Posted on 08/29/2005 5:57:35 PM PDT by RWR8189
Ask any politician about the possibility of having a flat tax in Britain, and they furrow their brow and say: "Hmm. Interesting idea. But it's just a tax cut for the rich isn't it? That's a tough sell." If they are a Conservative, they then descend into discussing the party's interminable leadership election (stay awake at the back).
Such a parochial attitude may soon be dispelled. The flat tax - where all exemptions and allowances are abolished and everyone pays the same rate - is marching across Europe, just as other ideas have conquered the Continent once every generation or so.
This time, the revolution is being driven not by the loathing of communism or of some ancien regime, but by that mysterious magic of markets: competition.
A flat tax regime has been adopted in 11 countries and counting. As each citadel falls, another is forced to respond to the new-found vigour of its neighbour. Next up is Greece, where the prime minister could announce one in a few weeks' time. Greece has unbelievably rickety public finances and the hope is that a flat tax rate of 25 per cent will revive the moribund economy, reduce evasion, attract high earners and send revenues pouring into the coffers of Athens.
But a far bigger prize for the flat-tax revolution is to come. Over in Germany, Angela Merkel, the daughter of a Lutheran pastor who, through some quirk of fate, was brought up on the wrong side of the Berlin Wall, is challenging Gerhard Schröder for the chancellorship. Judging by the polls, she is likely to win on September 18: her rating soared after she appointed a slightly eccentric professor called Paul Kirchhof as her economic adviser.
In fact, Merkel is so far ahead that the stock market has leapt, too. Germany, investors believe, is at last on the threshold of economic recovery.
"With her surprise move to name Germany's flat-tax guru, Professor Kirchhof, as her preferred choice for finance minister, Merkel has regained the political initiative and stirred up a healthy debate about tax reform," writes Lorenzo Codogna, Bank of America's European economist, in a note to clients.
"If Germany turned itself into the first major Western country to adopt a flat tax, it would probably become a much more attractive place for business investment in general."
A tough sell? I would say that, if Germany adopts a flat-tax structure, it could actually be tougher to resist it than to advocate it. Admittedly, there could be difficulties. For instance, how would it work alongside national insurance and corporation tax? In all honesty, I do not know. But there is a curious inevitability to the idea, just as Ken Clarke and his friends used to claim there was to the euro. Only, unlike the single currency, the flat tax is a triumph for democracy and keeps winning elections - in Poland, Greece, Russia and elsewhere.
Prof Kirchhof believes he can slim down or scrap more than 90,000 German tax rules and 418 tax exemptions. "Each person only has to pay 25 cents out of each euro earned," he explains. "With the rest, he is set free in the garden of liberty."
As you would expect, none of this appeals to Gordon Brown. He looks more and more like one of the old Soviet leaders who would say Niet to any suggestion that communism was failing, even as the Polish shipyard workers downed tools.
The Chancellor prefers to review his Red Army of tax inspectors and officials, parading past his window. In fact, he has just merged them into a sinister new department called HM Revenue and Customs and moved 1,500 of them into his own building on Whitehall, where he can summon them to his office to hear news of fresh victories.
And in case you think that describing Mr Brown's tax collectors as an army is overdoing it, a report by the Treasury select committee last year said there were 99,400 of them, only a couple of thousand less than the strength of the Army and much more than both the RAF and the Royal Navy.
We know Mr Brown does not like a flat tax because Treasury documents released under the Freedom of Information Act told us officials had dismissed the idea. But then, two weeks ago, this newspaper saw a full version of the Treasury's research, unearthed by the shadow chancellor, George Osborne. This revealed that someone had blacked out nearly all the bits that revealed officials were quite impressed. One of the Browned-out pieces even said there could be an "economic mini-boom" if a flat tax were introduced.
Mr Brown does not like the flat tax because it would see the end of his beloved tax credits. That would be a blessing to the one million people who have been given the wrong amounts and who must now repay the Treasury or face jail. The Child Poverty Action Group is even contemplating taking the Chancellor to court to protect the victims of this fiasco. It goes to show that the poor, as well as the rich, would benefit from a simpler, flatter system, where the savings in the cost of collection could be invested in a much higher personal allowance.
The only senior politician to realise that a flat tax has the potential to be a battering ram that brings Mr Brown's grim edifice crumbling down is Mr Osborne. Shadow chancellors have been two-a-penny in the past eight years, but he is the first to show serious signs of brain activity. He has even had the good sense to rule himself out of the current leadership contest.
It would be the kiss of death to tip a 34-year-old as a future prime minister, so I will spare him that embarrassment. But whoever wins the Tory leadership could do worse than to retain the services of Citizen Osborne.
Gee. What a novel idea. Didn't Adam Smith have a similar notion about this concept 200 hundred years ago?
I favor a flat tax because I favor simple.
But beyond that, there is no reason for the April 15 madness we go through every year. This is, I think, unique to the US. In most countries where there is an income tax, the money is deducted from your paycheck, and that is the end of it. There is no need to go through the annual business of filing. You file when you are first hired, to establish what your deductions are, and that is it.
No need ever to repeat the process unless your deductions change.
If your spouse works, fine, her taxes are deducted same as yours. Your income doesn't affect hers.
Unless you are a business, there is no reason ever to go through what we go through every year.
bump
I favor a flat tax, too. And the end of withholding. Then let the filing date be in mid-to-late October . . . giving a whole new meaning to "October Suprise."
Comsumption tax would capture the underground economy. I would favor that but understand it makes too many people tax collector's.
Actually with a consumption tax there would a lot fewer tax collectors. Today all the retailers collect state sales tax (except for the few states that don't have sales tax) plus all the employers collect income tax, and these employers include all the retailers and non retailers!!!
Gee, April 15 is now my favorite day of the year. It's the day when I fill out my one-page Singapore tax return. A couple of weeks later, they send me the bill - my entire income tax liability for the previous year, in a lump sum. The next day, I send them the check.
It's a big check - this year, almost 11% of my income. But it's the only time I pay tax: there is no witholding, no local taxes, no social security, just that one check.
So, every year, I can ask myself "was it worth the money?" Since I'm still here, you can guess the answer.
Another form with money going to another govt entity. If they could put up with that it would raise much more money. Our national pastime is spending, the govt models it very well for us too.
If we can't get the "fair tax" the flat tax would be the next best thing.
I have worked only in a couple of South American countries, where the pattern was as I described (you file only when you are hired, to establish your withholding, and never again), and in the middle east (where they didn't have any income tax).
I asked once when I first arrived how they could get by without filing annually... I said "what if you overpay? What if you underpay?" to which they just looked at me like I was a dummy... how is that going to happen? "If they take out too much this week, I suppose they take a little less next week" was the answer, but I was given to believe it wasn't an issue.
In one country, they did away with the income tax because too many companies collected it but failed to send it in, and their owners were politically untouchable. So they replaced the income tax with a banking services tax, 1% of every transaction. Credit card purchases, deposits, check purchases, withdrawals, everything.
When you bought something by check or card, the 1% was figured in to the purchase price just like a sales tax.
Cash transactions didn't worry them, because the theory was that all money passes through the bank sooner or later. And a second advantage was that the source or destination of the money wasn't considered, and hot money was taxed the same as clean money.
The Left got upset, because (and I quote) every advanced country has an income tax, so we have to have one too...
Eventually that government was overthrown, and the income tax reinstated (but they kept the banking services tax).
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