The claim made by George Osborne that VAT is progressive has been rightly dismissed by many, including me.
Prof George Irvin does so here. I recommend his logic.
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Glad someone has brought the notion of utility into the debate for once -it seems to have been forgotten by economists and decision makers. Is Ozzy Osborne related to George Osborne? I think Ozzy would be a better chancellor!
It’s a brilliant article by George – the best I’ve seen on this topic so far, in fact.
And I note that Tim Worstall gets in a comment – quibling about the sums – but conveniently ignores the most fundamental statement:
A progressive tax is one which takes a larger proportion of one’s income as income rises. This is true by definition. The principle that tax should be linked to the ‘ability to pay’ comes from Adam Smith’s Canons of Taxation in The Wealth of Nations (1776).[1] We accept as fair an income tax system based on rising marginal rates of taxation, just as we reject (say) a flat poll tax. Equally, we make the distinction between a direct tax (such as income tax) which is progressive, and an indirect tax (such as VAT) which is regressive, precisely because it is thought unfair to tax the rich and poor at the same flat rate.
I take it that’s because he actually doesn’t think it unfair to tax the poor at the same flat rate as the rich.