Tax and Welfare - a new way that PHers may approve of.
Discussion
A new book written in New Zealand called The Big Kahuna (US$11 for a kindle version) proposes a radical shake up of tax and welfare.
Three basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
Three basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
caziques said:
A new book written in New Zealand called The Big Kahuna (US$11 for a kindle version) proposes a radical shake up of tax and welfare.
Three basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
Quite like the underlying idea, but am struggling with the bold paragraph. I can sort of see the possessions tax thing, but why exclude artworks and cars (unless the authors are petrolheads and artists). And why introduce a flat 6% assumed increase in value, and then introduce a spiteful "but if you do better than a random imagined fair rate, we'll do you without lube"?Three basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
Still too complicated. Flat tax is the answer. It rips out so much of the Inland Revenue in terms of all of the thousands of people employed to administer the various credits and allowances that the tax threshold should be able to be set somewhere around a level where someone working full time on minimum wage will pay no tax at all.
davepoth said:
Still too complicated. Flat tax is the answer. It rips out so much of the Inland Revenue in terms of all of the thousands of people employed to administer the various credits and allowances that the tax threshold should be able to be set somewhere around a level where someone working full time on minimum wage will pay no tax at all.
An FOI request here http://www.whatdotheyknow.com/request/how_many_sta... says about 75,000 FTE people employed at HMRC in 2009.Let's say they earn an average of GBP 30k each; that's 2.3bn in salaries. Call it about the same for overheads and that's about 5bn a year all in. Not all of them are dealing with income tax of course.
Treasury says that 2011 income tax and NI receipts are about 250bn http://www.hmrc.gov.uk/stats/tax_receipts/table1-2...
So scrapping the entire HMRC would save about 2% of the income tax pool.
Newc said:
An FOI request here http://www.whatdotheyknow.com/request/how_many_sta... says about 75,000 FTE people employed at HMRC in 2009.
Let's say they earn an average of GBP 30k each; that's 2.3bn in salaries. Call it about the same for overheads and that's about 5bn a year all in. Not all of them are dealing with income tax of course.
Treasury says that 2011 income tax and NI receipts are about 250bn http://www.hmrc.gov.uk/stats/tax_receipts/table1-2...
So scrapping the entire HMRC would save about 2% of the income tax pool.
You'd still need a few cynical types to verify the self-assessment returns, or we would all lie.
Call it 90% redundancies then, and we could also get rid of 90% of the tax accountants.
Can we keep Eric though?
Let's say they earn an average of GBP 30k each; that's 2.3bn in salaries. Call it about the same for overheads and that's about 5bn a year all in. Not all of them are dealing with income tax of course.
Treasury says that 2011 income tax and NI receipts are about 250bn http://www.hmrc.gov.uk/stats/tax_receipts/table1-2...
So scrapping the entire HMRC would save about 2% of the income tax pool.
You'd still need a few cynical types to verify the self-assessment returns, or we would all lie.
Call it 90% redundancies then, and we could also get rid of 90% of the tax accountants.
Can we keep Eric though?
Newc said:
An FOI request here http://www.whatdotheyknow.com/request/how_many_sta... says about 75,000 FTE people employed at HMRC in 2009.
Let's say they earn an average of GBP 30k each; that's 2.3bn in salaries. Call it about the same for overheads and that's about 5bn a year all in. Not all of them are dealing with income tax of course.
Treasury says that 2011 income tax and NI receipts are about 250bn http://www.hmrc.gov.uk/stats/tax_receipts/table1-2...
So scrapping the entire HMRC would save about 2% of the income tax pool.
Their 09-10 accounts say that HMRC spent £16.4bn.Let's say they earn an average of GBP 30k each; that's 2.3bn in salaries. Call it about the same for overheads and that's about 5bn a year all in. Not all of them are dealing with income tax of course.
Treasury says that 2011 income tax and NI receipts are about 250bn http://www.hmrc.gov.uk/stats/tax_receipts/table1-2...
So scrapping the entire HMRC would save about 2% of the income tax pool.
http://www.google.co.uk/url?sa=t&rct=j&q=h...
Granted some £12bn of that went in child tax credits, working tax credit and so on, but that's exactly the money I was looking to fold into a flat tax anyway. But you weren't far off with your guess. And any savings can go to reducing the overall tax burden.
Under a flat tax regime we have a starting premise. That's the minimum wage, which the government has decided is the minimum someone can earn, anything less than that and they will need support of some kind from somewhere. Full time, that works out at pretty much £12,000 a year. Under a flat tax system, that would be the tax threshold; if the government has to give you money to live below that level, there's very little point in taking it away from you in the first place.
