“Progressive” taxation

 

             Some of you have complained about the idea of progressive taxation, some about the use of the word to describe a system which takes more from the rich than from the poor. I used the word because it is the term commonly used to describe tax systems which take more from those with more income and wealth. The alternative is poll taxeor fixed per hominem taxes. Some argue consumption taxes are “regressive”, hitting those on low incomes more. Yet if you look at VAT in the UK, because items like food are exempted, the rich pay proportionately more VAT as well as Income Tax, as all luxuries attract the full rate tax.

             Some of you suggest a flat tax. This is still a tax which taxes the rich considerably more than the poor. If person A is on £20,000 a year, and the flat tax is 20% with the first £10,000 of income tax free, they pay just £2000 of tax, or 10%.  Someone on £100,000 of income pays £18,000, or nine times the amount of the person on the lower income, at 18%.  When Mr Osborne said he liked flat taxes, it still left him supporting the general notion that that the rich should pay a lot more than those on low incomes.

             The June 2010 Red Book set out illustrations of how progressive the current UK system is. A family with one child on an income of £10,000 a year receives  in 2011-12 £6150 from the state  in tax credits after allowing for income tax and National Insurance. Someone on £20,000 a year pays a net  £1800,  on £50,000 a year pays  £14,405, and on £100,000 a year £35,405. The person on £100,000 a year pays almost twenty times what someone on £20,000 a year pays, if they have one  child.  

             Recent budgets have increased the tax on the higher earners, and increased the net payments from the state to lower earners. The top decile of earners have been asked to pay £1600 a year more on average as part of the budget measures to curb the deficit.

            In the March 2011 Red Book the Treasury gave their latest numbers on overall contributions to the state or drawings from  the state. These were based on 2008-9 figures, so the latest would give more to the low income groups and take more from the high income groups. They showed that the top 10% of income earners contributed  around a net £30,000 a year on average, the next 10% around £18,000 a year and the third  from top decile around  £14,000. The bottom three deciles of income recipients  all received money from the state, with the second lowest income group getting most at around  £3000 a year. These figures show benefits received minus all direct and indirect taxes.

             I would be interested to hear views on whether this is fair?  How progressive would you like the system to be?  How progressive can it afford to be, without discouraging people from work or from risk taking?

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190 Comments

  1. Mick Anderson
    Posted December 15, 2011 at 7:09 am | Permalink

    I’d go for a completely flat tax rate, with a lower-level cut-off somewhere between £10k and £15k.

    NI should be included in Income Tax, CGT should taper between 1 and 10 years, IHT and stamp duty should be abolished.

    In the same vein, I would also remove the Road Fund Licence. An extra £0.04 per litre would mean that Mr Osborne would be no worse off, but considering how fond Mr Cameron used to be of telling us that he would “end the war on the Motorist”, how about just deleting the tax (along with the cost of collection, and all the associated fined offences). The Treasury gained the best part of £0.03 per litre as part of the VAT rise, anyway.

    Such a simple system would be very simple to administer, easy to understand, and largely pointless to avoid.

    • John C
      Posted December 15, 2011 at 10:55 am | Permalink

      I think part of the reason for keeping the Road Fund License is that, by getting rid of it,some people would not bother to insure their car. At the moment a check is made, when the license is issued, that the car is insured (at that moment anyway).

      I agree that the Road Fund License should be scrapped. Fuel usage relates directly to the driver’s road usage. It would tend to be progressive to.

      • Disaffected
        Posted December 15, 2011 at 11:49 am | Permalink

        I understood that the Treasury collects £33 billion from VEL and only uses £13 billion on roads- where is the rest?

        Taxation should start from the premise of it being a necessary evil to fund public services in a cost efficient way not how much tax can be squeezed from people in variety of forms, as is the current system. Before the tax system is worked out there is another consideration that needs to applied as a main principle to taxation is the public spending issue necessary or desirable. In austere time desirable issues goes out the window. For example, yesterday in the HoC Cameron was full of admiration that the UK was the largest donator to Bangladesh in aid and it would help their green energy projects! I object. it is not necessary or I suggest even on the desirable list at this moment in time. He will be borrowing money to pay back with interest to give away and expect the British public to pay more taxes to fund this stupid idea. Basic economics needs to be applied to the country’s taxation and spending. When will politicians learn.
        I hope MPs today will realise that our tax (money) is being abused when they debate their wretched expenses. When will they learn? Bullying Filkin and and now IPSA so they can continue with corrupt practice to line their pockets is not acceptable. Once more, consider outgoings before asking for more money from us and start by example (good article by Oborne in the DT). Also good article by David Davis and comment by Boudicca in the DT about Europe and the Uk’s relationship with it.

      • Antisthenes
        Posted December 15, 2011 at 12:28 pm | Permalink

        Scrapping the road fund license would not help in enforcing the use of vehicle insurance but nor does it help maintaining enforcement much because the day after paying the licence the insurance can be easily cancelled. However because of number plates there will always be a need of some form of registration and a payment to do so and production of an insurance certificate. In France who I normally berate for it’s overly oppressive regulatory regime they have a system that has some merit. There every time a vehicle changes hands it has to be re-registered, which is of course true of the UK, and is a source of revenue . On top of which insurances once taken out cannot be cancelled unless the vehicle is sold or scrapped or the contract comes to the end of it’s term not less than one year.

    • Nick
      Posted December 15, 2011 at 11:08 am | Permalink

      Pretty much spot on Mick

      However, the government has all those massive Enron Debts. They need the tax.

