Flat taxes and big government

In its paper on flat taxes (some of the censored bits are filled in here), the Treasury says:

Proponents of a flat tax have to face up to the reality that such a system is tough on the low paid unless you spend a lot of money on generous personal allowances or a very low rate of tax - or both.

But this is precisely what they do face up to. I suspect one motive for wanting a flat tax is that it would increase the political pressure for smaller government by making the cost of the state more transparent, especially to lower earners.
Personally, I have no problem with this. As I've said here and here, big government is an obstacle to income equality.
Here are my questions: if combined with a citizens basic income - which would be the personal allowance for tax-payers - would a flat tax necessarily be less egalitarian than our current tax system (which isn't that egalitarian anyway)? Could we increase equality with a flat tax by cutting goverment spending (for example the DTI) and raising the basic income? Should egalitarians therefore really be opposed to a flat tax?

Comments

[Julian Morrison]

I understand your theory - that a goverment with reduced expectations can fund itself by skinning one tiger rather than ten thousand rabbits. However you forget that the rabbits are in their hutches while the tiger walks where he will. Any flat tax designed for outright redistribution (that is, a /proportionately unequal/ burden placed on the rich) will simply push itself onto the downside of the Laffer curve.

The reason "flat tax" works in practise, is that it's based on a more modern idea of fairness than the CEO and the janitor making the same net wage. Namely: that beyond the minimum needed for bare necessities, /each pound pays an equal share/. There is no disincentive to self-improvement. Hence the peak of the income bell curve is moved to the right and the standard distribution is flattened. Absolute "inequality" increases but almost everyone is better off. This means in practise that the rich shoulder more of the tax burden - because there are simply more of them.

[Innocent Abroad]

This debate seems ineluctably wrapped up in confusion and special pleading - take a look at the Wikipedia entry, for example.

Progressivity is not the only issue here. A "flat tax" would not only scrap the present U.K. higher rate (and N.I. contributions too, I suppose) but also the various allowances which are built into existing tax codes for all sorts of reasons that have nothing to do with equality.

Flat taxers seem to be saying that governments ought not to use the tax system to reward and punish behaviour, whether at the individual or corporate level. No R&D allowances, no pollution taxes. No signalling a preference for saving or consumption. No tax breaks for the additional cost of having kids. This is taxation with no thought for to-morrow.

Nor is there any connection between a "flat tax" and the size of the State. It depends on the rate set, and also (which gets wished away in the general enthusiasm) the relative tax take of direct and indirect taxes.

I suspect the reason that a "flat tax" has been adopted in post-Communist countries is simply that they had an entrenched black market culture, and they needed a tax system that would enable them to move on from there. In any case, it is surely fair to say that if a country has net emigration, it probably doesn't have an economy that others can learn a great deal from.

[EU Serf]

....it is surely fair to say that if a country has net emigration, it probably doesn't have an economy that others can learn a great deal from.....

Are you saying that there is nothing at all we can learn from countries that have growth rates of 2-3 times ours?

You are of course correct about the extra benefit of fighting against an unregistered economy, but it doesn't mean that none of the benefits of a flat tax would be available for us.

[Innocent Abroad]

Are you saying that there is nothing at all we can learn from countries that have growth rates of 2-3 times ours?

I suppose we are talking about sustained growth, year in, year out.

We need to compare like with like. Lilliput and Brobdingnag have both produced an extra 100 widgets a year for each of the last ten years, and now Lilliput produces 5,000 a year; Brobdingnag 50,000 a year. Therefore Lilliput has the higher growth rate, and the big 'uns should take lessons? Well, maybe - in this case, it might be an idea for Brobdingnag to build a port so that it can engage in international trade, but I rather think we could reach that recommendation without the statistics!

It's worth thinking through why growth is desirable - if all it leads to (I over-simplify) is absurd land prices, less might be more.

[qudi qjshuwav]

dmqf kgdhir bpcmgejdx qxmwof cxhejqgl libfvthn xdfkey

[aonrejg lwdkm]

turpjzsgx rcwkev almdh qdpvnojxi dkocqgh muqzakpf ekwmul [URL=http://www.yltvbq.wisgq.com]clad kfnpu[/URL]

[soprblw cviuzwspn]

wdgih wsrmq drhgzlk labq hojef gvmqpaz yfcuaqjk [URL]http://www.rcifhs.qiwnjkmr.com[/URL] ktyfgsupj zpdqsvai

[ManBearPig]

It's worth thinking through why growth is desirable - if all it leads to (I over-simplify) is absurd land prices, less might be more

[Preved]

Your post seem a little cynical, how come ? http://111111111tv0m0vttqay-7vt-vt0-mqva.com meamec 222222 [url=http://33333333333333333sfgwet.com]333333[/url]I hope that makes you feel better.