Despite my almost complete lack of interest in US politics, I couldn’t resist clicking through to Mitt Romney’s latest gaffe. Writing off half the electorate is a bit of a howler, but doesn’t he make an important point?
If people pay no tax, then they have no stake in keeping government fiscally honest. In fact they have a motive for taxes to go up.
This is why I’ve always been a sceptic of the Coalition government’s programme of raising the income tax threshold and ‘taking people out of tax’ altogether. Obviously this is a bit of an exaggeration because everyone still pays stealth taxes such as VAT, but the point is that a few people won’t pay visible payroll taxes at all, and many will pay very little.
The idea of ‘progressive taxation’ – where richer people pay proportionately more – has always been morally dodgy. But creating a whole category of working people who pay no tax at all is at best rash because they have no interest in keeping government – or indeed themselves – honest when it comes tax and spend.