      I’ve been advocating the VED issue for ages. It’s simple. Just put it on fuel.

      There are other changes. Road users should be taxed to pay for the costs of roads. They shouldn’t be used as a cash cow. Hypothecation is needed. Road users pay for roads and no more.

      What does this mean? Well it means that people know the cost of government services. The cost is overt and not covert. If we look at the civil service pensions. We are going to be paying for the next 80 years for services received this year. That is no way of determining if the government provides value for money.

      So we need the move to a no debt government. For a start we need a 0% cap on deficits. You just aren’t allowed to run one. Then we need the state to get out of pensions all together. It just pays accrued pension rights. No new borrowing should be allowed. They aren’t even allowed to roll over debts.

      Then the government can’t screw future generations. Everyone who wants a government service now, pays for it now. I suspect they will say no, the cost is too high.

      So if you want a Tobin tax, then it should be overt. 1 pound for every withdrawal from an ATM. Now you can hear the squeals of protest already. People will notice the money going. Yes, that’s the point. You get your transaction tax, and people see the tax in action. Ah yes, but we want bankers to pay it. No you mean you want banks to pay it. Yes. Ah but that means its just passed on to the customer. Don’t you want them to know? Ah er, um …

      • Disaffected
        Posted December 15, 2011 at 11:55 am | Permalink

        Politicians are always seeking ways of increasing tax without the public noticing. The recent BBC programme narrated by Nick Robinson highlighted how the Labour government used a firm to survey the correct words so it would be acceptable to increase NI. It was nothing less than a fraud because the public thought the increase was necessary to improve the NHS, it was n fact a scam to get more tax from us. like RBS someone should be held responsible and held accountable for their actions by a court case. The public should rightly be protected by the AG and other bodies to counter political wrong doing to the public, including fake reasons for wars.

      • uanime5
        Posted December 15, 2011 at 3:31 pm | Permalink

        Other than charging for ATM use how are banks going to pass these charges onto their customers? Higher rates of interest on loans and lower rates of returns on savings will just cause their customer to go elsewhere.

        • libertarian
          Posted December 15, 2011 at 6:36 pm | Permalink

          Oh dear you really don’t understand do you?

          We are talking about a tax imposed on ALL banks, so where would this ELSEWHERE that people can go be?

          Also they can charge for chequeing accounts, charge more for transactions, charge more for FX. Charge fees for credit cards, debit cards blah blah blah. All businesses already pay bank charges these will be increased and the costs passed on to their customers. Do you see?

          • lojolondon
            Posted December 16, 2011 at 2:33 pm | Permalink

            No, I don’t see. My bank in the Caymans will not charge me for anything I do. So why would I deposit money into my UK accounts?

          • Bob
            Posted December 16, 2011 at 8:44 pm | Permalink

            @lojo
            They work for nothing?

      • Mick Anderson
        Posted December 15, 2011 at 5:07 pm | Permalink

        Nick,

        You’re assuming that changing to a more simple, lower cost tax system will reduce the amount of money that the Government has available.

        This need not be the case. There would be substantially less money spent on staff at the tax office, but I don’t care if those who do not contribute to the Country lose their jobs. The money saved can go towards paying back the National Debt, or to reduce the amount of tax we pay.

        Even if there is no tax rebate, I would still be better off through reduced accountancy bills. There was no excuse for Mr Brown imposing such an over-complicated system on us, and it’s high time that Mr Osborne applied himself to rectifying these mistakes.

        To those who claim that VED is a good way to prove insurance and MOT, welcome to the 21st century. Police ANPR cameras already check that your insurance and MOT are valid when you drive past them. Have you never wondered what those attended non-speed-cameras are? Abolishing Road Tax is a really simple way for Downing Street to earn a little popular praise, and has absolutely no impact on any sort of safety.

        • zorro
          Posted December 15, 2011 at 7:02 pm | Permalink

          Abolish road tax and make sure that vehicles display an MOT disc instead. Insurance details are linked to the vehicle registration by computer and can be easily spot checked.

          zorro

          • Derek Weston
            Posted December 16, 2011 at 12:07 pm | Permalink

            I wonder if the road tax, insurance and mot could be displayed on the number plate, ie new numberplate discs every year.

    • Alan Wheatley
      Posted December 15, 2011 at 11:11 am | Permalink

      I too would prefer to abolish the road fund licence in favour of more tax on fuel.

      However, it has been argued that there would still need to be measures to ensure vehicles were being used with necessary insurance cover and where appropriate a valid MoT. So cost-effective answers to these issues too are needed.

      • Antisthenes
        Posted December 15, 2011 at 12:32 pm | Permalink

        I refer once again to France there MOT (control techniques) and insurance are displayed on little square documents to the windscreen similar to how road tax licences are in the UK.

      • Iain Gill
        Posted December 15, 2011 at 2:54 pm | Permalink

        just do what so many other countries do and get the insurance companies to issue a certificate of insurance the same size and shape as current tax disc and mandate it being shown in the windscreen

      • Alex B
        Posted December 15, 2011 at 3:55 pm | Permalink

        I agree, Alan. My proposal would be to replace Vehicle Excise Duty (“road tax”) with an annual documentation check with a nominal administration charge (about £10 sounds about right). Then, increase petrol tax such that someone driving a 30mpg vehicle 8000 miles a year pays the same as now. If we want to inspire manufacturers to produce more efficient vehicles, we can raise that efficiency figure from 30mpg upwards slightly. If there’s a downturn, we can increase the annual mileage figure temporarily.

