Tuesday, 4 August 2009

Taxes: only squeeze those who can stand a squeezing

Last time I had a good old rant about how our tax system, even after 12 years of supposedly socialist government, still inexplicably favours the well-off. I think anybody would be right to share my anger at this, and in my opinion it is reason enough to disqualify any government, especially a Labour one. But how should it be fixed?

For starters, we need to redraw the tax bands to make the system truly progressive, not just the half-hearted attempt we have now. In times gone by, the average earner paid very little in tax, as one might expect. Today, it is the average earner who contributes the lion's share of tax revenue. Also, there are many people on pay that is a long way below average who really should not have to pay tax at all, yet under our system they do, and what's more, now the 10p tax rate has been abolished, they are paying it at the same rate as the average earner. And the 40% top rate of tax, supposedly aimed at high earners, comes in at a little over £30,000 a year, thus catching many people who could hardly be described as rich. 40% is too heavy on those people, yet not nearly heavy enough on the super-high earners who fall into the same category.

Thus the whole band system needs a drastic shift upwards. Those on low earnings should pay nothing, after all their meagre paychecks are barely enough for the basic necessities as they are. The average earner should pay some tax, but at a lower, more reasonable rate. In any case, as the vast majority of taxpayers inhabit this group, the percentage rate should not need to be very high to bring in big revenues to the treasury. Then, as we climb up the income ladder, whereby every pound earned becomes more disposable, the government can take progressively bigger slices of that pound. The comfortably well-off should still be allowed to enjoy the majority of their earnings, but once we get beyond comfortable and into the realms of the stratospheric earnings of bankers, top executives and professional sportspeople, then I would have no qualms in imposing a rate of 90% or higher. There comes a level, which I would call 'enough money for anybody', beyond which further increase to a person's wealth becomes at best pointless, and at worst obscene.

Of course, the myriad loopholes which the rich have traditionally been able to exploit must be closed. Anybody who earns an income from a job, business or investment in the UK must pay UK tax on that income, regardless of citizenship or country of residence; it really is as simple as that. Many business leaders warn against higher taxes or more robust collection measures, lest all our top businesspeople desert Britain for other countries. Personally, I'm minded to call that bluff, and even if some do leave, I say let them go. Such grasping individuals are hardly the kind of people we want running our powerful commercial organizations, and besides, the UK is a massive consumer market, and nature abhors a vacuum. If they don't want to do business here, then someone else will fill the gap, you can guarantee it.

This is pretty radical reform I'm calling for here, but really all that is needed is a little political will. The gap between rich and poor is the single biggest global problem as I see it, and this would go a long way towards halting the UK's shameful slide in the wrong direction on this issue. And the thing is that it isn't really a big organizational task, the solutions are simple, we just need a government that is prepared to carry them out. Labour have shown that they have no real interest, which is frankly despicable given the supposed values upon which people have based their support for them. The Tories have always been ideologically opposed to high taxation for the wealthy, so while I can't accuse them of the same hypocrisy, I know they will be no help. Could a liberal government do it? Perhaps, if they were brave enough to be truly different...

Next time, what to do about tax credits.

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