The Beeb discusses the issue of flat taxes. I am a supporter – given that we are where we are and tax is a reality we have to live with. They have two people discussing – one of whom is the egregious Richard Murphy. As is usual, his argument is flawed by the use of logical fallacy – the non sequitur, mostly.
Currently the top 10% of all income tax payers in the UK pay about 59% of all income tax. They also pay tax at higher rates than anyone else. That is why they pay so more, but that’s also because they earn more than most, of course.
Under a flat tax system they would enjoy substantial – maybe massive – tax cuts.
Yes. That’s a feature, not a bug. The whole point being that the more money that remains in the pockets of those who earn it – as opposed to those who extort it – means that it will be spent more wisely. Everyone in the country – including the pissed-up spendthrift drunk, lying in his own urine in the gutter who will fritter his last penny on a bottle of meths will spend more wisely than government.
It is that last point that provides the real clue to what flat taxes are all about. It is not chance that they are always promoted by people who also argue for small government and massive cuts in public spending. That is what they are intended to deliver, and I have to agree, they would.
Yes, precisely. That is their whole raison d’être. Government takes far, far too much from the productive economy and pisses it up the wall on stuff we neither want nor need. Who, exactly needs fake charities? no one. And we certainly don’t need government funding for arts, sport or media, for example and we most certainly do not need to be sending millions abroad on foreign aid to countries that should be standing on their own two feet and if they cannot manage that, well, that’s their business, not ours. And those quangos, the ones that should have been torched by now…
Of course, Murphy raises the usual bollocks that he and his ilk always raise when ever lower taxes are suggested – schools ‘n ‘ospitals:
So flat tax would simplify almost nothing, but leave you paying to see the doctor or educate you children. That’s what the flat taxers fail to mention.
The reason it is not mentioned is that there are billions of pounds of government waste to trim long before you get to health and education – even accepting that there are those who are arguing for just that. Flat tax alone is not necessarily about private provision and funding of these services. Flat tax means that the state will have to trim its expenditure to only that which is necessary and not to funding all the hangers-on. Of which, people like Murphy are a prime example…
Oh, yeah, of course…
As always the left manages to conflate two completely separate issues.
There is the money we want to spend and then there is the issue about how we raise that money.
The taxes we use to raise the money need to be as simple as possible and carry as little dead weight cost as possible, which is why people like Timmy argue against corporation tax. Having a flat tax rate doesn’t mean that we will raise less it just means that we have a simple system. For example there is no reason why a flat tax couldn’t kick in at, say, £100k and then be set at 75%or whatever is needed to raise the equivalent in current NI and income tax.
The reason the left don’t like this is that it gives them less control and opportunities to meddle.
There are numerous reasons why a flat tax shouldn’t kick in at £100k and then be set at 75%. It is not healthy for a democracy to rely on a minority for the majority of its taxation revenues, it is actually undemocratic to have a system where the majority votes for a taxation system that does not apply to them (e.g. at the next election a party could offer to spend more on the majority if they increased the rate to 80% for the minority, the majority then has the option of benefitting itself to the detriment of the minority, the very definition of tyranny of the majority).
A lot of people would adjust their income to £100k. For example, someone who works 2000 hours at £75/hour earns £150k gross and currently takes home about £90k. They can, under the proposed system, take home £10k more working only two-thirds of the time. They’d be unlikely to think it worthwhile to work the extra time for just an additional £12.5k.
The proposal would mean that the majority is asking a minority to spend most of their working day working for the state rather than themselves. To me that is simply morally wrong, I do not think anybody should pay more to the state than they keep in their back pockets, and I include all taxes in that, VAT, council, etc.
The very rich would almost certainly leave in droves, why would you want to earn £10 million only to give £7.5 million less some small change to the state? Far better to tax such people £2 million and then get another £2 million in VAT rather than chase them away and have nothing.
I’m a big believer in flat taxes but I’d prefer a much lower rate that applies to everyone. If it raises less money than now so be it, the state will have to curb its profligate spending. Tax avoidance would largely disappear under a flat system with a lowish rate, say 20-25%.
To be fair, Simon wasn’t actually proposing that; merely positing that flat taxes could be suited to leftist ideology.
“I’m a big believer in flat taxes but I’d prefer a much lower rate that applies to everyone. If it raises less money than now so be it, the state will have to curb its profligate spending”
You seem to forget that there are democratic pressures that affect and shape state spending. A flat tax system that did not raise at least as much revenue as the present system would simply not be democratically sustainable., Also a flat tax system that shifted more of the burden of taxation onto poorer and middle income citizens would also not be democratically sustainable. Either governments would borrow to make up the shortfall or if they would cut services but would then face democratic pressure to raise more revenue.
In any case, a lot of our taxation is already flat rate such as VAT, but that’s just about politically sustainable because in theory it applies to “luxuries”, though in fact doesn’t, unless you consider not dying from hypothermia in winter is a luxury.