      • James Power
        Posted December 15, 2011 at 4:11 pm | Permalink

        I think we could cover insurance costs through adding money to fuel too… basic third party cover for all UK-registered vehicles could be provided/ funded by the state. It would be end the problem of uninsured drivers at a stroke.

      • APL
        Posted December 18, 2011 at 11:07 am | Permalink

        Alan Wheatley: “I too would prefer to abolish the road fund licence in favour of more tax on fuel.”

        I take the contrary position, I would like the government to cut the tax take, so while I support the idea of abolishing the road fund licence, I would like the government to cut spending and thus cut excise on fuel too.

        Once you start taxing a thing in excess of 100% of the value of the thing, as is the case with fuel excise, not only is it immoral it is also especially in the case of energy a tax on the productive ability of the economy.

    • Disaffected
      Posted December 15, 2011 at 11:56 am | Permalink

      John, look at Gibraltar’s system and tell me why it is not better than the one used in the UK?

    • BobE
      Posted December 15, 2011 at 2:55 pm | Permalink

      Replace the road fund with an Insurance Fund. 3rd party insurance with that as the registration disk. Same control of registration but everybody now has insurance.
      With Road fund directly on fuel then all drivers pay the tax including overseas visitors.
      People have spoken about this for 30 years but it is never discussed in government.

    • Geoffrey Meace
      Posted December 21, 2011 at 10:29 am | Permalink

      The government is always talking about austerity measures. they should instead be talking about realignment. We do not need less people employed, we need massively less people on the states payroll and more employing themselves and employed by small business, the engine of the economy.
      People need private sector jobs that must the priority. All good will come from that.
      Taxes must be reduced but we must start with business rates, Company NI, green energy taxes, we are competing with other nations who do not have these high taxes, every pound milked by the state deteriorates the jobs market.
      The money can easily be found by reducing all the reckless spending.

      Reduce to nothing, in 10 months time, the amount paid to unmarried mothers who recklessly sponge off the rest of us for thier lifestyle choice. If you want a baby get married and pay for it yourselves.

      People on the dole should not be given money for nothing they should do something in the community for it so that they do not lose the will to work.

      We need to leave the EU, that would save so many billions we do not even Know how many because our leaders refuse to work it out, some management style!

      We need to stop foreign aid except to natural disasters, and we need to stop all foreign adventures unless we are directly under threat, it is not our duty to police the world. However we do need a fantastic armed services all based at home with sufficient ships, aircraft, kit, men etc to ensure we never need to use them, except for our own natural disasters.

      All government and red tape should be trimmed to the minimum, no Quangos, and Tax should be massively simplified to reduce the bureaucratic burden.

      After all this has been done we will be able to reduce our debts and subsequently able to reduce taxes further, this will stimulate more jobs and the spiral will start going up again instead of inexorably down!

  2. Edward
    Posted December 15, 2011 at 7:37 am | Permalink

    I would rather the construction ‘proportionate tax’ be used rather than ‘flat tax’. The later suggests some form of fixed or static tax, almost like a ‘poll’ tax. The former suggests fairness, equality and is actually more precise. Any anyway the LibDems should love the use of the word ‘proportionate’.

    Ed

  3. Pete the Bike
    Posted December 15, 2011 at 8:03 am | Permalink

    A flat rate tax is the most effective if it is low enough to stop people avoiding it but you can’t simply take it in isolation. It is the hundreds of other taxes that make a system unfair. The real rate of taxation in this country is way above 60% due to taxes on taxes on taxes. Everything we buy is increased in price by the state. Buy a jacket in a shop and you’ll pay the tax on wages, business rates, raw materials and fuel that the manufacturer has paid. That also applies to all the middle men involved before you get the product. Something that should cost a few pounds ends up costing hundreds simply because of that. The tax payers alliance recently worked out that you needed £100 of pre tax income to buy £20 (also pre tax) worth of petrol so we pay 80% tax on income used to pay for it. That is true to a greater or lesser extent of every product for sale in this country and it’s why when you travel to a country that doesn’t have the “benefit” of an enormous state machinery everything is a quarter of the price we’re used to. Big government is not the answer to anything, it is the problem.

    • Alan Radford
      Posted December 15, 2011 at 8:28 am | Permalink

      “Big government is not the answer to anything, it is the problem.”

      I couldn’t have put it better myself. The trouble is, government LOVES being big, and wants to get bigger.

      • lifelogic
        Posted December 15, 2011 at 10:08 am | Permalink

        Indeed everyone in government or who get money from government has a vested interest in creating inventing new reasons/justifications for yet more government, more quangos, more complex systems, more laws, more regulations, more fines, more taxes, more coordination, more international co-operation and fact finding trips and all the rest.

        So more and more parasitic activities are found the only defence against this is elected politicians one vote every 5 years on many issues – this is clearly totally ineffective.

        So we get a balance where government only get limited when it get so big that it kills the cow it is bleeding – at about 50% of GDP. The real rate for maximum benefit for the voters is perhaps half this but the lack of political control mean we are stuck with about 50% and countless parasites inconveniencing us every day.

        • Iain Gill
          Posted December 15, 2011 at 2:58 pm | Permalink

          yes

          indeed the massive state subsidised housing estates need taking out of state control, subsidise those in need and not the houses, let the people take the money where they like, build in incentives to move for work rather than staying in a nice house in an area where there will never be jobs

          stop the state subsidy to mortgages, first time buyers or otherwise

          level a few playing fields

          tax should be for the military, emergency services, and schooling, and certainly not for cross subsidy of fuel on scottish islands, europe, medical treatment for masses of the 3rd world here on temporary visas, “aid” to corrupt regimes, and so on

          • rose
            Posted December 15, 2011 at 7:48 pm | Permalink

            And big government makes big mistakes which small government couldn’t. This applies in local government too.

