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The Adam Smith Institute works its magic

Oh. My. God. I logged on to ePolitix.com this this morning and found this:


The Adam Smith Institute is working its magic yet again with the flat tax. Only last year it introduced the idea of a flat into the Westminster political sphere with the launch of Flat Tax: The British Case by Andrei Grecu, followed up by Flat tax for the UK. All the major parties have been looking at it: the Treasury censored their findings about the flat tax; the original said it would create a “mini-economic boom”. Flat tax may be the most radical think tank proposal for a decade, but I have a distinct feeling this is going to be on the statute books quite soon.

36 comments to The Adam Smith Institute works its magic

  • Tuscan Tony

    It is more logical than the current system, although I wouldn’t call it particularly flat, as a large earner will pay more than one a more modest income, so it is still progressive, albeit less so than at present. If this is seriously mooted, it will bring into being the most virulent kind of special interest lobbying by PwC and the like. Not being particularly dull witted, they’ll see the red laser spot of the gunsight on their forheads pretty quick methinks.

  • Pies de Arcilla

    How come ‘moot’ means to propose/put forth as well as irrelevant/expired? Is this a U.K. Eng. usage exclusively? I’m not sure I am used to hearing it from non U.K. speakers.

  • Now, from the people who brought you the ‘poll tax’…

    The Adam Smith Institute certainly appears to be very influential. What a pity it is that they keep coming up with pernicious state bolstering claptrap like this. If they could just drop all these grand schemes for tax reform destined to turn into a politicians bait and switch con and concentrate instead on getting a few lower taxes here and there we might have something to thank them for. Unfortunately the ASI are once again being far too clever for our own good.

    For a real free market approach I recommend the anti flat tax and anti tax reform writings over at the Mises Institute and Sean Gabb’s Free Life Commentry number 18 on exactly what this ‘ASI magic’ consists of:

    According to himself, Dr Pirie is one of the cleverest men in the world, with a senior position in MENSA to prove it; and he has never been known to doubt the truth or wisdom of anything he has said. I, on the other hand, have always rather doubted his wisdom and the connection between many of his statements and the truth. On this occasion, the doubts are so plain, they nearly express themselves.

    Sean Gabb.

  • Robert Alderson

    Pies de Arcilla,

    I have primarily come across moot meaning irrelevant or expired in American English. in British English it would usually seem to mean “propose.” Of course, because there is so much transatlantic cultural and linguistic exchange the meaning is very variable. Much like the verb “cleave” which means either to hold together or pull apart!

  • I have yet to hear of a country introducing a flat rate tax which increased the tax burden so what exactly is your objection based on? If the UK introduced the flat tax that Slovakia now has (19% on both individual and corporate income) would that meet with your approval Paul or do you prefer the current higher rates?

    And with all due respect to Sean Gabb, I rather suspect the things Madsen Pirie does are a great deal more likely to end up with me paying less over to the state than anything in Free Life Commentry, no matter how well written they are.

  • Robert Alderson

    Flat tax is not only a perfectly reasonable idea but one which is not so outlandish as to be unacheivable. It’s more or less mainstream.

    The big problem with the current tax system is the complication and corruption caused by the multiplicity of tax allowances. Tax allowances are always going to be a vehicle for special pleading by various interest groups which all turn to the state to make their special pleas thus strengthening the state.

    I am not so naive as to think that a flat tax can be introduced without any special allowances but it would substantially reduce them.

  • Oscar

    Well, a flat tax is not “progressive” but “proportional”. Note that they are two different words with two different meanings. Where is the evil of progressive taxes? Somebody who earns more money will pay proportionally more than somebody else with a lower salary. But by no means will the final disposable income be lower for the former than for the later. It is not going to be even close. With such system, the government (a non-corrupted one) will give services like education, health, insurance. If those services are covered, what are left in the household budget? It means that Person B will be able to enjoy a much more luxurious life than person A, thanks to his/her everyday work efforts.

    And where are this kind of policies most tested? USA. Thanks to them, USA is now one of the most rich countries in the world, with a poor population living in developing country conditions. (for proof, see the stunning images form New Orleans)

  • Robert Alderson

    The poor population of the US hardly live in developing country conditions.

    The tax system in the US is highly inequitable because of its complexity. There are a multitude of allowances and the rich can afford accountants and lawyers to exploit the complexities and thereby reduce their tax burden. Flat tax helps simplify the whole system.

