Adam Smith Institute

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Flat rate taxation

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flat-rate-taxation

All three major parties in UK politics have insisted ‘fairness’ is one of the vital aspects they could bring to government, yet I am of the opinion the policies they intend to implement will do the opposite.

It goes without saying that different people or groups have natural advantages over others- be it strength, intellect, inherited wealth or simply good fortune. Despite this, mainstream social and taxation policy attempts to bridge the gap between the better off (not solely in financial terms), be it by the decline of grammar schools, ever increasing inheritance tax or most significantly varying tax rates on income.

It is the last policy I would like to discuss in depth as I it goes furthest to decrease individual liberty as well as being most detrimental to society as a whole. The vast majority of people want to work and work hard. Take some time off work. How long is it before one finds them self longing to be productive and to serve a purpose again? So, why is this positive aspect of the human psyche punished in monetary terms through higher tax rates for high earners?

Obviously, more money means a higher disposable income, so once necessities have been purchased a larger fund remains for higher earners than lower earners. Governments have utilised this as an opportunity to seize more money and hence more power for themselves, though of course it will be argued that it is for the good of society. This, when accompanied with state hand outs and benefits, leads to a culture in which hard work is punished and apathy rewarded. Those earning over £150,000 a year are now paying a 50% rate of tax. The revenue that is generated goes towards paying for schools and NHS hospitals they and their children are less likely to use. The temptation invariably is to go elsewhere, taking the jobs their businesses may provide and their individual skills abroad. This ‘brain drain’ means the UK faces losing one of its biggest assets to other nations, its intelligent populous.

A flat rate of tax would be fairer in that it would effect the entire working population proportionately. Were it to be introduced, governments would be obliged to cut spending down to a rate that the public as a whole, not just the very rich can afford to pay for, and (excluding monarchical systems) a decrease in the role of a country’s government can only be good for advancing its peoples’ liberty.

Jamie Brooke is the winner of the 2010 Young Writer on Liberty.