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Samizdata quote of the day In an interview for the New York Daily News in 1997, the actor and entertainer Clint Eastwood explained how the world would change if politicians adopted a flat tax:
“All of a sudden, what do you have? You have the whole tax system run by a little old lady on a home computer, doing the work of all these thousands of bureaucrats and accountants. Passing that would be amazing, wouldn’t it?”
Go ahead, Gordon. Make our day.
– Matthew Elliott
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And it’s happening. It’s happening. It’s one of those things that will eventually become unavoidable, as other economies adopt it and become more successful than the old-fashioned economic dinosaur systems.
SciFi fans might recall that Issac Asimov wrote about taxation as one of the basic principles of the fictional construct of pyschohistory. He noted that over time taxation systems inevitably became more complex as competing interests pressured governments into adapting the tax system for their purposes and politicians dispensed tax breaks as rewards to their supporters. Periodically there would be a clean up and simplification but the more complicated the system had become the more difficult and potentially explosive would be the simplification.
The question is, I believe: have the majority of the citizens of the world become so comfortable in their entitlement to convert to such an idea? And how hard the people within the system will battle to keep their non-producing, parasitic jobs.
The solution is simple. Introduce a flat rate tax system that is set at a high enough level to continue to finance the huge, unwieldy, non-producing, parasitic tax bureaucracy. Implementing the change should create enough make-work for a decade at least, by which time there will be plenty of justification for keeping, and indeed expanding the non-producing, parasitic organisation.
Everybody wins!
This is the scheme that will be implemented. You can put money on it (don’t forget to pay the betting tax).
zmollusc,
Unfortunately your prescription doesn’t recognise half the tax-burden problem. There’s a unwieldy, non-producing, parasitic tax bureaucracy outside the Government sector, in all those people whose jobs depend on assuring compliance and utilising tax-breaks.
They include not just bank compliance departments and accountants, but the mutual fund, savings and pensions industries, investment managers, compensation specialists and human resource people, tax lawyers, accountancy software providers, property consultants, shipping agents, film producers, and a wide range of industrialists in favoured industries.
Trades unions and politicans also stand to suffer from more transparency in taxation, which will allow people to understand the real distribution of benefits and the sheer amounts sucked up by the state. One of the greatest motors of government expansion in Britain has the establishment of PAYE (payroll deduction of tax), so that few people notice and fewer understand what they are paying and why.
Clint’s a good man. Bloody good director, too.
Once again I find myself in agreement with guy herbert (I must stop this) when he says:
” One of the greatest motors of government expansion in Britain has the establishment of PAYE (payroll deduction of tax), so that few people notice and fewer understand what they are paying and why. ”
That is precisely how it works. People on PAYE schemes grumble at the vague sensation of loss when their salary arrives newly mugged, but they have nothing like the visceral shock of, twice a year, having to write out a cheque for thousands of pounds.
Conclusions are being drawn from the German general election result. How did Merkel lose an 18% lead? Sadly, as I am all in favour of flat tax, her pledge to introduce this tax system is being seen as one, perhaps the main, reason why Schroeder got back into the race.
Sorry folks, I think flat tax may have just disappeared off the agenda.
John – for the Germans that may be the case but I think we can agree that the electorate over there has made a big mistake.
I for one cannot wait for flat tax in the UK to become a reality. Sadly it will never happen while Mr Brown is in a position of power. Simplicity is not Gordons friend – obsfucation is his preferred technique!
I suspect the only way to successfully introduce flat tax will be with a two stage process. A future government in waiting would have to campaign for a tax system with the high exemption (£12000 tax free allowance?) of the flat tax system and keep, or even increase, the higher tax rate on high earners. That way, our socialists won’t have the amunition to scare the electorate as was done by the German social democrats. Stage two, once settled in at number 10, reduce/eliminate the higher tax rate.
Guy Herbert – you’ve put your finger right on it, about PAYE. It’s a major part of the state armoury, and it should be up there among our priority targets. I’ve often thought that making the PAYE system voluntary might be a Tory “big idea” policy, like council house sales were – a policy that organically turned council-tenant Labour voters into property-owning Tories.
Alex writes: the actor and entertainer Clint Eastwood … We all know he is one hell of an actor, but in what way is Clint Eastwood an “entertainer”? Is he, unknown to most of us, a song and dance man? A stand-up comedian? Does he sing Sinatra tributes in boozy bars at two in the morning? Does he bend spoons through mind power? Alex – do tell!
Sadly, Clint is wrong.
Flat taxes would certainly simplify personal tax returns. But there are many other reasons why tax systems have become so ridiculously complex. Some of these reasons (unfortunately) are unavoidable and in many other cases flat taxes may help simplify taxes but would not in themselves reduce the complexity drastically. It would take a clear minded determined effort over several years and a whole lot more than flat tax to really simplify the system. This is not say that it shouldn’t be done – it should – but Clint’s vision shows that he hasn’t really examined the issues and has wholly unrealistic expectations.
Of course, flat taxes have other benefits as well as simplification, such as incentives
There is a very interesting paper on the Centre for Policy Studies web site on this issue.
Once again it seems that commenter’s ideas of a flat tax is a system based on largely on income. The latest version of ‘flat tax’ thinking is a system based entirely on sales tax, with no tax on income being nescessary. The ‘Flat’ refers to a single rate for all sales, with none of that nonsense of a special rate for so-called luxuries, so beloved of social engineering politicians.
It is suggested that a rate in the region of 23% would more than cover budget needs, and would have the benefit of applying a tax to the ‘black’ economy, via the proceeds of ‘illegal’ earnings being taxed when spent, thereby increasing the ‘tax base’ at one fell swoop.
Another advantage would be that many bureacrats would be rendered redundant, thereby producing yet another saving over the current system.
Wasn’t VAT supposed to eventually replace income tax?