Proposal - a flat income tax

[valisk1]

This thread is to discuss the suggestion of implementing a flat income tax.

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One of the single most vexed topics in politics to my mind.
I like the concept of a flat income tax with no exemptions and no other taxes.
It would not only simplify anybodies ability to work out the tax burden but it would cut away a vast chunk of bureaucracy at present deployed simply to shuffle stacks of cash around.

[jonathonstaples]

oooh, touchy issue. I certainly don't accept the idea of a flat tax, and I wonder where "no exemptions" leaves people on low income/benefits?

[valisk1]

Taxing benefits is of course self defeating
Disparity versus Low income earners is easily controllable by having a minimum base point, say £10,000 before the flat rate of lets say 20% applies.

I should have been a little clearer, by no exemptions I mean no ability to say, I spent £500 on a suit lets knock that off the bill, £85,000 on a new Merc etc etc, rather than no exemption in terms of liability for the little guy.

[jonathonstaples]

Taxing benefits is of course self defeating
Disparity versus Low income earners is easily controllable by having a minimum base point, say £10,000 before the flat rate of lets say 20% applies.

I should have been a little clearer, by no exemptions I mean no ability to say, I spent £500 on a suit lets knock that off the bill, £85,000 on a new Merc etc etc, rather than no exemption in terms of liability for the little guy.

Ah, that's much more reasonable. I think that merits further investigation.

Of course the tax policy of PPUK isn't going to be important for years yet!

[bobappleyard]

Earned income should not be taxed.

I doubt this would be something upon which a consensus could be reached.

[Grunchtherunch]

no one is exactly a fan of taxes but if you start eliminating certain taxes altogether - (income tax etc.) the government won't have enough money to function as an effective force of change/good in the country and that could lead to major major problems, the bottom line is the government really does need the money but we do need very intelligent individuals in the jobs that control the money and where it goes. i feel that because the people running the treasury are still politicians we could be wasting a lot of money instead of hiring external experts for these jobs and being much more efficient.

but just remember we would have no free health care without taxes and no councils taking care of our towns and providing services etc. they are important

[valisk1]

I don't think that's what Bob is suggesting.
I think he is more or less suggesting tax should fall on unearned income, such as rents, dividends, inheritance and so on. Possibly on sales also. Similar to pre civil war US taxation.

[AndrewTindall]

I hate the idea of flat tax. It makes things harder for the worse off, and cheaper/no noticeable difference to the wealthy. Those who can afford should be supporting those who can't

[erha]

A tax on real estate based on how good the area surrounding it is, that's a tax on unearned wealth. Landlords can't pass it on to tenants, because the supply of land is fixed. There is no way to dodge this tax.

http://en.wikipedia.org/wiki/Land_value_taxation

[Herr_ABP]

I hate the idea of flat tax. It makes things harder for the worse off, and cheaper/no noticeable difference to the wealthy. Those who can afford should be supporting those who can't

What if there was a flat tax of 30% but the personal allowance was £25,000? Cheap to administer, transparent and low enough not to discourage people from earning money but with a high enough allowance not to hurt the poor?

[bobappleyard]

I don't think that's what Bob is suggesting.
I think he is more or less suggesting tax should fall on unearned income, such as rents, dividends, inheritance and so on. Possibly on sales also. Similar to pre civil war US taxation.

Indeed, although I would be very wary of sales taxes, as there are unwanted distorting effects, and those of limited means are likely to be unduly affected.

I think it's a bit of a divisive issue, as I alluded to before. As I'm coming at it (as it stands now) from outer space as far as the "political spectrum" is concerned, I understand that others will hold quite different views, and that this could be an impediment to the formation of a sensible platform.

[bobappleyard]

A tax on real estate based on how good the area surrounding it is, that's a tax on unearned wealth. Landlords can't pass it on to tenants, because the supply of land is fixed. There is no way to dodge this tax.

http://en.wikipedia.org/wiki/Land_value_taxation

That would be an example of taxing rent. It's the canonical example, pretty much.

[valisk1]

I hate the idea of flat tax. It makes things harder for the worse off, and cheaper/no noticeable difference to the wealthy. Those who can afford should be supporting those who can't

As I mentioned, that's easily addressed by adjusting the starting point of the tax, if the tax does not affect income up to £15k or £20k p.a for example then a lot of people will be better off, particularly if N.I. (a seriously evil and regressive tax) is abolished also, the total tax take wont be terribly affected as by the current figures, the lowest 25% of income earners contribute only 2.8% of the total tax take. (that was 2.1% until Mr Brown abolished their lower rate )

As for the wealthy, Governments don't exist simply to punish them, making sure they pay their fair share should be enough, and with such a tax having no tax write offs, they certainly will be paying their fair share.

Presently folks who are taxed in the higher bands can write off large swathes of their taxes against things they happen to buy, even so, the top 10% of income earners in the UK presently contribute 54% of the total income tax take

http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf

This figure would not change to any significant degree.

It would also reduce the complexity of the present system and allow a large reduction in the amount of civil servants involved in taxation thus saving money for the taxpayer that way also.

