Magazine article New Statesman (1996)

Taxes: Marx Loses His Grip, 156 Years On

Magazine article New Statesman (1996)

Taxes: Marx Loses His Grip, 156 Years On

Article excerpt

A new revolution has erupted in eastern Europe--and it is proving easier to spread than the communist revolution. The flat-rate income tax, whereby all citizens pay the same proportion of their incomes to the state, rather than the rich paying higher proportions, started in the Baltic states in the mid-1990s. Then Russia, with a flat 13 per cent rate for all taxpayers, followed in 2001. Ukraine (13 per cent) and Slovakia (19 per cent) adopted the flat-rate tax this year. In this summer's election to the European Parliament, opposition parties that advocated flat taxes topped the polls in the Czech Republic and Poland. If they can follow through their success into domestic elections, it is possible that, within two or three years, a quarter of all EU member states will have flat-rate tax regimes.

A flat tax rate was the norm in the 19th century. Then came Karl Marx's call for "a heavy progressive or graduated income tax"--second in his 1848 manifesto after his demand for the abolition of private property. And this was one Marxist idea that eventually found broad favour. Economists argued that marginal increases in wealth were less important to the rich than to the poor. If you have $1,000, an extra dollar is worth less to you than if you have just $100. Therefore, the greatest happiness for the greatest number came from taxing the rich at a higher rate.

Even so, it took 60 years before the UK's 1908 budget replaced the flat personal income tax rate with a graduated rate. …

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