To make sums easy, I'll take the example of someone earning up to the basic rate limit of £37,400. Currently the allowance is about £7,400, so they pay 20% income tax on £30,000, or £6000. Ideally we'd like them to pay about the same tax really, so on a 12,000 threshold we would need to get £6000 out of £25,000ish, or a 24% tax rate.
for an average UK salary of £27k, we would get something like £4k of tax currently, to get the same £4k we would need a 26% income tax rate.
So if we set the income tax rate flat at 25%, we get to a situation where the person earning an average salary will end up paying a bit less (£3750), and the person who earns an above average salary will pay a bit more (£6250). That then makes the tax system much simpler, and to my eyes a little fairer.
caziques said:
A new book written in New Zealand called The Big Kahuna (US$11 for a kindle version) proposes a radical shake up of tax and welfare.
Three basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
It has it's meritsThree basic propositions.
Every adult receives a basic income (5500 pounds proposed)- and get rid of ALL benefits and transfers (including state pension)
Everyone pays 30% tax on everything they earn by way of income. (So on about 15000 you effectively pay back the 5500 basic income).
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
Obviously there are a number of other conditions, but the basic reasoning seems sound.
Recommend you read the book.
The Big Kahuna: Tax And Welfare : Turning Tax And Welfare In New Zealand On Its Head
by Susan Guthrie, Gareth Morgan.
30% tax sounds allot but we are already paying 32% when you take into account NI. Personally I still think that a level as high as this will entrech statism and wasteful state spending, particularly as there will be a new source of revenue from taxes on assets.
The 6% assumed rate of return does seem rather high and will screw over those who are asset rich and income poor. Take a pensioner couple who live in a mortgage paid up three bed house worth, say, £200K. Income from the state £11,000, tax on their house £3,600 a year.
I fully agree that to to reduce far too high marginal rates of income tax, taxes on wealth have much to recommend them as an alternative. But without an allowance before you start paying tax on assets it does not work.
davepoth said:
...the person who earns an above average salary will pay a bit more (£6250). That then makes the tax system much simpler, and to my eyes a little fairer.
The problem in the UK (with flat tax) is that a big proportion of total income tax comes from high earners, and, with a rate set to suit ordinary people, high earners would pay a lot less. So the sums don't make sense.Australia got close to implementing flat tax and then realised at a very late stage that the majority of people would be worse off but the wealthy would pay less.
caziques said:
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
Isn't that the same as saying all net assets and all gains on assets will be taxed at 1.8% ?This seems as if it would be bizzarely complex in practice.
Why not a simple flat rate income tax on all income (whether in cash or in goods)?
Countdown said:
One tax system on its own would not work (IMO of course). Different types of "income/wealth/earnings" require different types of taxation in order to ensure people pay their "fair" share. Of course the "fair share" is the $64m dollar question.
Why do they require different levels of taxation?Why not one personal allowance and one rate of tax for all income of any kind (money, gifts, inheritence, barter, anything else...)
Deva Link said:
The problem in the UK (with flat tax) is that a big proportion of total income tax comes from high earners who only gain their income from PAYE and don't use tax avoidance measures to lower their effective overall tax rate, and, with a rate set to suit ordinary people, high earners would pay a lot less. So the sums don't make sense.
Australia got close to implementing flat tax and then realised at a very late stage that the majority of people would be worse off but the wealthy would pay less.
EFA. From what I've read, one of the benefits of the flat tax would be to catch those who optimise their tax affairs (indeed, how very dare they...bloody tax evaders etc.[/sarc]. By pulling down the top rate of tax to a single flat rate, people are less incentivised to avoid tax and actually the overall tax take goes up. Hard to say definitively though but certainly seems to make logical sense. Powerfully-built company directors, what say you? Australia got close to implementing flat tax and then realised at a very late stage that the majority of people would be worse off but the wealthy would pay less.
Tebbers said:
Powerfully-built company directors, what say you?
For highly paid people there would still be a lot of money to be saved by avoiding tax if possible. If they're employed, there are also considerable employer NI savings.Who knows though? I guess that's a big part of the problem - it would be a heck of gamble to introduce flat tax, not really knowing how much was going to be coming in.
