also there are no barriers for the government to hide tax increases behind. It is common knowlege that the Labor party said that they would not raise tax before the 2001 general election, what did they do right after? They raised national insurance, under a flat tax they would have had no chice but to have risen the basic rate of tax or not raise it at all. The two things have the same effect, but at least with the flat tax it's completely transparent.

* The minimum wage will no doubt be a topic of a future posts on this site, but I wish to say here that the present tax regime is proof of the lack of concern for the less well off by our government. The minimum wage is supposed to be the minimum wage that someone can be expeced to live on, therefore, in order for that to be true it must be the case that the whole of that wage is taken home, however, under the present system a significant part of that wage is taxed, taxed to help whom? If these are the people who need protecting, then why are we taxing them?

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