      • Alan Wheatley
        Posted December 15, 2011 at 11:13 am | Permalink

        The EU being a prime example.

    • libertarian
      Posted December 15, 2011 at 2:18 pm | Permalink

      Total agree Pete

      Big government IS the problem. Its a self perpetuating monster.

      We need far fewer politicians at ALL levels. We should lose one whole layer of local government at least. Those that remain should concentrate on the public service they are there to provide, ie highway maintenance, cutting grass in the parks, emptying bins and STOP all the “innovative” and extra curricular activities ( Kent County Council has an officer of digital engagement and innovation as well as TV stations, gardening companies etc etc) .

      I agree with majority of commentators we need a flat tax system with a simple as possible structure so that people know what they are paying.

  4. alan jutson
    Posted December 15, 2011 at 8:11 am | Permalink

    John

    I think most people are happy with the explanation that the more you earn the more tax you pay, the problem arises when its also the higher percentage you pay. Too higher percentage and it kills incentive to either work harder, to expand the business faster, and to tae on more employees.

    Many people I know have chosen to work less, and get a better, so called, work life balance, rather than have the headache of employing more people and getting little reward for this extra burden and risk, and with todays employment laws, complicated tax system a risk and a burden it is.

    When I had my business, everyone was employed on a self employed contract basis, as I could not guarantee continuing/unbroken employment within the construction industry, due to not knowing in advance what contracts we would win.

    The monthly Construction industry returns which have to be made for each sub contractor, and having to continually check if they were registered as bona fide by the Inland Revenue, and the stopping of tax if they were not, complicated things, and led to hours of paperwork.
    This new system took over from the far more simple 715 Certification process which was a piece of cake in comparison, with one return per tax year..

    • alan jutson
      Posted December 15, 2011 at 8:23 am | Permalink

      Most people would be very happy with a simple tax system, if it was deemed fair, where the the earner gained more than the State, for their efforts.

      The tax as a percentage of earnings, compared to disposable income in the UK is simply too high.

      Most people believe that their hard earned taxes are being wasted, that many fit and able people who could work, are simply refusing to work, and they thus are disenchanted with the system which seems to reward lazyness and the dependance culture.

      Yes I am aware that there are not many jobs about, but try and get a window cleaner, get your grass cut at a reasonable price, get your car cleaned/valeted at home/office while you work.
      All these jobs could do with extra competition, and I guarantee other posters can think of many more.
      But to financially penalise workers, so the State can pay able bodied people to sit at home to do nothing, is just silly and wasteful.

      Tax rates need to come down, and so does State spending.

      • Mike Stallard
        Posted December 15, 2011 at 9:19 am | Permalink

        I so agree with this!

        I think our host is asking the wrong question. Not “How? but “How much?” ought to be more helpful.

        Compared with other times in history, our tax rates are extraordinarily high. Before the French Revolution, for example, the peasants were only paying 50% of their income to the hated aristocrat – even in times of famine. In ancient Rome, during the fall of the Empire, maurauding bands of soldiers stole everything. And then they disappeared. Muslims had the religious Collection for the poor, but they abolished all taxation – (words left out-ed) They still work like this whenever they can.

        Comparing our taxes with other profligate countries is pretty misleading. We are all victims of pretence “Compassion”, a very expensive and inefficient bureaucracy, and hypocritical “Socialist” reliance on other people to perform “Services”.

        Time for a new John Wesley, methinks.

      • Posted December 15, 2011 at 11:16 am | Permalink

        Alan the traditional Conservative position is that the rich should pay more tax so that they can be more philanthropic in ways which they can track in detail.

        I can see both the problems with this position and the problems with having a large, impenetrable and unreformable state.

        Rather than swinging between these traditional incompatible paradigms we should look at how communication technology combined with changes in the way we live can reconnect us with the state and make it properly transparent, accountable, reformable and fit for the purpose for which it was intended in a way which makes us justifiably proud. We have, as yet, only scratched the surface of what the internet makes possible.

      • uanime5
        Posted December 15, 2011 at 3:37 pm | Permalink

        “The tax as a percentage of earnings, compared to disposable income in the UK is simply too high.”

        Only for the poor. The rich seem to have plenty of disposable income, despite the fact that they’re supposed to be paying more in taxes.

        “Yes I am aware that there are not many jobs about, but try and get a window cleaner, get your grass cut at a reasonable price, get your car cleaned/valeted at home/office while you work.”

        Try living off the salary for doing this and you’ll soon see why it isn’t viable. A job that doesn’t pay a living wage isn’t worth doing.

        • libertarian
          Posted December 15, 2011 at 6:43 pm | Permalink

          You live on Mars mate, it costs me £80 to have my windows cleaned !

          I pay £90 to have my grass cut twice a month in summer.

          Its only not viable if you are a lazy, incompetent any one else can easily make £500 per week doing this kind of work. The only thing that makes work unviable is our TAX system

        • Robert K
          Posted December 15, 2011 at 6:53 pm | Permalink

          The thing that those who advocate high taxes ignore is that the money they excise does not belong to them

        • Alan Wheatley
          Posted December 15, 2011 at 7:09 pm | Permalink

          Re “A job that doesn’t pay a living wage isn’t worth doing”, it could also be said that living on unemployment benefit isn’t worth doing if the “wage” isn’t “living”. In both circumstances the payer has a say in how much to pay.

