I was having a conversation with the wife, about oil prices, the UK tax levy on crude, the largese of government spending and the seeming inability of governments to tackle in any meaningful way the problems faced by most western governments, when the subject of personal taxation came up.
Now, in the UK, we have a scaled tax system; if you earn more you pay more tax. I’m not against that as such, and I can understand certain moral or ethical principles which might support this. Most poeple I’ve asked about it, simply say, its only fair if you earn more then you should pay more tax.
But none of those types of argument justify a higher tax liability, simply because you earn more money, I mean, it’s not as if, as a higher earner, you present a higher burden on the state/national services and infrastructure which (at least in principle) your tax money pays for.
I’m not ranting about it’s implicit fairness or otherwise, simply that, looking at it through the cold lens of logic, it seems inherently discriminatory, that those who earn more pay more tax.
Which brings me onto flat rate tax. Everyone should pay taxes, and reasonable taxes at that. It seems to me that it is fairer that everybody should pay the same proportional amount in taxation, including personal allowances – like such a scheme as that being bandied around the UK by the conservatives right now. And it would be so much simpler to administer. Listening to the radio this evening I was only mildly surprised to hear of a recent study concluding that the taxation rules of the USA’s I.R.S would take someone in the order of years to read through from start to finish, and falling slightly behind that was Germany and the UK.
The only slight problem with the Conservatives proposed scheme, as highlighted by the Adam Smith Institiute, is that it doesn’t generate as much tax income as the current scheme. But it did point out that that may be offset by increased consumer spending, given that people would be cash richer.
So my question, to anyone who’s interested, is this, is it justifiable to pay more tax if you happen to earn more money, and if so why? and is a flate tax system just plain wrong?