Enemy Of The State

October 16, 2013 12:00 pm

We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Said Sir Winston Churchill. And he was right. If an enemy of the state wanted to bring a nation to its knees, all they would need to do is raise taxes on income, fuel, air travel, and retail goods, and consequently starve our economy of the oxygen of growth. Oh, but wait…. that’s exactly the situation we have right now…

I asked someone recently if they could imagine a nation that had the cheapest fuel per litre on its continent, but which was then topped up with a 144% tax. They said I was crazy. I said they were living in that nation now. Welcome to the United Kingdom, where tax itself is the enemy of the state.

UK

Something to consider first, if you will; I have written several times about the virtues of lowering taxes and allowing people the freedom to spend their own money and vault our economy forward. And I have weathered the consistent rebuke that without our exorbitant taxes government would lack the funds to pay for the infrastructure that we all benefit from. Well, perhaps some people need reminding that it was never the government’s money to begin with. It’s yours. And a sizeable chunk of that revenue isn’t ploughed back into making your lives better.

Our government reaped about £700 billion in taxes last year from you, from I, and from everyone who understood that the difference between tax submission and tax evasion is a prison wall. But what single cause gobbled up the biggest piece of that pie? Education? The NHS? Welfare? Nope. The largest share went into paying the interest on the national debt. That’s right, folks. You’re working several hours of every day to help your government pay off its credit card bill. You’re essentially working for the government without having to take the civil service exam. Now if you can find the logical, moral or economic sense in doing that, then you’re a lot smarter than I am.

Our politicians could do with learning from history. In the past, raising taxes to lower deficits only encouraged more government spending and thus higher deficits. And the same thing is happening now. The nation is still borrowing more money every year, despite insidious hikes in various taxes. Isn’t it time we tried something new?

Lowering the tax rate to a single flat percentage would allow more of your income to stay in your pockets for you to determine how to spend. But more importantly, it would rid the system of the endless loopholes and caveats that allow for tax avoidance. The Treasury would need to spend less of your money administrating and policing all these leaks in her timbers while simultaneously collecting what she was due, thus leaving more funds available to pay down the debt.

A low flat rate would be fairer and more fruitful for lower and middle-income earners, while at the same time not penalizing prosperity at the top. I realize there are many who resent the wealthy and demand they pay a bigger share, but whatever the flat rate would be, it will still reap proportionately more money from bigger pots. Furthermore, the increase in demand through greater private spending and investment will help to create the jobs our nation has been craving, leading to more people on payrolls paying taxes. Exemplified by a precedent, nearly three decades ago lowered taxes doubled our government’s income from its legalized robbery of the people, allowing it to pay off most of the nations debts.

Wealthier people would be arguably keep their money on-shore, pay what they owed and re-invest more into the nation, further propelling the economy forward. And tax collection would enjoy a greater simplification: pay the rate, or go to jail. Even Dirty Harry would be impressed. Instead we have a vastly complicated tax system that is woefully unfair on the many, while inviting shameless farming by the few, and ultimately serving no one but the accountants. Revenue collection is cumbersome and stilted instead of smooth and fluid, and our economy is going nowhere fast.

Of the nations that have experienced the highest growth around the world, even during the global meltdown, virtually all have low tax rates. You may think those nations have no infrastructure to show for it. But no one would accuse a country like, for example, South Korea, one of the most technologically advanced in the world, of having poor infrastructure. Their government manages to spend double the percentage of the country’s GDP than we do on science and research alone, and all from a top rate of tax of just 21%.

By way of contrast, our government is taxing us off the roads, taxing us out of the air, taxing us out of the shops, and penalizing us for working. And they then dare to wonder why the economy has stalled.

Now, I know I’m not an economist and shouldn’t presume to deliberate on such a complex issue. But, you don’t need to be an economist to understand that a tax policy that can only worsen the economic situation of the individual citizen and of the state. President Truman regularly yearned for a one-armed economist, complaining that each of them would state “Well, on the one hand, Mr President…, but then on the other…” Perhaps, this could be the reason Albert Einstein once said that the one thing he failed to understand was taxes.

Tax machine

It really isn’t rocket science to see that when people are relieved of the burden of funding government’s in-built tendency to grow, spend and rack up debt, they can kindle the flames of the economy until it is incandescent with the energy of growth. Whatever the political fabric of the serving administration, its vice of taxes on everything needs to be loosened before the nation is suffocated into a coma from which it cannot be awakened. After all, it’s your money. Do you really think they’re going to do a better job of spending it than you are?

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