A dip in the middleSource: The Economist (adapted)Sep 8th 2005Income tax has been paid in Britain for more han two centuries.
First introduced by William Pitt the Younger to fi nance the war
against Napoleonic France, it is the Treasury´s biggest source of
revenue, raising 30% of tax receipts. It arouses strong political
emotions, regarded as fair by some because it makes the rich pay a
bigger share of their income than the poor, but unfair by others because
it penalizes enterprise and hard work.During the
past 30 years, income tax has been subject to sweeping changes, notably
the cut in the top rate from 98% to 40% under Margaret Thatcher between
1979 and 1988. Now another Conservative politician, George Osborne, is
fl oating a radical reform to match that earlier exploit. The shadow
chancellor announced on September 7th that he was setting up a commission to explore the possible introduction of a fl at income tax in Britain.Introducing a fl at income tax into Britain would involve two
main changes. At present, there are three marginal tax rates. These
three rates would be replaced by a single rate, which would be
considerably lower than the current top rate. At the same time there
would be an increase in the tax-free personal allowance, currently worth
4,895 pounds.The flat income tax
a) is intended to hinder enterprise and hard work.
b) would be below the present top rate.
c) ought to please low-earners and high-fliers.
d) must generate a cut in public spending.
e) might be financed by increases in other taxes.