    Although I wouldn’t discount the idea of some small, initial element of progression in tax rates the problem with it is that it reduces incentives to work harder. This does make a difference. It was one of the reasons I decided to leave the UK; half of any additional income I earned was lost in income taxes whilst anything I might buy with that extra income was subject to 17.5% VAT. Too much tax! Too complicated!

  • Perry,

    I have several objections to the flat tax proposals, indeed to schemes of tax reform at all. For detailed analysis there are plenty of pro-free market anti-tax reform writings on the web mainly by Austrian School economists. But is short my objections are:

    1. The state will not be reduced by a uniform levelling from the top but rather will be weakend from successive chips at it foundations. Those favouring a free market and greater liberty should be ready to expolit any weakness that presents itself even if that means opening up new and more tax loopholes. A flat tax locks liberty advocates into a strategic straight jacket.

    2. A flat tax is an open door to a bait and switch scam by politicians. Relying on politicians to implement this scheme will almost certainly result in the bait of ‘simpler’ taxes but will quickly turn into the switch of the closing of a lot of loopholes and avoidance schemes but without the benefits of the significantly lower rates.

    3. Closing any tax loopholes whatsoever is initiating an immoral imposition even if taxes are lowered elsewhere.

    4. It is Counter-productive of liberty and statist, essentially this scheme makes tax collection simpler, more streamlined and less painful. This is not good in the long run as it lets statism suck you dry all the more insidiously. It’s like avoiding the pain of being occasinally mugged by setting up a standing order to the muggers.

    If the ASI wants to argue for higher personal thresholds or lower tax rates all well and good to them but why dress it up in this needless schematic straight-jacket which simply obscures the fact that it is less tax not simpler tax that benefits society and the economy.

    I rather suspect the things Madsen Pirie does are a great deal more likely to end up with me paying less over to the state than anything in Free Life Commentry, no matter how well written they are.

    A lot of people who were lumbered with the poll tax would disagree. I shall be bold enough to offer another Gabbism which is certanily exceptionally well written whatever else you might think of it:

    Notice how it devised the Poll Tax – a scheme that might have cut down on local government waste, but only at the expense of tagging the whole adult population. Notice its endorsement of video cameras in public places – another scheme that might save money only at the expense of our liberties. The rhetoric is liberal: the reality is that we are being given progressively more of the government we pay for. The Adam Smith Institute has enabled the transformation of social democracy from a system that was always on the verge of collapse into one that is both stable and moderately prosperous – one that yields enough to enrich the farmers and to keep the cattle well-fed.

    Sean Gabb.

    Of course, Perry, I would be in favour of a flat tax if it meant a low tax, but if low tax is what we mean why not say so. There is no virtue in mere simplicity.

  • The flat is as in flat (or proportionate) rate. In other words, if the tax is set at 15% of net income, everyone above a certain income level would pay the exact same rate of income taxes. Progressive means that the percentage bands increases by income. Regressive is just the opposite.

    Flat rate tax doesn’t mean everyone pays the same amount, but the same rate.

  • John East

    The argument against more redistribution, and in favour of a less redistributive flat tax requires an appreciation of human nature.

    Fans of progressive tax often see the underclass as a fixed group of people. If only the tax system would redistribute wealth to this group everything will be alright. But the underclass is not a fixed group, but one constantly losing people who work hard, save, and do something to improve their lives. On the other side of the coin, it gains people who give up striving for themselves and their families.
    So by all means throw money at them if you must (yours not mine), but not only will we still have an underclass, it will increase in size. Why work when you can live off the taxes of other people?
    What will change of course is that a flat tax would encourage more entrepreneurial activity in our society, and there would be a tendency towards less bloated government and civil service. As a nation, we all gain then.

    Where I suspect we will be conned if a flat tax is introduced, by Nulabour or Tory, is that they will bugger about with the details so much that more tax collectors will be needed, and our overall tax burden might even rise.

  • Johnathan Pearce

    For the life of me I don’t quite understand Paul Coulam’s objection. Of course the ASI wants lower taxes overall, as anyone who knows Dr Madsen Pirie and his colleagues realises. But there is no doubt that making the tax code simpler and free of economic distortions is all of a piece to making it lighter.

    Sometimes the pursuit of utopia gets in the way of real, measurable reform. If we could shift to a flat-tax regime of say, a uniform 25 percent rate for all, with generous allowances taking the poor entirely out of the tax code, that would be a terrific start.

