Will Hutton (London Observer): One tax that the rich will love

[Jack Rabbit]

From the London Observer (Sunday supplement of The Guardian Unlimited)
Dated Sunday September 11

One tax that the rich will love
A new economic idea has seized US neocons, Angela Merkel and now the Tories. The trouble is it's batty
By Will Hutton

It is the new political idea of the season and its sudden prominence is a fascinating commentary on our times. Its endorsement is a badge of virility for every right-of-centre columnist, and now the virus has spread to our politicians. The Lib Dems and Tories say they'll look at it, with shadow chancellor George Osborne announcing last week that he is setting up a new tax commission to assess it.
This catch-all solution for our ills is the flat-rate tax or 'flat tax'. No more higher tax rates for higher incomes. No more tax credits for the poor or allowances to encourage this or that virtuous activity, such as saving for retirement. Just one straight flat rate for all, rich or poor alike. Simple. Understandable. Easy to collect. The long awaited magic bullet that will transform the British economy, remoralise our society and revive Conservative fortunes.

Even its most enthusiastic champions recognise that for the first few years the income tax take will fall, but only as the price of transition. There would be such a tidal wave of business start-ups and a burst of creativity unleashed by the new incentive that increased growth would soon restore overall revenues to where they used to be. An economic nirvana would dawn. As for the poor, if the flat rate was too onerous, then one sole new allowance might be permitted: an exemption for, say, the first £10,000 or £12,000 of income. Millions would be taken out of the tax system altogether. And the millions more who earn just a few thousand above the threshold would be better off, too; they would just pay the flat rate on the balance of their income over the allowance - a trivial amount.

Moreover, this boon for the poor and for the enterprising alike is not just the wishful thinking of right-wing think-tanks and bow-tied, swivel-eyed fogeys; it is already happening. Eastern Europe is leading the way with flat-rate taxes; the Russians have followed suit and now even putative German Chancellor Angela Merkel is flirting with the idea.

Read more.

Another GOP idea falling flat.

[ClintonTyree]

1. A TRUE flat tax is a lot different from the "modified" version........

the rich want to push forward. Oh, they'll sweet talk the middle and lower classes with their promises that it will be "more fair", but they've so modified and skewed it that it no longer resembles a TRUE flat tax. Anyone not familiar with the "flat tax" and the perversions thereof......... http://en.wikipedia.org/wiki/Flat_Tax

[Jack Rabbit]

2. Related story

From the London Observer (Sunday supplement of The Guardian Unlimited)
Dated Sunday September 11

Right falters in German poll
With the opposition stymied by its 'flat tax' guru, Schroeder's stock is swinging higher.
By Luke Harding in Bonn

Until last week there was little doubt who was going to win Germany's general election: conservative challenger Angela Merkel.

For Bernd Becker, a supporter of Gerhard Schroeder, campaigning had been a demoralising experience. In the affluent villas along the Rhine, and in the timbered village just south of Bonn where Becker lives, there appeared little enthusiasm for the Chancellor.

But then something happened. 'Our campaign suddenly gained momentum,' Becker said, as he handed out newspapers for Schroeder's Social Democratic party (SPD). 'I'm now convinced we can win. We've tried to change the country. We've started to reform it. It hasn't just been nonsense.'

Schroeder has staged an extraordinary comeback in the final stages of Germany's gripping election. Merkel is still on course to be the next Chancellor, but her opinion poll lead is beginning to vanish. Over the past week the Social Democrats have gone up from 31 to 34 per cent, as Merkel's Christian Democratic Union (CDU) has slipped back to 41 per cent. For the first time in months, the polls suggest her centre-right coalition might not win an overall majority next Sunday.

Read more.

[Kellanved]

8. I wonder where the "Merkel = reform" meme comes from

The conservatives are about as likely to do reforms as a rock. Schröder on the other hand did reform and got a lot of bad press for it.




Sure, worker's rights will be reduced, but what then? Merkel hasn't even the standing in her party to defend against the state PMs wishes before the election (her forced embrace of Merz, her inner-party enemy #1 being a good example), she won't get the CDU, let alone the CSU, to follow her far.
The proposals are utterly not financable, she has yet failed to actually say what reforms she intends to do and when. Why? ...


Oh:
http://www.bundesregierung.de/Anlage877296/Germany%27s+surprising+economy.pdf
(Although I have to say: rooting for Merkel based on her current stronger position in the upper house is decidedly undemocratic)

[T_i_B]

3. This is a really bad idea

It's inherently and totally unprogressive, not to mention bad economics, but both the Conservatives and even the Liberal Democrats in the UK seem to like it. :grr:

The thread below explains more, and needless to say, if the Lib Dems adopt this idea they will lose a lot of support on DU, not to mention the UK left as a whole.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=191x10139

[replacement]

4. I thought the 50% top rate was the Lib Dems best policy

The flat-rate tax is indeed an awful idea that needs kicking firmly into touch as soon as possible- preferably with George Osborne and Vince Cable holding the football.

[T_i_B]

5. They appear to be considering a U-turn on taxation.

They have been for more progressive taxes since 1997 at least, but at the General election in May they lost some votes to the Tories over tax, whilst they picked up votes from Labour.

As most target seats for the Lib Dems are still Tory seats they appear to be considering dropping their policies on taxation in a startling U-turn. Needless to say that they will hemorrhage voters to Labour and the Greens if they go through with this.

It's at times like this that you just wish that the Lib Dems would stop trying to follow political trends, especially silly ones such as flat taxes.

[replacement]

6. Whilst I'm rarely shocked by politicians backtracking...

I have to say I was surprised by the complete 180 the Lib Dems are considering doing on this (although I was kind of expecting them to quietly drop the 50% top rate), and if I was one of the former Labour or left-leaning voters who helped give them their biggest parliamentary party since the 20s this May, I'd be feeling pretty disgruntled at the moment. I just think they went into the last election with highly unrealistic (imho) expectations of winning 80-90 MPs, and now that hasn't happened the party's neo-liberal orange book wing have sensed their chance to set the agenda and put forward crappy, unprogressive policies like this aimed at winning over Tory voters. But the Tories are still only polling a couple of points above their core vote, so i really don't think there are that many moderate Tory votes up for grabs- and if Clarke becomes leader there'll be hardly any. So all the Lib Dems will end up doing, as you say, is bleeding votes to Labour and the left.

Personally, I think it's pretty instructive that the only vaguely prominent party to advocate a flat-tax at the last election was Veritas...

[replacement]

7. Now it seems the LDs are considering going in the opposite direction...

And advocating a more progressive structure. I think there are some excellent proposals here, but I'm going to give up completely on trying to understand Lib Dem internal politics...

http://politics.guardian.co.uk/libdems/story/0,9061,1568736,00.html