Why flat tax is a non-starter

Posted on

Someone asked me to write a brief piece on why flat taxes would not work, so I did. And I thought I'd share it. This is what I wrote:

The flat tax debate in the UK is a non-starter for five reasons. Firstly, flat tax is not simple. Apart from simplifying the calculation of the actual tax due no other complication in the UK tax system would be removed by the introduction of flat tax, whatever people say. For example, accounts would still have to be prepared.

Secondly, flat tax does not ease the admin burden of tax. 84% of people in Estonia have to submit tax returns. Only 16% do in the UK.

Thirdly, flat taxes would only help the poor by a tiny amount (maybe £200 a year). But given that national insurance rates of 30% are common in flat tax countries even that may be an illusion. In fact, in reality only the rich would benefit from a flat tax in the UK. Middle England would suffer badly and that would be electoral suicide.

Fourthly, because of inevitable increased national insurance rates there would be no additional incentives to employ people or to work. In which case there is no chance of the economic boom flat taxers promise. And logically why should that happen when at least 90% of people would be worse off and so have less to spend under a flat tax?

Finally, there’s no way a government could balance its books if a flat tax were to be introduced at any reasonable rate. But that exposes what this is all about. It’s not about tax at all. It’s simply about seeking to undermine the role of the state. And as the people of Britain show at election after election, they want state education, health, transport and all the other things which flat tax would deny them.

Which is why flat tax is a non-starter.