Think tank urges for single 30% income tax rate
A new single income tax rate of 30 per cent should replace and abolish eight different taxes, a report by a Government think tank has said.
The 2020 Tax Commission, whose report is jointly published between the TayPayers' Alliance (TPA) and the Institute of Directors (IoD), suggested abolishing national insurance and raising the basic personal allowance to £10,000 in order to boost economic growth and help struggling households.
It said that the proposals would result in substantial tax cuts for households, with a two earner household with an income of £28,000 receiving a tax cut of around £3,400.
According to 'The Single Income Tax' report, the Government needs to introduce transparency and simplicity through cutting taxes, including:
- Reducing taxes to 33 per cent of national income - they currently account for around 38 per cent of national income according to the Financial Times.
- Capping marginal tax rates at 30 per cent and increasing the personal allowance to £10,000. The Government confirmed in Budget 2012 that the latter is to rise to £8,105 for the 2012/13 tax year and £9,205 from April 2013.
- Taxes on capital and labour income which are 'disguised' as business taxes should be abolished and replaced with a tax on distributed income.
- Transaction and wealth taxes, such as inheritance tax and stamp duty land tax, should be abolished.
- Consumption taxes should remain, while transport taxes such as fuel duty and air passenger duty should be cut or abolished.
- Local authority grants should be cut so that they raise 50 per cent of their spending power through local taxes.
While the commission said that limiting taxation and spending to one third of the economy would mean a continuation of current austerity measures until 2020, it estimated the increase in GDP after five years would be 8.4 per cent.
Matthew Elliott, chief executive of the TaxPayers' Alliance, said: "The Government's priority has to be strong economic growth to create jobs and ease the pressure on families struggling to make ends meet. Tax reform is essential to make that possible. At the same time, the tax system has to be fair, and seen to be fair."
"Our complicated tax code where income is too often either taxed repeatedly or not at all doesn't pass that test."
"The single income tax is a serious plan for a tax system that can restore Britain's economic fortunes and leave more of their money in taxpayers' pockets."