He mentions a few advantages flat tax would have over the system currently employed:
- 1. Increase revenue as the black economy will disappear; tax exiles will repatriate their fortunes; and instead of paying for expensive advisers the rich will simply pay the tax;
- 2. Increase the revenue as the economy will grow (as was the case when Thatcher and Reagan cut taxes);
- 3. Maintain a zero rate for those who are less well off by putting the threshold from which tax becomes payable at a high enough level;
- 4. Do away with a large chunk of the HM Revenue’s expensive administration
This is an interesting point of view, as in Romania politicians on the Opposition side are envisaging the reinstatement of a progressive tax in the likely event that they would come to power in 2012 (though, one must say, to their credit, that they take the current level of 16% as the ceiling and think of cutting taxes for the poorer rather than increase them for the richer).
There are, I believe, a few arguments against this system of taxation, at least if one looks at things through the lens of classical liberalism, which the National Liberal Party claims as its doctrine.
Firstly, it goes against the principle of equality of chances: people should be equal at the starting point, not at the finishing line. It is a fair thing for all to know that they must pay the same percentage of their income and thus allow their personal creativity and hard work to produce as much wealth as they can. Why should someone who is a more productive member of society be forced to pay a higher percentage of his income? Why should this person be penalised by the state? It is as if the state told him “I know you are good at producing wealth, but I’m quite certain you are incapable of spending it properly, so I’m going to relieve you of that burden...”
Secondly, tax is really just a price we all pay for the services we are being provided with by the state, services without which we, as individuals, could not maximise our potential. I am thinking here mainly of personal and national security, justice and other such things. But these things are being enjoyed by all in fairly equal measure, so why are the richer being taxed more? If one takes the logic further, one is compelled to admit that the state actually benefits the poor more than it does the rich: the better off are more likely to seek education for their children in private schools (or ‘public schools’, as they are called in the UK, by some irony of language), to seek healthcare in private clinics, to seek protection by employing private bodyguards; while at the same time being less likely to seek state pensions. So, in essence, in a progressive tax system, the rich are asked to pay more in order to fund a state from which they benefit less. How exactly is that fair?
That is not to mention that, thirdly, the richer do end up paying more even under this scheme – since paying 16% of 10000 RON is at any rate more that paying 16% of 1000 RON. It would therefore be utterly unbalanced to ask them to surrender as much as 40% of their income, as demanded by some of the more radical proposals put forward by the Social-Democrats, the other major Opposition party.
Certainly, the arguments in favour of the flat tax do not end here, but nor will the debate around it. There will be – doubtlessly – more opportunities to express them.