      • Bazman
        Posted December 15, 2011 at 4:19 pm | Permalink

        Window cleaner as an example. Most charge a reasonable amount and there is not many for a reason. There are not enough windows to support two cleaners. Often someone comes along and cuts the price in half, this however is not viable, so they give up. It involves to much work for one person in one day, leading to shoddy work and loss of customers. This competition that many imagine is not realistic and the competition that does exist is often between companies on who can undercut each others contracts. Hence minimum wage cleaning jobs and revolving door recruitment by cleaning companies.
        It ain’t rocket science. You want servants and they do not exist anymore, except in the good will of relatives, bob-a-job and starve-em’ Tories.

        • Robert K
          Posted December 15, 2011 at 6:55 pm | Permalink

          Interesting. Perhaps we should persuade JR to sponsor a Supervison of Window Cleaning Bill

        • libertarian
          Posted December 15, 2011 at 9:15 pm | Permalink

          A total crock of nonsense, There are at least 5 independent window cleaners operating in my small town all making a decent enough living.

          “It involves too much work for one person”…ha ha ha ha ha that tells you everything you need to know about Bazman and his work ethic, why do a days work when you can get someone who does work hard to pay more tax

          • Posted December 17, 2011 at 4:27 pm | Permalink

            Libertarian – you say there are 5 companies in your local area and yet you’re paying £80 for your windows to be cleaned. So much for competition driving down the price eh?

            Or maybe you live in a greenhouse?

        • alan jutson
          Posted December 15, 2011 at 9:40 pm | Permalink

          Bazman

          No I do not want servants. Although I am informed that a well Qualified Butler costs a small fortune, if you can find, and afford one.

          As it happens we have a very good window cleaner, who gives what I think is value for money, and has done for years, I would not wish to change a reliable man just to save a few pennies on an untried operative.

          The whole point of this is many people cannot find a window cleaner for love or money. So work is about, if you choose to find it, but it will not appear in any advert !

          You could make the same argument about supermarkets, we had 4 in Wokingham, so you would think it was fully covered, but a German Company has just opened a new store in town, to make 5 and seems to be doing very well.

          • Bazman
            Posted December 16, 2011 at 9:34 am | Permalink

            Window cleaners are hard to find this is true. Mine travels about forty minutes to my area and for quite a while I could not find one. I ask him why and he says that not many people want to do it. The work is hit and miss because of the weather and people do not want to pay. H e laughs at Polish chancers, by the way and for sure they soon give up after cutting his prices in half. There is more easy and safer work paying more money in this area. He also scoffs at the companies that do the cleaning from the ground using machines. They only clean the glass and the water they use has to be purified to prevent streaking meaning that up to a third is discarded on top of the price of the equipment. I wonder how they clan the gutters out? They don’t…
            “Easy life in the summer?” “Naa! Sunburn and sweating. Bad time of the year”
            It would be interesting to see how long many of the middle class lightweights would last cleaning windows or any other physical job they put upon the rest for little money and no respect. Let me tell you. You desk jockeys would not last five minutes outside your polite cushy jobs. Me? I do a job harder and more skilled than cleaning windows with many other ways of falling down. Ram it.

          • alan jutson
            Posted December 17, 2011 at 8:52 pm | Permalink

            Bazman

            What makes you think I do a desk job !.

            I ran my own design and build construction Company for years.

            Before that designed and built, yes actually built my own house, in all of those yearsI never asked anyone to do something I would not do myself.

            Yes, even given hod carriers a lesson in hard work when I was younger.

            Now retired, but last week installed a staircase in my Daughters house, and helped plant 40, yew trees (7 ft in height).

            Think I know a bit about hard physical labour and its value.

  5. Javelin
    Posted December 15, 2011 at 8:12 am | Permalink

    Progressive taxation equates to regressive rewards for hard work. Its only there to appease class war, jealousy and envy. As such it keeps the evils of jealousy and envy alive and discourages the goodness of hard work and creativity.

    Having said that the disproportionate increase in pay at the top of large listed companies is morally vile and greedy by executives who are simply feeding at the trough.

    If you are going to tackle flat taxes you must tackle both the envy from the bottom and the greed at the top. You can’t tackle one without the other or your argument does make sense.

    • Posted December 15, 2011 at 11:18 am | Permalink

      You don’t think it’s even vaguely possible that Warren Buffet actually exists Javelin?

    • Mike Stallard
      Posted December 15, 2011 at 4:22 pm | Permalink

      “You cannot serve both God and Mammon.” Do you know what? Most people don’t know that!

  6. ian wragg
    Posted December 15, 2011 at 8:12 am | Permalink

    First of all John taxes are too high and legislation should be introduced to limit government spending to say 35% of GDP.
    I am not very bothered whether taxes are progressive orv regresive. What I am bothered about is how they are wasted.
    Bailing out the Euro
    Paying child allowance to foreign kids
    Installing useless windmills
    Paying incapacity benefits to perfectly fit people
    Paying exhorbitant salaries to heads of local authorities

    to name but a few.
    If the government spent wisely, income tax could be cancelled and all taxes raised on consumption. This would be very fair.

    • Mike Stallard
      Posted December 15, 2011 at 9:21 am | Permalink

      This is a comment which I utterly agree with.

    • lifelogic
      Posted December 15, 2011 at 10:10 am | Permalink

      25% of GDP is plenty for what is needed.