  • Oscar

    Some of the richest countries in the world, with less poverty, with a highest level of education, and a highest enerpreneurship per capita are Scandinavians. They are also some of the countries with higher taxes. Tax pressure don’t seem to be strongly correlated with lazyness or low GDP.
    It has also to do with fair taxes. Direct taxes are fair. Indirect taxes (mainly VAT) are unfair. Direct Taxes with many shortcuts for those having large part of income other than salary are unfair, whatever its “nominal”progressivity.

  • If we could shift to a flat-tax regime of say, a uniform 25 percent rate for all, with generous allowances taking the poor entirely out of the tax code, that would be a terrific start.

    If what we want, which I certainly do and I’m happy to give Madsen the benefit of the doubt, is a raising of the thresholds and a lowering of the rate then why not say so?Why all this faff about ‘flatness’? Why do we need to close all the loopholes? Talking about ‘flatness’ utterly obsucres the truth that it is lowness that is important for freedom and prosperity. Where ‘flatness’ and ‘lowness’ don’t clash fine but where they do it is preferable to choose ‘lowness’ over ‘flatness’. The ‘Flat Tax’ denies (or prehaps more charitably obscures) this.

    The only advantage to this deliberate obfuscation is to allow a bait and switch scam to be smuggled in. Economist Mark Thornton, commenting on tax reform generally, says:

    Tax reform is like the shell game played on the streets of New York City. Every time the customer puts down his bet, he has every confidence that he will win. Every time it is the dealer who goes home richer as a result.

    But my further objection is that this is not a ‘measurable reform’ in the right direction but a local anaesthetic to rub on our jugular veins so that the state can suck our blood out without us noticing so much.

    Of course the ASI wants lower taxes overall, as anyone who knows Dr Madsen Pirie and his colleagues realises.

    Well Dr Gabb knows them very well and has this to say:

    Yes, I have written for the Adam Smith Institute. I hold many of its people in high regard. I have enjoyed many of its Christmas gatherings – though no more after this appears on the Internet, I suspect! But it has done nothing on the whole to promote liberty in the past 21 years. Every one of the panegyrics on Hayek that I find in its Catalogue is more than balanced by advocacies of the kind of market reform that simply strengthens the hand of the statist enemy. Dr Pirie may pride himself on the number of solutions he has provided. In truth, he is part of the problem.

    I’m not sure if I quite agree with that. I’m sure the ASI have done something to promote liberty in the last 21 and no doubt it will come to me in time.

  • Johnathan & Perry,

    I should point out that I am, of course, being deliberately provocative. I’m bored and caved into a temptation to mischief. I do, however, think the flat tax a terrible idea. I’m not a utopian I just think that we should be clear about what is important and that is low, not flat, taxes.

  • Julian Morrison

    Paul Coulam: I think “single flat tax” is the best route to low taxes. The reason being, that it moves low taxes from being something that has to be discussed in terms of ideologies (because the numbers are too fiendishly complex) to something where the general public can understand the math. The leftists can dispute us all day about what’s right – and the public, seeing a controversy, takes the middle position in defensive ignorance. But if the entirety of taxation is expressed in a single rate, they can see exactly how much is being taken, and reach their own conclusions as to whether it’s too high.

    BTW, most tax “loopholes” are far from being havens against the state. They’re intentional and placed there as bait – you could say they’re the most statist part of the tax system. Their message is “if you obey our irrational and unjustified whims, we won’t take as much of your stuff”. Erasing all that “social enginnering” is another reason the flat tax is good idea.

  • Bernie

    I am inclined to agree with Paul C on this.

    1. I don’t like the idea of a flat rate tax. A flat fee tax would obviously be fairer even as it would throw out the suppresive Marxist notion of “from all according to their ability”.

    “Tax the rich” is a battle cry that feeds this morally bankrupt notion and slips in the idea that the costs of government will not be bourne by upstanding productive folk (as if the “rich” got rich by spongeing off the rest of us)

    So called “progressive” taxes are a method of divide and conquer. Instead of beating down the government we turn to the government to make “them” pay more. “They” are not the enemy the state is.

    2. The number of ways in which the state forces us to pay them are so numerous and devious that we would still have very little idea of where the bullets are coming from.

    3. What is really needed is one simple tax and no other method for the state to raise money other than purely voluntary donations.

    Alistair Darling has this idea to of a motoring tax to “replace road tax and fuel duties”. There would be some merit in this idea if it were a flat fee on all vehicle owners rather than based on mileage. As it stands it will bring about price inflation even if the total raised amounts to the same as what is currently extracted by road tax and fuel taxes.

