September 21, 2014

NO REPRESENTATION WITHOUT TAXATION:

Inequality and the narrowing tax base : Taxes are best raised on a broad base, but in many countries it is worryingly narrow (The Economist, Sep 20th 2014)

"I LIKE to pay taxes," said Oliver Wendell Holmes. "With them I buy civilisation." Most people recognise that taxes pay for public services, but few are as keen to stump up for them as Justice Holmes was. High income taxes tend to discourage effort and entrepreneurship, while encouraging all manner of activity to avoid them. That is why a basic principle of good tax policy has long been to charge a low rate over a broad base.

It is a target which many countries miss, and the gap is growing. Income taxes--one of the main sources of tax revenue across the rich world--are increasingly paid by a small minority of the most affluent. In Britain, employment has risen by 1.3m in the past five years, but the number of taxpayers has fallen by 2.2m. More than 40% of American households pay no income tax. In contrast, the most highly paid 1% of workers in Britain pay 28% of all income tax, while in America it is 46%. In 1979 those shares were 11% and 18% respectively. Corporate income taxes show the same concentration. In Britain just 830 firms pay almost half of all corporation tax. Five American industries account for 81% of the country's corporate tax revenue, but just a third of its companies.

Consumption taxes are universal but allow the consumer to decide how much he'll pay in taxes (once some level of food, clothing and housing are exempted).

Posted by at September 21, 2014 8:35 AM
  

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