    • Robert Christopher
      Posted December 15, 2011 at 11:54 am | Permalink

      ian wragg on December 15, 2011 at 8:12 am

      It would do for starters!

    • Antisthenes
      Posted December 15, 2011 at 1:01 pm | Permalink

      As much as I am appalled at the EU leaders recent summit concentrating on strict budgetary and debt rules as it was inappropriate at this time for dealing with euro crisis and was putting the cart before the horse. I commend the principle and the sooner that the UK adopt something along the same lines the better. Oddly enough where as the euro-zone adopting these rules does not help the euro crisis it would greatly assist the UK in keeping it’s bond yields low by reinforcing the UK commitment to tackling the UK’s problems. The reason being is if the UK adopted these rules it would be putting the horse before the cart as the UK introduced debt reduction policies in advance of policies to retain stability later. Doing it voluntarily and with out being pressured to do so would would reap tremendous rewards by increasing confidence even more.

    • Martyn
      Posted December 15, 2011 at 6:14 pm | Permalink

      I gather from an article in today’s DTel that the British taxpayers must provide the Treasury with the £575 billion it needs before the end of this financial year. It says that each family will be paying a total of £21,300 per annum in taxation, made up of £9372 direct taxes, £1704 petrol and customs tax and VAT of £2769, the remainder being made up of Council tax and other levies.
      Clearly not all families are paying anywhere near £21.3k p.a., so that is perhaps not a good way to present the facts (if facts they be), but would it not be possible for someone to divide the £575 billion by the number of individuals registered as tax-payers to show just how much, on average, each of us is paying. That would set a few hares running, no doubt. Why cannot we constitute a fully legal tax-payer union? Think what could be done if such a union had the same clout as that currently held by the established unions, so if anyone starts a tax-payers union, count me in as a member!

    • Robert K
      Posted December 15, 2011 at 6:56 pm | Permalink

      …and fighting wars we shouldn’t be fighting…

    • zorro
      Posted December 15, 2011 at 7:24 pm | Permalink

      I remember doing some reading on how if we had increased public spending by just the rate of inflation from 2002 onwards, we could have abolished income tax by now! Think of it!

      zorro

    • philip riley
      Posted December 15, 2011 at 9:09 pm | Permalink

      great post.

  7. Javelin
    Posted December 15, 2011 at 8:16 am | Permalink

    Ps why did the BBC claim women were hardest hit by unemployment when City AM is saying 85,000 men and 45,000 women were made unemployed. The BBC appears to have resorted to not telling the truth to push its agenda. As journalists who have the facts in front of them its a real struggle not to call them out right liars.

    • lifelogic
      Posted December 15, 2011 at 10:17 am | Permalink

      BBC always like to defend women and portray them as loosing out. In BBC think woman earn less than men because they are “discriminated” against in fact (as can clearly be shown) they earn less because they balance family commitments with work and make different choices to men. Single woman already earn more, in fact, than men.

      The BBC also think woman loose out on pensions when in fact they pay in less and get more out due to the fact that they live far longer.

      The BBC never lets logic or facts get in the way of a good story. Just look at their green or EU coverage.

      • Mike Stallard
        Posted December 15, 2011 at 4:20 pm | Permalink

        I am racking my brains – in vain – for a true Eurosceptic on Newsnight, despite all the talk about them.

        • Robert K
          Posted December 15, 2011 at 6:58 pm | Permalink

          Probably still feeling sore about Peter Oborne duffing up “the idiot in Brussels”. And Richard Lambert

        • Alan Wheatley
          Posted December 15, 2011 at 7:11 pm | Permalink

          I too can not recall when last I heard a true eurosceptic voice on Newsnight.

        • lifelogic
          Posted December 18, 2011 at 4:29 pm | Permalink

          As they “EU-sceptics” are certainly more than 50% of the population they should be able to find one or two. The problems seems to be that they rarely come from Universities, the government, the three main political parties, the BBC, the “Arts” or the pop industry and so do not get a look in.

  8. Alan Radford
    Posted December 15, 2011 at 8:26 am | Permalink

    A flat tax is the way to go. Taxation at the current levels produces a sclerotic economy, failing businesses, closed-down high streets, millions of unemployed and depression. At the same time there is corruption, inefficiency and massive overspending in the state sector How ‘fair’ is that?

    • uanime5
      Posted December 15, 2011 at 3:41 pm | Permalink

      The current problems are caused by the Government massively reducing employment in the public sector while the private sector is only creating a fraction of the jobs needed.

      • libertarian
        Posted December 15, 2011 at 6:45 pm | Permalink

        WRONG

      • Robert K
        Posted December 15, 2011 at 7:01 pm | Permalink

        If the function being performed by the public sector jobs needs to be done, then it will be done by the private sector.

      • lifelogic
        Posted December 18, 2011 at 4:33 pm | Permalink

        There is not “a massive reduction” that is the main problem – the private sector cannot create jobs when it is being bled dry by over taxation and over regulation.

        But it will do then they finally get off its back.

  9. Posted December 15, 2011 at 8:31 am | Permalink

    For years taxes have been political devices, devoted solely to achieving support from target social groups whenever an election is on the horizon. Labour has of course been the principal such practitioner of this although the Lib-Dems joined in during the last election.

    This is always promoted under the banner of fairness, ignoring the fact that it can hardly be described as being fair on those people who end up being forced to subsidise political advantage as a result.

    The years of Gordon Brown as chancellor show how important it has become to put a stop to this and only a flat tax can do so. Apart from the likely prospect of higher revenues, the cost to the public purse of administering a system of bewildering complexity will be cut.