    I am in favour of a single flat fee for all citizens of working age.

  • Johnathan Pearce

    Paul, I still don’t quite understand why you get so steamed about this. I don’t think the ASI as unwitting stooges of some sort of high-tax agenda. I think part of the reason the ASI and other such groups favour a flat tax is because it the impact of the tax code much clearer to Joe Public, and hence may further encourage a reduction of said tax code.

    If it is tax cuts you are arguing for, you won’t get any disagreement from me. Low taxes are the aim, but why not also press for simplification along the way too?

  • Jack Maturin

    Being an anarchist, I’m against all taxes on principle, but if in the time between now and some future Hoppeian Utopia, there must be some form of property confiscation and government thievery, to fund all the rent-seekers, Guardian readers, and other assorted welfare bums, I can see the appeal of flat taxes. The problem is, and here I find myself on Mr Coulam’s side of the fence, the long-term hidden disadvantages quickly start outweighing the apparently up-front advantages.

    As I’m building myself up to watch England beat Australia 2-1, after a really tense draw at the Oval, I don’t have enough mental capacity to run through all the reasons why the flat tax isn’t what it’s cracked up to be, but there’s a really great PDF article below, which explains the Austrian position, to which I subscribe:

    The Case Against the Flat Tax

    Essentially, if we accept flat tax, we:

    1. Accept that the government has the right to take whatever it sees fit from our income, and that we have no excuses whatsoever to hold some of it back, in the form of allowances

    2. There will be a ruthless tax clamp-down the like of which has yet to be seen in Britain, to track down every spare grockel, scheckel, and groat, down the back of every sofa in Britain, to fund Gordon’s (or George’s) great fat stomach, as our government masters seek to live an even better life off our backs.

    With no allowances to protect ourselves with, against these new “fair” tax regulations, we will be entirely defenceless against the newly combined Revenue and Customs “service”.

    If the government should find itself one red cent down on its current income, it will redistribute by providing a universal allowance, such that all the Welfare bum government-supporting voters will pay no income tax at all, and those of us who actually do something useful, will get hammered with a “fair” flat tax rate at every penny above this nominal allowance (probably enough to get Sky Sports, a chinese take out each night, and enough fags and booze to make life bearable on the ‘social housing’ estates of Britain).

    Remembering that very few Guardian Readers actually pay tax anyway, most of them being tax consumers rather than tax payers, none of them will mind paying higher and higher “fair” flat tax rates, as it all comes back to them anyway, as ever-increasing government salaries and index-linked government pensions.

    This “they love it in Eastern Europe” argument also falls flat, I’m afraid, pardon the pun. Why does the flat tax look so good to them? Because look at what they had before it; 100% Soviet-style taxation, except for anything you could sneak in through the black market at the risk of hefty prison sentences if you didn’t bribe enough socialist guards with enough chocolate, cigarettes, sex, cash, or whisky. Even the socialist republic of Scotland would look good after living for 50 years under the Soviet jackboot.

    Don’t wish for the flat tax, Perry. Just follow the maxim that if the Tories support it, it is by definition a bad idea, and you won’t go far wrong. If we do have the misfortune to adopt the flat tax system, I don’t think it’ll take you long to come round to the view that, in the words of Mr Paxman, we will have all been well and truly stuffed.

    If you want a real-life example of how bad a flat tax can be in western Europe, just take a look at our very own National Insurance, which started off as a flat tax (of sorts), and has now evolved into a rampant confiscatory monster. Multiply the stinking mess of national insurance by ten, and that should give you a flavour of what the flat tax will turn into.

    Sometimes the pursuit of utopia gets in the way of real, measurable reform. If we could shift to a flat-tax regime of say, a uniform 25 percent rate for all, with generous allowances taking the poor entirely out of the tax code, that would be a terrific start.

    This is dangerous thinking Jonathan. Politicians live and breathe on creating rival groups, and then playing one group against the other. What your proposed scheme will create is a large group of tax consumers paying no income tax and another smaller group (probably including you and me) paying LOTS of ‘fair’ flat rate income tax. The politicians will side with the former group, and we will once again be stuffed well and truly, vers la derriere.

    The Flat Tax? Just say no. Even better, say “No” to all forms of taxation.

