Thursday, March 22, 2007

Proportional is Fair

In one of the many “How to Vote” forms I received recently a local politician states that he wants to introduce a fairer tax system. He goes on to say that the GST is not fair because the poor are taxed the same as the rich. It is true that we all pay 10% GST but what a lot of people seem to miss is the %. The % bit makes all the difference. It is the bit that makes it all very fair. Without wanting to explain basic high school mathematics percentage is proportional. Thus in the case of GST the taxpayer pays tax as proportion of their spending. The more you spend the more you pay and the richer you are the more you have to spend. What is unfair about that? I don’t understand why income tax shouldn’t be the same. Why don’t we just apply a flat proportional rate on income tax, say 30%? Again it’s the % bit that makes it fair. The rich would still pay more tax than the poor. Sure there needs to be mechanisms to protect very low income earners, thresholds that allow people to earn a minimum amount without being taxed at all. After that everyone should pay the same percentage.

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