Which highlights that democracy is a flawed concept. The demos are more than happy for other peoples money to be taken from them in order to fund their desires. For many, “the rich” equates to “someone who has more than me” and the politics of envy has become deeply rooted into the public psyche and it ain’t pretty.
When over 50% the money we earn is stolen by government then something is deeply wrong. Government should be able to get by providing perfectly efficient services with a fraction of what they currently extort. Unfortunately, a bloated public sector, thieving, useless NGOs, quangos and unnecessary, unwieldy state departments that provide nothing of use or value have created a client voter base that will continue to vote for more money from the magic money tree.
So, yes. those of us who support the principle of flat taxes are well aware of the democratic pressures. Doesn’t make them right or moral, though. Theft never is.
“Which highlights that democracy is a flawed concept”
Yes, I know that is a popular view amongst libertarians of a certain stripe and why I consider libertarianism to be fundamentally undemocratic.
Not if enough people decide to vote for it. As it is, democracy is nothing to write home about – it has merely given us the deeply corrupt and flawed process we currently have. A dictatorship by the political classes. Great. I’m thrilled, really I am. Colour me unimpressed. Ultimately, two wolves and a sheep discussing lunch. Fantastic, Give me more of that.
That it is flawed is highlighting an observable fact, it is not an opinion. Recognising that fact – whoever is pointing it out – is not undemocratic, it is pointing out the truth. Democracy is flawed, deeply so. Unless you have something half decent such as the Swiss system. Ours is a pile of shit.
My point, which I thought I’d made, is that there is nothing democratic about pressures that shape a spending situation in which the majority benefit by oppressing a minority by getting them to fund a better lifestyle than the majority have earnt.
Before services are cut, there is a lot of money that could be saved, reduced numbers of MPs for a start, money given to the EU, quangos, subsidies for renewable energy, funding of fake charities, funding of sport and the arts, funding of broadcasting, etc. If, when all this money has been saved, there is insufficient to fund all the services people want then the flat tax could be raised or services cut, but a government should only spend what it can fairly raise and progressive taxes are unfair and undemocratic.
My point, which I thought I’d made, is that there is nothing democratic about pressures that shape a spending situation in which the majority benefit by oppressing a minority by getting them to fund a better lifestyle than the majority have earnt”
Well if that minority is very rich people who pay more taxes as a result of being rich, then I do not consider them to be an oppressed minority. Moreover in what way have they “earned” this wealth but by harvesting the surplus value of their employees or by taking rent from land that had no owner until it was sequestered by the state on their behalf. I am no revolutionary but it seems the least they could do is pay large amounts of tax by way of restitution.
With flat taxes the rich pay more. You are entitled to your wrong opinion, but if the majority who get to keep 80% of their income vote for a minority to only keep 50% of their income then they are clearly oppressing that minority. I’ve made half my ‘fortune’ from professional fees (I can qualify as one of the evil 1% on professional fees alone) and half from employing people. Those I employ I pay a market salary in return for their labour which they freely sell. They choose not to be self-employed because they are more comfortable being an employee, they are happy to reduce their value in return for receiving a guaranteed pay check. As to property, well, either you believe in property rights or you are a stinking commie bastard.
You pay to see the doctor or to educate your children anyway (always assuming that you have children) through taxation. Chances are if you have to fork out directly you will seek value for money and the time servers will be out on their ears. Sounds good to me.
“Chances are if you have to fork out directly you will seek value for money and the time servers will be out on their ears. Sounds good to me.”
Except insurance based health care systems are notoriously inefficient and wasteful. In the US 30% of its health care spend goes on administration. Moreover, if the NHS were abolished, health insurance premiums would rise significantly, as the private health care providers would no longer be able to cherry pick the services they provided, relying on the NHS to do the difficult but unprofitable stuff.
And if you say, get rid of health insurance as well: pay direct for your health care. In that circumstance, what do you do if you develop a chronic long term condition? It would wipe you out financially in double quick time.
“Except insurance based health care systems are notoriously inefficient and wasteful.”
Maybe they could use government consultants to help them increase efficiency and make sure they don’t waste money.
Snork.
“Maybe they could use government consultants to help them increase efficiency and make sure they don’t waste money.”
Not really possible as the bureaucratic waste is intrinsic to an insurance based system.
Who amputated your sense of humour?
“including the pissed-up spendthrift drunk, lying in his own urine in the gutter who will fritter his last penny on a bottle of meths will spend more wisely than government.”
Assumption & untrue.
If you had inserted the word: “SOMETIMES” in there, you might have had a point.
Greg, do you always take everything with such po-faced seriousness?
It was hyperbole used to make a point with humour. No one was expected to take it literally.
I’m all for flat taxation – if only to rid us of the confusing and tortuous tax laws that encumber us.
Make it cheaper to collect and we will all benefit – lower taxes or more tax available to spend on defence, education, health, …