  10. lifelogic
    Posted December 15, 2011 at 8:41 am | Permalink

    Indeed as you say a flat tax is already taxing the rich far more than the poor yet they probably use rather rather less state services on average. The figures you give show that someone earning £20,000 with one child ends up just with just £2050 more over the £10,000 earner. There marginal rate is an absurd 80% what incentive is that?

    Not really worth doing the extra days or any overtime especially as you might have extra costs in getting to work childcare and the likes.

    We should not be looking for what is “fair” we should be looking for something that works and gives a strong incentive to work hard, support ones own family and get the economy going again,
    Life is not and will never be fair. People have to get used to it and do the best they can with the cards they have been given.

    If the tax benefit system say as it does do not bother or go black market that is what they will probably often do.

    Nor should we be seeking to maximise tax receipts, we should be maximising efficiency which would tax people at more like 20% of GDP – more than enough for all the services needed. Some services not needed among countless more are the green deal, subsidy for green energy, benefit transfers to the feckless, equalities and human rights commission, pointless wars, transfers to the PIGIS & the EU, quack and vanity NHS treatments and the countless pointless over paid civil servants all over the place.

  11. john
    Posted December 15, 2011 at 8:55 am | Permalink

    John, debating whether tax system A is more fair or less fair than tax system B gets us nowhere. In fact, it gets us dragged down into a fruitless debate with left wingers over morality and ideals which can never reach any conclusion.

    Would it not be better to strive for a more scientific analysis along the lines, “What tax regime squares the circle of maximising revenue whilst maximising business activity and wealth creation?” This is still a very difficult question to answer, but at least it steers us away from the emotional, ideological, and unanswerable mire of the “fairness” approach.

    • uanime5
      Posted December 15, 2011 at 3:45 pm | Permalink

      The Government needs to consider the fairness aspect of taxes because if taxes are perceived as unfair they will not be re-elected. Maximising business activity and wealth creation are useless if they alienate most of the population.

      • Robert K
        Posted December 15, 2011 at 7:03 pm | Permalink

        Not necessarily. Governments are elected by the majority. It’s unfair that 1% of the population pay a large proportoin of all income tax, but it their vote carries no weight.

      • lifelogic
        Posted December 15, 2011 at 10:20 pm | Permalink

        Yes, but the public do not just vote on what they think is fair. If something, such as low taxes and small government actually works (as it very clearly would) voters will feel the benefit and will perhaps reward the government for it.

        Even it they did not see it as fair initially. Voters want what works not what is superficially seen as fair the absurd 50% tax rate for example.

  12. john w
    Posted December 15, 2011 at 8:58 am | Permalink

    John,I would have a look a vat.I would like to see the top earners empty their piggy banks in all the shops.Drum up some business to create some jobs,then we can all go shopping.No pressies for my family this year,no job to pay for it.I also like the idea of paying off those nasty mortgages.I paid mine off a few years ago,best thing i ever did.A good stamp on inflation would do some goodand we need to sort them unions out.Train drivers are over paid,and they now want to strike for more money.Labour and the unions create poverty then complain about it and we have to pay for it.

  13. Posted December 15, 2011 at 9:24 am | Permalink

    As a I said in my comment to ‘Fair Shares’ John,
    You’re falling into the trap warned against in ‘Masters of Nothing’.

    You can’t tell what is fair and what is not without studying reality.

    You need research and evidence regarding the effects of the benefits and taxes on the ground and the realities of the experiences of those participating in the system.

    One tranche of the research shows (here: http://www.youtube.com/watch?v=u6XAPnuFjJc) that people need a certain amount of money and then what properly motivates them is engagement. So you need to bear this in mind – because it point to the very obvious conclusion that you can pay all but the poorest less and tax them more if you genuinely engage them in the big society. Which of course leads us to observe how catastrophically this government has failed to pursue its own declared agenda – your blog excepted in that of course.

    As for the values? Of course – it depends…… Any huge generalities will not work unless they are offset by funds for those who suffer badly at their hands. Forensic research could and should show up specific changes which are viable. I’m afraid chatting on your blog – much as I value your doing it, is no substitute for proper research.

    • Brian Tomkinson
      Posted December 15, 2011 at 10:33 am | Permalink

      Rebecca: ” you can pay all but the poorest less and tax them more if you genuinely engage them in the big society. ”

      Just who is the “you” to whom you are referring – it wouldn’t be the government by any chance? Is it the “big society” that you support or the “big state”?

      • Posted December 15, 2011 at 11:27 am | Permalink

        The government.

        I suppose I should also have pondered the practicalities of managing human expectations.

        It is not fair to force people into bankruptcy if those people have always been model members of society who have managed their finances well and met their obiligations but who suddenly can’t due to changes in government policy. This points towards the freezing of wages and benefits during times of inflation which is, of course, currently happening.

        Brian I explicitly support the big society and dedicate most of my time to analysing the ways in which communication technology and good policy can interact to bring it to life.

        So for example I’m looking at topics like – should we use Primary Schools as hubs by which local people (especially the empty-nesters) can make links with young families under stress and spend time visiting them to work with their children on homeworks, reading and general one-to-one attention such as playing games. If you want to get the parents in young families back into productive economic work sooner rather than later strategies like these cost nothing and can really help parents create some breathing space to think about the future as well, of course, as being of help the the children involved.

        There are so many policies like this which can now be rapidly developed and properly supported for virtually no cost because of the internet and it breaks my heart that this government cannot see them because the people who populate it are so disconnected from reality on the ground.

