The left should listen up: Tax reform is a progressive cause

Matthew Elliott
Follow Matthew
General Views Of Government Ministries Around Westminster
A reformed tax code should have fans from across the political spectrum (Source: Getty)

In 2012, the columnist Mary Dejevsky wrote a piece for the Independent arguing that the centre-left should advocate a flat tax.

It was in response to the publication of the Single Income Tax, the final report of the 2020 Tax Commission, convened by the TaxPayers’ Alliance (TPA) and the Institute of Directors, and chaired by former City A.M. editor Allister Heath.

The article was an interesting take. Dejevsky argued that the then Labour leader Ed Miliband should rid the tax code of its many loopholes to ensure that everyone paid their fair share, and that the only people who should fear a flat tax would be those who spend time and money coming up with ways to reduce their tax bills.

Dejevsky was making a case that, if listened to, would put to bed for good the endless debates we have about the rich, multinational tech firms, and whoever else the latest pantomime villain is this week.

Instead of complicated, multilateral solutions like those espoused by IMF chief Christine Lagarde earlier this week, reforming and simplifying the tax code would solve our problems in better, more sustainable way.

Here’s the thing about low, simple taxes: they are progressive. A reformed tax code should have fans from across the political spectrum for all sorts of different reasons.

If you’re a deficit hawk, you might enjoy the tax take increasing as economic activity takes off. Or if you believe that small businesses need a level playing field with larger, established firms, simplicity and a reasonable tax burden makes sense for you too.

As I mentioned, the TaxPayers’ Alliance was key in producing that report. I founded the organisation back in 2004, and it celebrates its fifteenth anniversary today.

When I set it up, I was fully aware that concern about wasteful spending fuelled by ever higher taxes was an issue that riled a broad range of people.

For every free market fan concerned about the economic damage of high taxes, there was someone on the left worried about the impact of wasted money on essential public services.

I also knew that it had to stay non-partisan.

Today, lots of the outraged Twitterati make all sorts of inaccurate allegations against the TPA. But a cursory look over its history will show a fearless campaign that calls out politicians from all parties; top draw research that isn’t concerned about who pulls the levers of power; and countless media appearances sticking up for the taxpayer above all else.

Anger over the tax burden should not be the preserve of those on the right of the political spectrum. Tax reform is also a progressive cause.

Britain has the highest tax burden since 1970, for starters. The poorest households often pay a bigger share of their gross incomes in tax, when regressive duties and VAT are accounted for.

I can make decent fist of explaining the benefits of tax cuts for those on the lowest incomes, but John F. Kennedy – a Democrat who was seen as one of the smoothest political orators in memory – put it better than I could in 1963.

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

More revenues, better public services. Why can’t today’s centre-left politicians see that?

And in the midst of another crucial week when it comes to Britain’s future relationship with the EU, it is worth remember that it’s innovators and entrepreneurs who will grow our post-Brexit economy, not politicians with a blank cheque book.

Politicians of all stripes should be doing whatever they can to support them, by cutting and simplifying taxes.

As the TPA turns 15, the achievements I am most proud of are taking the fight to local politicians of all parties in town halls across the country; its role in helping to increase the personal allowance, which leaves millions with more money in the bank at the start of the month; and its laser-like focus on identifying wasteful spending.

The rich can look after themselves. Taxpayers on the lowest incomes deserve to have a powerful, independent voice shouting loudly on their behalf.

It’s now time for those on the centre-left to also take note.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.