Tuesday, 22 June 2010

Hannan: There's nothing regressive about VAT

Daniel Hannan argues, quite reasonably, that there is nothing regressive about VAT:

On the contrary, VAT correlates closely to disposable wealth: rich people pay more, because they tend to spend more. Almost every other type of levy is paid disproportionately by one group or another. Property taxes fall especially heavily on pensioners; income tax isn’t paid at all by around a third of the population; the poll tax hit the working poor. All of us, by contrast, are affected by a sales tax, because we all buy things.

Not that I approve of the VAT rise, you understand. There are plenty of budgets that could have been cut instead. I just don’t understand the Labour Party’s contention that indirect taxes of this kind penalise the worst off.

We'd actually be much better off if VAT were the only tax, though property-tax-only and poll-tax-only regimes also have points in their favour.

Like Hannan, I don't think the VAT rise was necessary. Likewise for the other tax rises. They will harm the economy, and sustain an monstrously bloated state. There was no moral or economic case for these rises; they were pure politics.

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