Why the case for a flat-tax is irresistible

Written by | Thursday 17 February 2005

It works on two levels. The single rate is set sufficiently low that
compliance shoots up. It is less worthwhile to avoid tax by complicated
tax shelters and less worthwhile to evade it by criminal failure to
declare income. The second effect is that the low rate increases the
reward of extra effort and risk-taking. Since people can now keep a
higher proportion of what they earn, extra earning becomes more
attractive.

A Tartan (Flat) Tax?

Written by | Tuesday 7 December 2004

Like all of us, Gordon Brown is struggling to make ends meet. Public spending has skyrocketed, but tax receipts - though up 7% - are well below his optimistic ambitions. He needs to spend less (fat chance!), or raise more money.

But New Labour knows tax is unpopular, and has pegged income-tax rates. The media have rumbled his stealth-tax scams. So what can he do?

The mother of all privatizations

Written by | Sunday 28 November 2004

Exactly 20 years ago this week, 2.4m Britons scrambled to buy shares in the state-owned telephone company, British Telecom (BT), before it was floated on the stock market. At almost £4bn, it was the biggest stock market sale in history.

It gave the world the concept of mass-market privatization. It bristled with marketing innovations. It sparked a revolution in share ownership. It heartened the government to privatise more. And it provided a model from which many other countries, including ex-communist ones, were happy to borrow.

Queen's speech

Written by | Wednesday 24 November 2004

What struck me most about the Queen's speech was not the draconian plans to combat terrorism or crime. With an election coming up, that is just advertising. The government has plenty of powers to combat terrorism. But still feels the need to convince tabloid readers of how illiberal it can truly be.

The rich will pay more if you tax them at a flat rate

Written by | Sunday 21 November 2004

Shortly before the US election, President Bush listed his domestic priorities to the New York Times. "I'm going to come out strong after my swearing-in," he said, with "fundamental tax reform, tort reform, privatising of social security [pensions]."

That first priority is particularly interesting, because many of Bush's economic advisers are urging him to tear up the 55,000-odd pages of the US tax code and to follow the lead of nine other countries by replacing it with a simple, flat-rate tax.

The rich will pay more if you tax them at a flat rate

Written by | Sunday 21 November 2004

The idea of the flat tax is that everybody above a set threshold pays the same rate of tax. You simply scrap the complicated banding system of progressive rates, where big earners pay a higher rate of tax than middle earners, middle earners pay a higher rate than low earners. Out go the intricate adjustments depending on people's age or marital status, and all the other exemptions, concessions and rebates deemed necessary to make a progressive tax system look remotely fair. With flat tax, the poor pay nothing.