TaxPersonal TaxChew on this proposition

Chew on this proposition

All the excitement about flat taxes, the dinner party tax discussion of choice this year, seems to have died down.

The idea was always unlikely to gain momentum. Apart from anything else, it
would mean raising taxes for a very large group of people. Anyone endorsing it
would be committing political suicide.

But the flat tax remains interesting for what it reveals. The whole
discussion has surely just been a proxy for a deeper yearning among a very large
group of people in the UK for lower taxes.

The argument for lower taxes is not being made, mainly because it is
politically unacceptable. It is such an accepted (current) notion that we ought
to pay more to get better public services, that the idea of lower taxes is
portrayed as some kind of barmy Thatcherite/American-style vision that leads to
no society and inequality.

There is surely a case to be made, however, that economies with lower taxes
consistently outperform those with high rates.

An admittedly cursory look at OECD figures confirms the trend. The countries
with the highest growth rates for 2004 – Turkey and the Slovak Republic – have
tax burdens of around 30%.

The lowest growth rates belong to Italy and Portugal, with tax to GDP ratios
of 43% and 37% respectively.

Would it not be worth looking into the relationship more closely? It would be
complex, but surely it is a more interesting debate than the one we’re having?

Alex Hawkes edits the tax page

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