    Ok, you might argue, it’s alright for you cave-dwelling anarchists living in La-La land to argue the above sentiment, but we real-worlders need some relief now, not after the collapse of society and the emergence of these so-called alleged Hoppeian utopias. Ok, I hear ya. If George Osborne wants some ideas on tax, and how to grow the economy, how about these, tossed off, as it were, in two minutes flat:

    1. Abolish capital gains tax.
    2. Abolish higher rate tax.
    3. Abolish corporation tax.
    4. Abolish inheritance tax.
    5. Abolish stamp duty.
    6. Stop growing the money supply, the worst tax of all.
    7. Abolish insurance tax.
    8. Abolish fuel duty.
    9. Abolish VAT.
    10. Abolish national insurance.

    I don’t want a different tax system, I just want tax cuts, the more of ’em, the better. Cut, cut, and cut again, until one day there’s nothing left. In the words of Murray Rothbard, if I’m being generous, I’ll let them keep the same government tax income they had in 1776. Well, actually, that’s too much, as they’ll only use it to grow themselves back up to their current giddy heights.

    If the Tories are serious about tax, they should just start working their way through my ten-point plan above, and stop all this flim-flam nonsense about flat taxes.

  • Tim Sturm


    The only thing wrong with this:

    “1. The state will not be reduced by a uniform levelling from the top but rather will be weakend from successive chips at it foundations.”

    is that we are losing that contest. The State is being strengthened by successive chips being added to its foundations.

  • ernest young

    The Flat or Fair tax is better explained at the following link;
    a description of a Flat tax

    It would seem that the worthies above are unaware that the modern concept of a Flat Tax, is largely sales tax oriented, and NOT income based. The book by Boortz and Linder entitled “Fair Tax” is available from Amazon(US), and it explains the workings of a true Flat and Fair Tax.

    One of the benefits of a flat, sales tax orientated regimen, is that the proceeds from the ‘black’ economy are taxed in exactly the same way as the proceeds from more normal endeavours, i.e. at the time such profits are spent. This alone would increase tax revenues by some suggested thirty percent. Surely worth the discomfort endured at ‘changover’ time.

    That the above commenters and the ASI automatically assume that the ‘flat’ tax is to be income based rather than sales based, would show just how hidebound and outdated their thinking really is, – at least twenty years behind the times, and hardly worthy of being considered either progressive, or innovative, and certainly not ‘thinking outside of the box’.

    The original Flat tax as mooted by Forbes many years ago, had flaws which made it unworkable, these have largely been corrected with the latest version named ‘The Fair Tax’. Read the link, if not the book!

    For what it is worth i.e. – very little – I always thought that the ‘protagonists’ mentioned above were largely statists in outlook and could never understand their claim to be ‘small governement’ minded.

  • Jacob

    “Flat tax” and “Fair tax” are entirely different things.
    (ernest young seems to mix them up).

    The first is an INCOME tax, and it differs from the current income tax only in that it has one single rate (vs. progressive rates), and (presumably) less allowances or deductions.

    The “Fair tax” proposal is actually a sales tax, unrelated to income that is supposed to replace all income taxes and abolish them.

    I agree with Paul Coulam here. Insted of wasting our energies and political capital toward a major reform of dubious value, we should concentrate on what really matters, which is – reducing taxes, whatever the tax scheme is.
    And stop deluding yourselves that there is such a thing as a “fair tax” or a “simple tax”. In real life, al tax schemes are bound to be unfair and unsimple.

    Then there is the very serious concern that any major reform, if implemented by our politicians, will result in more taxes paid, no matter how they try to sell the scheme to us.

    Finally, note, that the flat tax schemes that were implemented in Eastern Europe were planted more or less on virgin soil, after a revolutionary upheaval and system change.

  • Julian Taylor

    Very neat Newsnight article on this topic and good to see a refreshed Paxman ripping David Milliband a new one on his (Milliband’s) opposition to flat taxation. Could it be the realisation that they might not get to steal money by stealth – via the Employee and Employer National Insurance Contributions system?

  • Well I’ve never been too keen on a flat tax on the grounds that I manage to use the current loopholes to keep my tax bill down. But it does kinda force the issue that tax levels act as a drag on economic growth and from that point of view I welcome the Tories’ exploration of the idea. I can only hope it leads to a competitive downward bidding war on tax between the parties that count.

  • Matt O'Halloran

    Julian Taylor- It was Ed Miliband MP on Newsnight, not David.

    The programme calculated that if everyone was allowed to earn £12,000 pa tax free and then pay 22% on all other income, there would be a shortfall of £50bn from today’s take. The flat rate would have to be 37% (not far short of the current top whack of 40%) to keep the yield up.

