Preface
Tax affects every worker and business. What tax levels are fair is a question that remains largely unanswered.
Tax can cause discontent if too high as it adds resistance to the ability of individuals to innovate by flattening out the ‘benefits’. It can make it seem like extra work or skill is not valued. Most would argue that incentivising work is a good target, but to what degree can be open to interpretation.
Discontent can lead to people emigrating to somewhere with more favourable tax conditions (human-capital-flight).
In general, most may argue that the removal of tax altogether is out of the question. Tax pays for many things that people feel are essential: the police, healthcare, infrastructure, the military. It also pays for things that would not be funded privately either due to risk, or a lack of profitability such as the culture sector or long term R&D. Just because things aren’t profitable may not mean they don’t offer tangible benefits to the public.
In the UK
In the UK, tax tends to fall on the broadest shoulders, with the proportion taken increasing arbitrarily as pay goes up.
Simple reforms to the tax system
- Fixing the removal of the personal allowance. This is an unnecessary and arbitrary cliff-edge that leads to a high marginal tax rate.
- Removing the double taxation of work by rolling National Insurance into income tax. If we value workers, why is it more unfavourable to earn money in this way.
More complex reforms
- Reform the personal allowance. The personal allowance and minimum wage could be rolled into one idea. A set tax free minimum rate that all workers should be paid. Simply, if it costs a certain amount to live (the minimum wage) then this should be an untaxed sum.