Mr Eugenides modestly claims that he inspired the policy. He also notes Iain Dale’s hostile, seemingly hypocritical, reaction.
Iain Dale is right that the probability of doing away with income tax is roughly on a par with that of hell freezing over, and other similar clichés. But it is still interesting to think about. If it is true that you could do away with income tax while still leaving enough money to fund the Government’s 2001/02 budget, it is very interesting.
It is obvious why those who favour low taxes in general would be in favour of doing away with income tax. But I have wondered if it would really be in the interests of the left to abolish income tax as well. When I say left, I am talking about redistribution — good old fashioned soak the rich stuff. Those on the left typically believe that this should be done via a progressive income tax.
I might be missing something really obvious. I am not an expert when it comes to finance. But I’ll throw it out there anyway.
Surely an income tax is the easiest tax for rich people to avoid. I’m not just talking about the possibility that rich people will move abroad when tax increases, although that is probably true.
But if I was rich, I doubt that earning income would be among my top priorities. Maybe I would spend all day playing Xbox. Perhaps my whole life would be spent hopping from one skiing holiday to the next. If I got really bored, I would start sorting out my many fivers in order of tattiness.
I would be doing anything but working.
Rich people don’t earn income (except interest on their savings, which I wouldn’t have thought amounts to that much in the grand scheme of things). For this reason, I think the argument about making income tax more progressive in order to soak the rich and redistribute wealth is a bit of a red herring.