    If these BBC sums are close to being right, they make in spades the objection one often hears to today’s graduated system: the sharpness of the jump between rates. To go from 0% to 37% (or even 30% after a lot of spending cuts) at one fell swoop would be pretty hard for most folk to swallow, given that the average earned income is around £20,000. And presumably Brown’s punitive and phoney National ‘Insurance’ impost would be slapped on top of this.

    I can’t see any country with a long established progressive tax system making the jump to a flat one without prohibitive political costs for the government trying to swing it. You just can’t get there from here, alas.

    If the libertarians had had any success in convincing people to accept the withdrawal of central government from large parts of life, and the consequent reduction of the State’s share of GDP by several percentage points, then it would be a different story. But all the libboes do is tell each other they know better, grumble at the status quo, booze and take photos of themselves pulling faces. There was some populist steam behind tax cutting in the 1980s, but it seems to have evaporated. Among the under-40s I detect very little resentment at having a big dozy State on their backs.

  • pommygranate

    I am very surprised that on a free market blog there are so many dissenting voices.

    The principles behind a flat tax seem sound; make the tax code simpler, incentivise low wage earners to work rather than collect benefit, incentivise entrepeneurs to generate wealth by allowing them to keep more of it, and disincentivise the rich to use tax avoidance schemes. Everyone (except accountants) benefits.

    However, Matt’s point is a good one. There would be an initial significant shortfall in revenues. Hence the flat tax proposals need to be marketed in conjunction with a campaign to reduce the scope of the government.

    This is very hard when the economy is in such good shape and unemployment so low. However, in a couple of years things will not be so rosy. So maybe the campaign is a little premature.

  • ernest young


    A flat tax can be either based on sales, or on income. That you and so many others aoutomatically assume that it has to be on income says much about how well you have been ‘conditioned’ by out-dated thinking.

    Of course it can be a mixture of sales and income tax, which is how the current system of V.A.T. was foisted on a gullible public by a ‘progressive’ Tory govenment. I seem to remember the sales pitch that said that, ‘VAT would eventually replace income tax’.

    The ‘Fair tax’ system is a modified version of the original Flat tax, as propounded by Steve Forbes, and does include assistance for the less able in the community.

    At least read the link, – I would defy you to say that the Fair tax is not an attractive alternative to the present system…

  • John McVey

    There are errors I see repeated over and over, not just on this thread but the entire topic I’ve seen mentioned to date.

    First, while we are all in agreement that there’s no such thing as an actually fair tax and no such thing as a fair share in tax, many people seem to believe that there is nevertheless still some level of gradation in the unfairness. This is wrong. It doesn’t matter how much is taken or under what system, theft is theft. One can argue until the cows come home about how a government may manipulate different systems this way and that to suit its ends as it is irrelevant to fact that the principle of respect for private property being violated. So one group of muggers takes a fixed proportion of your funds out of your wallet while another employs some sort of sliding scale, woopty doo. Neither one is entitled to a single iota, and each is as equally morally culpable as the the other irrespective of how much they take and on what basis. Discussion about which tax is fairer than which is nonsensical. The same applies to the question of reform over loopholes and the closing thereof, too.

    Second, the issue of tax reform is being treated as somehow separable from other reforms. Government revenue and government expenditure move in lockstep. There cannot be any serious discussion of reform in one without reform in the other. No statist government with a revenue shortfall will ever cut programs that are popular, it will carp on about the need for more tax revenue, and will win support therefor accordingly as a number of recent polls have shown (or at least purported to show). There is no starving the beast, there is only killing it by actual blows. The idea that flat taxes (or any other tax reform) can serve as foundation for tax reduction is wishful thinking.

    Third, the way to kill the beast with blows can only be from the bottom up, via social change. However, that is one thing I do not want to see any political party spearheading. By all means, let a good party identify, articulate, and implement – but NOT foment – leave that to grassroots activism. Discussion as to whether any tax or other regulatory system in the mean-time will help or hinder social change is folly, both philosophically and practically. Philosophically, there is only one position to take – full laissez-faire – and part of that means letting go of the idea of the paternal state, which necessarily includes explicitly ruling out ‘moral leadership’ on the part of the government. If any party of ‘freedom’ begins its tenure by violating a core principle of freedom, the enemy will have a field day over the hypocrisy and tear it and its programs to pieces, and public support will evaporate. The immoral is the impractical. Thus the other half: practically, whether more or less regulation now gives people pause to question the way things are headed cannot be answered as without an underlying philosophically-directed seachange in favour of laissez-faire. The well-practiced sophists among our enemies can always make arguments in favour of their position, such as of the kind “there isn’t enough” or “we can stop here, now” etc. A reduction in taxes and other regulatory burdens can just as easily lead to (as has been already said) Claudius’ lament that “I have reconciled Rome to monarchy” as to whetting the appetite for more. There is no prognostication possible either way on a purely political-analysis basis, and hence no sense in saying this or that reform helps the cause of social change in favour of freedom. All that is a burden even for a fully pro-laissez-faire political party, so expecting a party that is not so well disposed to real freedom to be beneficial in the matter is laughable.

