Our approach to Income Tax is all wrong

In this country, we start off with a tax free allowance, which is currently £6,475. Then we have a Basic Rate of tax, which is 20 per cent of what you earn up to the threshold of £37,400. Following that we have the Higher Rate, which is 40 per cent on earnings up to £150,000 and then the Top Rate of 50 per cent on those earning in excess of £150,000.

I'm not disputing the thresholds, in fact I think they're broadly right. What I'm disputing is the approach.

The current system is wedded to the idea that the rich must pay more tax. That's the default position. It comes from the belief that a flat rate - say 30 per cent for everyone regardless of income - would, whilst being absolutely fair in purely mathematical terms, cause the poorest in society to pay an amount that leaves them too little to live on.

I think we should make it clear that the system does not seek to penalise the rich by making the 40 per cent tax bracket the Base Rate of tax. If you earn less than the threshold then you get a discount rate of 30 per cent or 20 per cent depending on your earnings. This leaves the thresholds and amounts exactly where they are now, but makes it clear that the vindictive left wing ideology that drives extra taxation of the rich is wrong. We should all be paying 40 per cent tax, it's just that some of us can't yet afford it.

I go with the 40 per cent rate as the new Base Rate because I believe that 40 per cent is the level of taxation a responsible state should put on its population. I think the 50 per cent rate is not only unfair but counter-productive, as people are less inclined to pay it. However, it could remain as a temporary Income Levy on those earning over £150,000 if the government determined it was necessary. This measure is all about psychology and overcoming left-wing ideology. It's about saying that the country doesn't want to tax the rich more, but help the poor by taxing them less.