We went to Hull today. As usual, it took 20 minutes to get to the outskirts of Hull and 40 minutes to get from the outskirts to the centre. I was pleasantly surprised by all the construction that's gone on there since I last visited, particularly with a new shopping centre right next to the train station. There were very few closed-down shops anywhere from what I saw, I didn't see any charity stores, but there were large numbers of independent stores. It looks as if the city has borne the recession quite well, which is especially good given its post-war general lack of prosperity.
Part of the reason, I believe, is the much lower cost of living here compared to the south. Four capuccinos and a hot chocolate came to £7.90 in one of the more upmarket coffee shops, when they'd have been more like £12 or £13 in Colchester. With shop rents and business rates low, more people can open shops, therefore more commerce occurs, therefore more people have jobs, therefore more people have money to spend.
Nationally, the same kind of reasoning should apply. If you want your country's economy to grow, then you make it inexpensive to set up and operate businesses. Don't tax these businesses heavily — use income tax and sales tax instead. If you want to be fairest, just use income tax. The cost of living will fall at the lower end, so you won't need to pay as much in benefits, either.
People would vote against a rise in income tax, though. Businesses don't have votes, so it's not going to happen. Still, maybe if someone had a virtual world that they could try this stuff out in, we'd get a better sense of whether it would actually work or not.
Oh, here's the hot chocolate:
Mmm, there's a radiator directly behind me and it's on.