    Jack Maturin is right in that at least some form of taxation system will be required as a transitional stage between what we have now and freedom. Therefore, the real question about tax reform, as part of a broader and wholly comprehensive set of reforms, is what system is best integratable with those reforms in such a manner as leads to the establishment of a tax-free laissez-faire economy in the quickest and most painless way, all of which must come on the basis of a pre-existing and fully-informed mandate for laissez-faire from the body politic. Anything else is just rearranging the deckchairs.


  • John East

    John McVey,
    I admire many of your aims, but how can you support a total tax abolition package which you must know can never and will never happen in a democracy. The only government which might try and deliver what you want would be a benevolent dictatorship, and that’s less likely to happen than the current system abolishing tax.

    In fact your statement, “No statist government with a revenue shortfall will ever cut programs that are popular, it will carp on about the need for more tax revenue, and will win support therefor accordingly as a number of recent polls have shown (or at least purported to show). There is no starving the beast, there is only killing it…..” shows that you are aware your aims are unachievable without some revolutionary change in our political system.

    I think I’ll stick with the others and explore ways to tweek the beasts tail. At least there is every chance that this can be achieved, and once achieved we’ll tweek it again, and go on tweeking it. Maybe we’ll reach your destination quicker than you will.

  • pommygranate writes:

    I am very surprised that on a free market blog there are so many dissenting voices. The principles behind a flat tax seem sound

    There are so many dissenting voices because the principles behind a flat tax are anything but sound. Read the Rothbard piece ‘The Case Against the Flat Tax’ which Jack Maturin provides the link to above.

    The ‘flat tax’ is a pox ridden whore but for some reason Madsen Pirie has taken it upon himself to dress her up like a duchess and pass her off to polite society.

  • Matt O'Halloran

    Pommygranate: I don’t follow why you think it would be easier to sell the public the idea of shrinking the State during a recession. Surely that’s when our welfare-nurtured younger generation would clamour for *more* intervention, more spoonfeeding, and wish to ‘Keep a hold of Nurse/For fear of finding something worse’?

    The brief wave of enthusiasm for Thatcherite cuts and privatisations came in the mid-80s when the global economy was swinging up. Brits felt richer and readier to take a chance on fending for themselves. Nowadays one of the easiest ways to get heads nodding in agreement in the pub is to say that the railways should be renationalised. Dreams of a plc Post Office and BBC are long gone.

    Moreover, the young welfare sucklings want a big NHS and a surveillance society to ‘keep us safe’. The terrorism scare, unwittingly abetted by hysterical anti-Muslim liberventionists, has made citizens feel they want to be wards of the State. ‘Dr Mad’ in his 50s-adman garb cuts a forlorn figure.

    It’s no good flatly stating that a flat tax would be fairer, either. Concepts of fairness vary too widely between individuals, even in individual brains according to mood. I happen to think that the more you earn, the *less* heavily the upper slice(s) should be taxed, but progressive taxation has always taken the view that fairness entails making the richer members of society pay not only more, but more of, their extra income– mitigated, with typical British hypocrisy, by loads of loopholes and breaks which clever planning can wangle.

    In the interstices of differing philosophies of what government is for and how to pay for it, the tax system (if you can call it that) just keeps growing like a malign, crazy octopus. The standard reference work, Tolley’s, is now more than a thousand pages thick. Few Inland Revenue officials understand it all– try calculating capital gains tax for an investment with accumulated income held for 20 years!

    One can understand why exasperation would lead Dr Mad and others to simplify income tax drastically and suddenly, but the political obstacles are immense. No wonder the libboes here are so often exasperated by parliamentary democracy.

  • Old Jack Tar

    The flat tax makes is more clear what we actually pay (which is always a good thing) rather than have that hidden in a cloud of confusing complexity and probably will reduce the overall tax outlay. I will leave the purist to their ivory towers and applaud this as an incremental step towards what we all want: less tax.

  • The flat tax makes is more clear what we actually pay (which is always a good thing) rather than have that hidden in a cloud of confusing complexity and probably will reduce the overall tax outlay. I will leave the purist to their ivory towers and applaud this as an incremental step towards what we all want: less tax.

    Old Jack Tar, they really can see you coming can’t they? This was exactly the flannel that was used to sell that other great ASI tax reform scheme the ‘Poll Tax’. I guess you are just one of the slow learners. It is Madsen who is in the ivory tower coming up with another crock like this. If you want some incremental steps to low tax then what could be simpler and less ivory tower than Jack Maturin’s ten point plan above.

  • Old Jack Tar

    The Poll Tax was a political disaster but it was a far more reasonable way to tax as unlike Rates, it does not let people vote for taxes they do not have to pay themselves. I supported Poll Tax for that reason as Council Tax still has lots of voters able to make other pay whilst themselves avoiding it entirely.

    Or were you under the impression it was the much taxed middle classes out there rioting against the Poll Tax?

  • There was nothing reasonable about trying to register and monitor the entire adult population of the country. It was suggested, and it seems you fell for it, that with everyone paying people would vote for lower taxing councils. Nothing of the sort happened of course, instead the national government was blamed for high poll taxes and many people found themselves subject to massive impositions thay had not previously been subject to. Closing the loopholes for a flat tax will have the same effect. Massive costs imposed suddenly on some people and businesses in order to pursue a chimera of simplicity and fairness.

    It is a crock, if ever it is implemeted it will be doomed to failure politically and economically. It is all in the Rothbard piece – he had some trenchent criticism of the poll tax too – why don’t you read it?

    You fell for the poll tax (as did I at the time though I’ve since learned my lesson) don’t get sucked in by this twaddle as well.

  • John McVey

    John East: Indeed, I am quite aware that what I have in mind is unpalatable at the moment within the body politic. I generally think that I wont see anything close to it in my lifetime, and I am only 33. I support a total tax abolition policy because it is the right thing to do. I do not expect significant public support to eventuate for a very long time, and I even think that reforms fully publicly mandated should be phased in over a period of at least twenty years.

    It also means, Jack, “purist” I may be, but I do not at all say that we should be saying “abolish all tax NOW.” What I am saying is that it is silly to get all worked up about one tax law change that is completely disconnected from any real plan to follow through politically nor built on at least a semblance of voter support based on a deeper understanding of the whys as a driver. As I said, even if some taxes were cut now, the cut can either reconcile the public to what remains or whet the appetite for more cuts. Can you honestly say which it will be? And tomorrow, and then the day after that? It is all very well to say that some reform will make it more obvious what each is paying in tax as an individual, but then what? How can you be sure that the majority response wont be something along the lines of people being willing to pay (ie and make others pay) lots of tax so long as they know the actual extent? Merely knowing how much is no guarantee of revolt. Or, how do you know the public wont just clamour for some reductions, then dig in hard against further cuts because they know it means cuts in services they’re addicted to? Or, clamour for a new shift in the tax burden, e.g. jacking up the cut-in threshhold level and/or the tax rate? And so on. That’s the trouble with pragmaticism, you can’t know.

    How do we go about making real progress? To be true to principle, yes John it has to be a social revolution (I don’t mean a violent type), where politics follows as a consequence. This means a lot of hard work, and over a very long time. What does that work consist of? A counter-gramscian movement, perhaps? That’s part of what groups like the Ayn Rand Institute are doing, amongst other things – and beginning to fruit I hear, I might add. Prodos’ work, particularly Celebrate Capitalism, are also good stuff. Bureaucrashers are having a ball being pro-capitalist activists, too. Every one of these groups knows what they’re about, and the long term picture is in mind. I’m sure others can name other efforts.

    Real change has to be integrated on all levels, from the most abstract (ARI’s OGC), through schools (ARI’s other work), to the man in the street (Celebrate Capitalism, Bureaucrash). I raise an eyebrow at your ‘ivory tower’ charge, partly from that it is the ivory towers that our enemies direct things hitherto fairly successfully from (even if, in the case of Gramsci, the Ivory Tower is a prison cell), but mostly because it is inane since activism without principled thinking and some semblance of a long-term plan driving it is just emotional outbursts with delusions of grandeur that often achieve worse than nothing. People who operate on that non-“ivory-tower” level are easy pickings for manipulators and sophists, which is how we got into this mess in the first place. Yes, let’s be activists – but put some thought into it.