Discussion
A quote from the article which sums up the problem in rich countries
'America is not Russia. It has a functioning tax system, albeit a clumsy one, so has something to lose from uprooting its tax system and starting again. But the potential gains are not negligible. In a typical year, the IRS estimates that for every dollar it collects, another 19 or 20 cents is owed, but not paid. This shortfall amounted to between $312 billion and $353 billion in 2001. Small businesses fail to report about 30% of their earnings. Babysitters and gardeners fail to report 80%, says the IRS.
In part, the tax system is burdensome because people dodge it. Every loophole that is exploited must be plugged. Every blurry line that is crossed must be sharpened. But Messrs Owens and Hamilton worry that the tax-codifiers and the tax-dodgers are locked in a mutually destructive “arms race”. The code is made more complex, because of tax wheezes. More people then seek to avoid taxes. The best way to fight tax avoidance, then, is with simplicity.'
I would agree with that assessment-I would also say that the marginal rate of atx should be as low as possible in order to maintain healthy economic growth.
I agree with a simple flat tax.
'America is not Russia. It has a functioning tax system, albeit a clumsy one, so has something to lose from uprooting its tax system and starting again. But the potential gains are not negligible. In a typical year, the IRS estimates that for every dollar it collects, another 19 or 20 cents is owed, but not paid. This shortfall amounted to between $312 billion and $353 billion in 2001. Small businesses fail to report about 30% of their earnings. Babysitters and gardeners fail to report 80%, says the IRS.
In part, the tax system is burdensome because people dodge it. Every loophole that is exploited must be plugged. Every blurry line that is crossed must be sharpened. But Messrs Owens and Hamilton worry that the tax-codifiers and the tax-dodgers are locked in a mutually destructive “arms race”. The code is made more complex, because of tax wheezes. More people then seek to avoid taxes. The best way to fight tax avoidance, then, is with simplicity.'
I would agree with that assessment-I would also say that the marginal rate of atx should be as low as possible in order to maintain healthy economic growth.
I agree with a simple flat tax.
I really like the concept. Especially so if you extend the concept of simplification.
Unfortunately, politically, the government of the day, and in particulat this government, tax you with the death of a thousand taxes, where no individual tax seems to hurt, but overall its a huge burden.
My proposal would be:
Scrap national insurance (employers and employees). Its tax, so call it tax. Have a single, flat rate income tax - maybe 35-40%. (When you allow for existing NI, thats less than you pay now). There would need to be a transition for employers to pay you a bigger gross, since they won't be paying employer's NI.
Far more transparency. And no Gordon Brown claiming no tax rises when he puts NI up again.
Scrap different rates and allowances for CGT, Savings, Dividends, Pension income, self-employed income, employed income, and make it all income. All taxed at flat rate.
(Not sure about inheritance tax - maybe should be scrapped in its entirety).
Allowances should remove the lower paid from paying tax - maybe a lower allowance of £10k, and you play flat rate above that.
However, you also get allowances for personal payment for provision the state should otherwise provide, so private health insurance, private education, personal pension contributions, are all deductible.
Pensions and/or benefits kick in on a means tested basis, which should be graduated to eliminate the poverty trap - i.e. if you work to earn, you always take home more (even if it's slight).
That should save on the salaries of about 90% of inland revenue employees for a start.
Unfortunately, politically, the government of the day, and in particulat this government, tax you with the death of a thousand taxes, where no individual tax seems to hurt, but overall its a huge burden.
My proposal would be:
Scrap national insurance (employers and employees). Its tax, so call it tax. Have a single, flat rate income tax - maybe 35-40%. (When you allow for existing NI, thats less than you pay now). There would need to be a transition for employers to pay you a bigger gross, since they won't be paying employer's NI.
Far more transparency. And no Gordon Brown claiming no tax rises when he puts NI up again.
Scrap different rates and allowances for CGT, Savings, Dividends, Pension income, self-employed income, employed income, and make it all income. All taxed at flat rate.
(Not sure about inheritance tax - maybe should be scrapped in its entirety).
Allowances should remove the lower paid from paying tax - maybe a lower allowance of £10k, and you play flat rate above that.
However, you also get allowances for personal payment for provision the state should otherwise provide, so private health insurance, private education, personal pension contributions, are all deductible.
Pensions and/or benefits kick in on a means tested basis, which should be graduated to eliminate the poverty trap - i.e. if you work to earn, you always take home more (even if it's slight).
That should save on the salaries of about 90% of inland revenue employees for a start.
Wouldn't it be nice if they rolled NI and income tax into one? It would save a fortune in admin costs but would lose too many votes so would never happen.
I wouldn't have a problem with the actual amount of tax I pay if it got used efficiently - it just really grates when they piss it up the wall and still want more.
I wouldn't have a problem with the actual amount of tax I pay if it got used efficiently - it just really grates when they piss it up the wall and still want more.
I'm not sure it's politically possible in the UK. There would be far too many losers and not enough gainers. Tthe only way to convince people it would work would be to point to it working in countries similar to ours. And while new EU countries are probably doing quite well out of it right now, they don't have a comparable sittuation in any way.
Besides, you think that gardeners (etc) would pay tax if it suddenly became easier?
Besides, you think that gardeners (etc) would pay tax if it suddenly became easier?
Some sensible proposals Size Nine Elm
I particularly liked the idea of having E'ers ni coming out the pay packet so theat people can see just how much the government takes.
but Inheritence tax should remain, and the current basic state pension should not become a benefit, but remain calculated as it is.
Duncan23 said:
I'm not sure it's politically possible in the UK. There would be far too many losers and not enough gainers.
If it was initially revenue neutral you would be right.
However if it was done on the expectation that revenues would rise due to economic growth and less evasion it could be structured to benefit a great number of people.
A large rise in the personal allowance would benefit the low paid most of all and the flat rate would beenfit the rich currently paying higher rate tax.
The impact on those in the middle would depend on the rate chosen-22% has been suggested, but i think that results in too much lost revenue.
If we were to have a personal allowance of 10k then I think the flat rate would have to be in the 25-30% range.
JagLover said:
If it was initially revenue neutral you would be right.
However if it was done on the expectation that revenues would rise due to economic growth and less evasion it could be structured to benefit a great number of people.
True. The political problem is simple. If you stay revenue neutral, then you hurt too many people. If you accept less revenue on the basis the economy grows and beurocracy is down, then everyone just laughs at your figures and says you will slash public spending and what about the hospitals and the schools?
It'd take a brave politician to push it. And it'd probably be their successor who felt any benefit. Let's face it, "the ability to pay" has been a mantra for long enough that changing to a flat tax would take a huuge effort.
cliffe_mafia said:
I wouldn't have a problem with the actual amount of tax I pay if it got used efficiently - it just really grates when they piss it up the wall and still want more.
The only way we will ever stop wasting the majority of the money is to stop people from being career civil servants. This will take years even if we start now, but all new hires should be employed on the basis of a fixed term 3 year contract so they know they will have to do real work throughout their life rather than just be cucooned wasting our money ticking boxes and stamping forms. If we did that civil service empires would crash and literally Billions would be saved. We would also notneed as many immigrants and the largely unskilled and stupid public sector workers could be put to use building the infrastructure we need to maintain our economy. The resultant savings could then be passed on as tax cuts.
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