Radical Realism: The Case for a Single Income Tax

Daniel Pryor December 18, 2012 2
Radical Realism: The Case for a Single Income Tax

 

A brief Twitter exchange with Independent columnist Owen Jones reaffirmed to me that groundless vitriol surrounds the concept of a ‘flat tax’ (or, more accurately, a proportionate tax). In a recent article discussing UKIP’s new status as ‘Britain’s third party’, Jones asserts that UKIP’s proposed 31% flat tax rate would leave ‘millionaires paying the same as call centre workers, nurses and bin collectors’. Carefully worded to extract maximum ire with minimum rationality, the piece conveniently neglects to mention that 31% of £1,000,000 is not actually ‘the same’ as 31% of £21,173 (starting salary of NHS nurses). Newly qualified NHS nurses would pay just £2,998 in taxes under UKIP’s fiscal policy, owing to the proposed raise in personal tax allowance to £11,500. He also claims that ‘UKIP’s economic policies are a hard-right wet dream – and a nightmare for the rest of us’. If completely taking the poorest out of income tax is described as a ‘nightmare’, perhaps it’s time to start doubting Owen’s ‘lefty’, pro-working class credentials.

Dubious discussion of taxation seems to be Owen’s speciality. Appearing on BBC This Week earlier in the year, he was rightfully shot down by Andrew Neil for making the A-level Economics mistake of equating net worth with earned income. However, the real debate about the introduction of a single income tax lies beyond Owen Jones and his ‘soak-the-rich’ rhetoric. Anaemic growth, unacceptable levels of unemployment and a malicious anti-capitalist mood are all playing their role in making life harder for the average working citizen of this country. There are compelling arguments that demonstrate how a flat tax is the most pragmatic, credible and fair method of kick-starting the ailing UK economy.

Simple. A flat tax simplifies the tax system, freeing up time and resources that could be put to productive use instead of being tied down by bureaucracy. At over 11,500 pages, our tax code is one of the longest in the world. Around 26,000 people are currently employed at HMRC in compliance [1] (administration, inspection, and record-keeping). Individuals are severely burdened by the ‘additional hidden cost arising from the legal obligation to comply with often complex tax codes’ [2]. Abolishing certain taxes by merging them into one single rate is a powerful way of reallocating private and public resources towards more productive ends.

Fair. It is not enough to improve the standard of living for one section of society. Any reasonable tax proposals must benefit individuals and families from across the income spectrum. No income group would pay more tax as a result of flat tax proposals. The incentive to earn more would no longer be penalised by higher marginal rates, with those on lower incomes instead encouraged to improve their lot.

Prosperous. In the words of John F. Kennedy, ‘the soundest way to raise the revenues in the long run is to cut the rates now’. Economic modelling suggests that the 2020 Tax Commission’s proposals for a Single Income Tax would increase business investment in the UK economy by 60% over the next 17 years. Following the introduction of a flat tax, GDP growth is predicted to be permanently about 0.4% higher than would otherwise be the case, with public borrowing and consequently public debt falling spectacularly after necessary short-term restraint on government spending.

At least Owen got one thing right in stating that ‘UKIP has become a vehicle for those repulsed by our technocratic political elite’. The columnist attracted the attention of Olly Neville, the newly elected Chairman of Young Independence (UKIP’s youth wing). Olly registered his surprise at Owen’s comment, remarking that ‘even Owen Jones supports UKIP’s fresh, honest approach’. Achieving 14% in the latest polls is quite a feat for UKIP. But it is nothing compared to such a ringing endorsement from a traditional enemy of freedom and the smaller state.

1 Mary Dejevsky: Why the political left should adopt the ‘flat tax’.
www.independent.co.uk/voices/commentators/mary-dejevsky/mary-dejevsky-why-the-political-left-should-adopt-the-flat-tax-7786012.html

2 ‘The Single Income Tax’ p.44.
www.2020tax.org/2020tc.pdf

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