Isn't the point of a flat tax to stimulate the economy? Personally I'd favour a 20% rate with nobody paying anything until they're earning a minimum of £12500 P/A. This gives the low paid a big payrise so suddenly there is a greater incentive to actually have a job and the high earners get to keep more of what they've earned so there is a greater incentive to start businesses and for foreign companies to set up operations over here. Those in the middle, of which I am one, would see less benefits and would probably moan the loudest but would hopefully shut up as the economy booms and they find their houses going up in value again.
I expect there is a massive flaw in this plan but I hope it is more than simply crying "it's not fair" and "so and so should pay more tax because they earn more than me".
I expect there is a massive flaw in this plan but I hope it is more than simply crying "it's not fair" and "so and so should pay more tax because they earn more than me".
It's a hideous idea. What's the point in the government collecting tax, only to pass the money through an expensive bureaucratic system and then hand it back to us? The best way to give people benefits is by cutting their income tax. I think things like Child Benefits should be administered by making an adjustment in your income tax.
This idea just makes everyone ultra reliant on the state.
6% of £500k is £30,000, so you have to pay £9k on top of the £30k hit you took? Also, people have different ambitions. Some people will use massive parts of their wage to live in the house they want but drive a shed, and who is anyone to say that what they are doing is wrong, but it's ok to live in squalor and drive a Bentley GT?
What about if you're trying to start a business? You've saved long and hard to bridge the two years you think it'll take to establish it's self. The business, at the end of the first year, is worth £100,000 in assets, yet lost £10,000, but you're ok with that because you expected it. Why should you have to hand out £2k extra while you're creating jobs and wealth and it's costing you money?
There seems little logic in it, and I don't think that anyone capable of wealth creation would find it an attractive situation.
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.If you are wealthy, you've already paid your taxes. Why should the state keep milking you because you've worked hard?
After someone has paid their taxes, it should be considered their money. Work hard, save hard, nice house, a few acres and your own business, and you're screwed. Piss it all up against the wall, and you get left alone. What was the point in being prudent again?
Edit: Are you really going to value every house in the UK every year, or do it by bands, meaning tha some would lose thousands, and some get off very lightly? How much would that cost?
The more I think about it, the more stupid it is.
This idea just makes everyone ultra reliant on the state.
caziques said:
ALL assets, including houses, business, land etc (but excluding cars and artworks etc) will be deemed to return 6% a year. And 30% tax will have to be paid on this, regardless if it returns 6% or not. (The asset is the net amount you own, ie only the equity in a house). Earn more than 6% and there will be 30% tax to pay on the extra.
So you have a house worth £500,000. It depreciates by £30,000 over the year.6% of £500k is £30,000, so you have to pay £9k on top of the £30k hit you took? Also, people have different ambitions. Some people will use massive parts of their wage to live in the house they want but drive a shed, and who is anyone to say that what they are doing is wrong, but it's ok to live in squalor and drive a Bentley GT?
What about if you're trying to start a business? You've saved long and hard to bridge the two years you think it'll take to establish it's self. The business, at the end of the first year, is worth £100,000 in assets, yet lost £10,000, but you're ok with that because you expected it. Why should you have to hand out £2k extra while you're creating jobs and wealth and it's costing you money?
There seems little logic in it, and I don't think that anyone capable of wealth creation would find it an attractive situation.
caziques said:
The whole point is to stop all the crap about the deserving poor and how that is determined - and to make wealthy people, who generally arrange their affairs to pay little tax, pay more.
If you want the wealthy to pay more, adjust the tax rates. This method is very selective and just forces people to spend their money on things that they are not really interested in. caziques said:
The west is infatuated with income taxes, in general it's a very poor way of determining wealth.
After someone has paid their taxes, it should be considered their money. Work hard, save hard, nice house, a few acres and your own business, and you're screwed. Piss it all up against the wall, and you get left alone. What was the point in being prudent again?
caziques said:
Recommend you read the book.
I think I'll pass thanks. Edit: Are you really going to value every house in the UK every year, or do it by bands, meaning tha some would lose thousands, and some get off very lightly? How much would that cost?
The more I think about it, the more stupid it is.
Edited by MX7 on Sunday 30th October 00:45
JagLover said:
30% tax sounds allot but we are already paying 32% when you take into account NI. Personally I still think that a level as high as this will entrech statism and wasteful state spending, particularly as there will be a new source of revenue from taxes on assets.
Actually we pay quite a bit more than that one way or another. With government spending running at 45% of GDP, you are paying for it somewhere. Even if it is corporate taxes, special duties on certain things it feeds back through into prices and the overall tax rate has to be around 45%Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff