Wednesday 19 October 2011

Tax and spend

I wish someone with right-wing leanings could explain to me why it is so important for rich people to pay less tax than the less well off members of society, because it is a concept that I really do not grasp. I understand why they claim that more tax is collected if the rich pay lower rates, although I don't necessarily buy that. I also know of the arguments about it encouraging entrepreneurship which is a false argument because if you tax people a little bit more they’ll look for opportunities to earn even more money to compensate. So I really don't see any of their tired arguments as justification for lower taxes. It is like the government saying "we don't have a very good arrest rate for muggers so we're going to make mugging legal". Morally it is indefensible and mathematically it is questionable.

One of the problems we have with our tax system is that it is so unfairly weighted towards those in society that are less well off. We are virtually all taxpayers as I’ve explained before. Very few escape apart from the very rich and the insane. Tax should always be equally about two things: fairness and revenue collection. A tax regime has to be seen to be fair as well as being fair but it must also be effective in revenue collection. At present we have neither. Our tax system is far too complicated which enables the rich to avoid paying what they should. It is my belief that a simpler and fairer system would actually increase tax revenues.

Okay, redistribution of wealth is still not as popular in this country as it should be but that is not surprising as the rich expend a lot of energy and money on propaganda to hoodwink the population into believing that a large gap between rich and poor is desirable. And, sadly people fall for it. Redistribution of wealth, financing the mechanics of state and paying for measures to promote social mobility are what taxes should be for, with the emphasis on taxes applied to income rather than spend. When you tax spending this disproportionately hits the less well off, those that can least afford to pay taxes. If we had less of a divide between those at the top of the earnings ladder and those at the bottom then differing rates of tax wouldn’t be so necessary but unfortunately UK companies would rather get away with paying most of their staff the bare minimum rather than generous wages so that they can reward those few at the very top; it’s pure capitalism/market forces which as we know doesn’t work for the majority of people.

I think the sad thing is that the fair and equitable redistribution of wealth would ultimately create a stronger economy, with a higher GDP per capita and lower tax rates. What fat-arsed money men can’t seem to grasp is that if you put more money into the pockets of the less well off the less well off will spend it. When they spend, business booms and the economy grows. As the economy grows this generates more wealth and higher tax revenues. Beats quantitative easing every single time. It’s similar to the model that works reasonable well in Scandinavia. What’s not to like?

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