So. We sit at the edge of a global financial and economic crisis and here I think “Is there a way the country could be saved?”

The answer is yes, through political suicide. The problem is that the proposals which would work are not politically feasible, and the proposals which the politicians can sell unfortunately do not address the genuine problems. This is as much a perceptive as a structural issue. Case in point, the 50% tax band in the UK. It looks terrifying, giving half your wealth to the taxman after a certain point? Good god no. I imagine the Americans would baulk at such a prospect. Indeed, one of the Reublican outside runners has proposed the 9-9-9 solution. Which involves a taxation rate of, you guessed it – 9%.

Absurd. There is no government about that would be able to withstand such a marginal rate without the kind of cuts that would send public services to the middle ages, no matter how vehemently the right might argue about the so called Laffer Curve. The Laffer Curve is a bell shape by the way, it’s supposed to be used for calculating the maximum tax take when collecting money for the public purse, not as a simplistic stick to say “Less taxes equals more revenue”. It’s not that simple. Too low and even if the economy generates a much bigger pie, you won’t get enough from it to sustain services, too high, and the rich go into tax avoidance mode.

Here’s my proposals, and they are I should state, suicidal in the UK from a political prospective:

1) Merge National Insurance and Income Tax into a single “Earnings Tax”, set at 35% flat rate. No ceiling on what gets taxed, and more importantly, no discrimination on what gets taxed. If you make a profit, personally from it, you’re liable for the profit margin. Set personal allowances to £15,000 for single households and £25,000 (combined earnings) for family or multiple earner households.

Now, the first part is actually on the table already. There’s a lot of rumbling in the background about merging the two as benefits are being eroded, and contributory versions of benefits are slowly being phased out, or made near as makes no difference un-claimable. This would result in approximately the 35% figure that I have quoted, however I am saying that in doing so, bands should no longer exist. It should be a flat 35% irrespective of what you earn. The right would love this until I get into the “gotcha” element.

That 35% also takes the place of Capital Gains, Inheritance, Share Bonus issues, just about everything imaginable. This means that those who save extensively will see their capital gain taxed at thirty five pence in the pound, as opposed to the curent 28 ish percent that’s applied. Without any exemptions, loopholes, or discretions, this dramatically simplifies the system whilst at the same time guaranteeing that everyone pays “their fair share”. It would also be applied to the profit from selling your main residence, yes, this means property speculators and those who specialise in CGT flipping tricks would get hit, but frankly the only way to solve the problem is to close the tax gap. This solves it elegantly.

Since the new tax regime would no longer care about (a) how you got your money or (b) what you’re doing with it, all you need do is ensure everyone declares their wealth, even the offshore stuff. Failure to declare is tax evasion already and is illegal, yet quite a number of the well off do this. Others still place their money into tax havens, where it accrues interest and cannot be reached by the taxman, the system I propose would in effect wipe out this option as well, since your tax bill for the year is calculated on your earnings from all sources, offshore or otherwise.

The rich would -hate- the reality of this idea, and the poor would hate the perception. The media has trained us to believe that the rich suffer under huge tax burdens and the poor get away with paying very little when in reality the tax rate applied to those in the bottom 30% is potentially higher than the tax applied to those in the top 5%. It would however cure the problem, both in perception and in reality, as it would be transparent, one could quite simply look at the system and know where the money is being taken from, this would force the arguments back to actual merits and drawbacks, as opposed to -percieved- merits and drawbacks.

Unfortunately this whole plan would be politically suicidal, for obvious reasons. See if you can work out the issue.