[valisk1]

I hate the idea of flat tax. It makes things harder for the worse off, and cheaper/no noticeable difference to the wealthy. Those who can afford should be supporting those who can't

What if there was a flat tax of 30% but the personal allowance was £25,000? Cheap to administer, transparent and low enough not to discourage people from earning money but with a high enough allowance not to hurt the poor?

An allowance of 25K would no doubt be an immeasurable good to those at the lower end of the scale.

[valisk1]

I don't think that's what Bob is suggesting.
I think he is more or less suggesting tax should fall on unearned income, such as rents, dividends, inheritance and so on. Possibly on sales also. Similar to pre civil war US taxation.

Indeed, although I would be very wary of sales taxes, as there are unwanted distorting effects, and those of limited means are likely to be unduly affected.

I think it's a bit of a divisive issue, as I alluded to before. As I'm coming at it (as it stands now) from outer space as far as the "political spectrum" is concerned, I understand that others will hold quite different views, and that this could be an impediment to the formation of a sensible platform.

I've read quite a bit about this sort of tax being implemented, mainly from US authors a couple of years ago.
I don't think it's unreasonable, but it needs to be fully fleshed out so we can give it proper consideration as it would be an interesting alternative to the present system. but as you say, alien to a large number of potential voters.

[bobappleyard]

I don't think that's what Bob is suggesting.
I think he is more or less suggesting tax should fall on unearned income, such as rents, dividends, inheritance and so on. Possibly on sales also. Similar to pre civil war US taxation.

Indeed, although I would be very wary of sales taxes, as there are unwanted distorting effects, and those of limited means are likely to be unduly affected.

I think it's a bit of a divisive issue, as I alluded to before. As I'm coming at it (as it stands now) from outer space as far as the "political spectrum" is concerned, I understand that others will hold quite different views, and that this could be an impediment to the formation of a sensible platform.

I've read quite a bit about this sort of tax being implemented, mainly from US authors a couple of years ago.
I don't think it's unreasonable, but it needs to be fully fleshed out so we can give it proper consideration as it would be an interesting alternative to the present system. but as you say, alien to a large number of potential voters.

That it's alien is enough of a reason not to go for it. After all, the main policies regarding copyrights and patents are likely to be left-field enough. We should focus on explaining those things to the public.

These are all very traditional arenas. For instance, you pick a flat tax (as the OP is suggesting) and all the lefty types would be all "no way!" I don't think it would matter too much what your arguments were, you've just turned off a load of potential supporters, something that a fledgling party should try to avoid.

The Swedish Party's explicit non-alignment on these issues seems to me to be a saner approach.

[beardymouse]

What if there was a flat tax of 30% but the personal allowance was £25,000? Cheap to administer, transparent and low enough not to discourage people from earning money but with a high enough allowance not to hurt the poor?

This would be fantastic if it would work.

[rjmunro]

I hate the idea of flat tax. It makes things harder for the worse off, and cheaper/no noticeable difference to the wealthy. Those who can afford should be supporting those who can't

Not if you combine it with a tax credit of a fixed amount, e.g. £60/week to anyone at or seeking work, then all income taxed at 30% means everyone earning less than £10,000 is getting more credit than they are paying in tax. Hopefully you could abolish job seekers allowance, and maybe some other things because it's all covered by the £60/week payment.

One government department will do the £60/week payments. There will have to be rules to discourage people from living off the payments and not contributing to society, and the department will enforce those. You may get bonuses on this payment e.g. if you have children, if you are disabled, if you are a student or something, but income will not be a factor.

Another department will charge the 30% on any "income". They won't bother to charge government employees - they would just have a 30% pay cut to bring their take home into line. Working out what income should be included and what should be exempted is quite hard.

Of course, the hardest thing is predicting what this will do to peoples motivation to work, and how you balance the numbers so the government can still afford to do all the things it needs to. In general if people work a bit less, IMHO that would be good for society, both because people will have better lifestyles, and because the work they don't do will be available to people who are currently unemployed, but that's a massive simplification, and it won't work as easily as that...

[Swollentesticles]

A tax on real estate based on how good the area surrounding it is, that's a tax on unearned wealth. Landlords can't pass it on to tenants, because the supply of land is fixed. There is no way to dodge this tax.

http://en.wikipedia.org/wiki/Land_value_taxation

I don't understand how a landlord increasing his rent charge sufficiently to cover his tax bill is not passing the cost on to the tenant. As for not dodging the tax.. people will live in the cheaper areas and commute. Which may be bad for the environment.

[erha]

The thing is, if a landlord wants to make the most money, he tries to charge as much as he can get away with. He does that regardless of high or low taxation. Now, other people also want to make money. But the difference between stuff that just exists and stuff that is produced by humans is crucial here. For stuff that has a fixed supply, demand is what sets the price. For stuff produced by humans the cost of production also plays a role and taxes add to the cost of production.

As for urban sprawl, the tax makes it really expensive to hold land without using it. So the typical effect is that it reduces urban sprawl.

It is all in the Wikipedia article.