        • Graham C
          Posted December 15, 2011 at 5:15 pm | Permalink

          And who exactly will pay for all the criminal background checks that have to be performed before anyone can be allowed near a child these days?

          • Posted December 15, 2011 at 7:47 pm | Permalink

            They’re very cheap if you’re a volunteer Graham – I think only about £12, so you’d probably find that the volunteers would generally pay if asked. (I’ve read from one source tonight that it’s actually free if you’re a volunteer now but I’m not sure that’s true.)

            I find it sad that we’re still discussing – ‘How much do you have to cut benefits by before single parents with several young children will go out and get a job during a recession?’ Does that not strike others as mad?

            People in that position need support and mentoring from people who interact with their reality as it currently is and help them make sensible decisions. Is that not obvious?

          • lifelogic
            Posted December 18, 2011 at 4:35 pm | Permalink

            Even £12 can be 3 hours take home pay for some!

  14. Richard
    Posted December 15, 2011 at 9:59 am | Permalink

    We are perhaps looking at tax from the wrong perspective.
    Its rather like a company only concentrating on sales and ignoring the quicker way to success of reducing expenses.
    What we need to do is to reduce the need to tax everyone and everything so highly by reducing the size of the state.
    If we didnt run a huge borrowed money deficit and balanced our budget just through tax revenues just think how high the levels of tax would need to be.

    I think that it is theft to tax someone at 50% or above on their earning or profits, but the real high marginal rates are imposed on those trying to get out of the benefits trap on lower income levels.

  15. sym
    Posted December 15, 2011 at 10:05 am | Permalink

    The state has about as much right to redistribute your income as to redistribute your house or your children.

    It’s just like in communism, they confiscated property in the name of public good. No difference. The result was anything but.

    • uanime5
      Posted December 15, 2011 at 4:01 pm | Permalink

      The state will redistribute your children if you lack the ability to care for them. That’s why this country has children awaiting adoption and fostering.

      • Robert K
        Posted December 15, 2011 at 7:05 pm | Permalink

        True, and how scary is that? Heaven help any family who fall foul of social services.

  16. Alex
    Posted December 15, 2011 at 10:26 am | Permalink

    John,

    I think you need to take in to account employers NI to get a complete picture of the tax paid for employing an individual at a certain salary.

    Gross salary is an illusion, the employer doesn’t pay it, the employee receive it.

    Alex

  17. Gary
    Posted December 15, 2011 at 10:31 am | Permalink

    We don’t have to endlessly theorize, just look at Hong Kong if you want a model of how to create phenomenal growth and entrepreneurship, govt surplus, and support of the populace, all achieved with a flat tax of 15% on income and zero% capital gains tax.

    The problem that we have is getting from here to there in tax terms. With a socialist system where the populace are conditioned to cradle to grave handouts and the govt governing by Pavlovian tax favours and punishments and vote gathering largesse, it won’t be easy. There will come the time in the not distant future when we are so mired and so poor that ANYTHING will be seen as better than what we have , and that will be the time to switch. Until then we will have ernest debate re-arranging the deck chairs.

    • uanime5
      Posted December 15, 2011 at 4:04 pm | Permalink

      Given that Hong Kong has a greater income disparity than the UK, lower unemployment, and fewer social services it’s not a good idea to try to copy it.

      Until minimum wage is a living wage and unemployment is in the tens of thousands, rather than millions, benefits will remain a way of life for many people.

      • Robert K
        Posted December 15, 2011 at 7:06 pm | Permalink

        Wrong way round – while benefits remain a way of life for many people, unemployment will remain in the millions.

        • lifelogic
          Posted December 15, 2011 at 10:31 pm | Permalink

          Exactly – the best way to get pay up is to create more jobs by having a smaller parasitic sector, more competitive industry and lower taxation.

  18. John B
    Posted December 15, 2011 at 11:01 am | Permalink

    Rather than asking how to tax, the first question should be why?

    Taxation, in my view, should be to fund the essential function of government at national and local level, and to provide those services that are better provided as a community than as individuals, and there are relatively few of these, but heath insurance – not its provision – might be one, and education costs – but not its provision – another.

    Clearly taxation is being used for so-called wealth redistribution, but wealth is added value, and as such cannot be redistributed, so what we have is wealth accumulated by one, dissipated among others in the form of money.

    A progressive tax is fair when it means that higher earners are paying a higher proportion and so subsidising lower earners to finance the functioning of government, but not fair when it is de facto a means of paying some people a wage they do not earn.

    The problem we have, is the culture among politicians is how to raise more tax, not how to raise less.

    We have a political class, even the Tories, who accept the principles of Socialism or at least a quasi-Socialism which they think can be financed by the free market Capitalism which is its antithesis.

    The mess “Europe” is in and the UK shows what a flawed model this is.

    The best tax policy would be to reduce direct taxation to a minimum – say 10% to 15%, take lower income levels, say up to £20 000, out of direct taxation.

    Remove all tax deductible allowances.

    Remove taxation on interest on savings up to £50 000.

    Get rid of tax credits, remove any form of welfare to anyone above £20K, because people will be left with the money that now is taken away from them and then given back via the tax system. Limit unemployment benefits in amount and duration – up to 12 months.

    Privatise healthcare provision and schools to take that expense off the budget, use proceeds of the sale to cover immediate reduction in tax receipts, whilst government expense is scaled back and to ensure borrowing can be brought under control.

    Take the cap off the NIC, properly to reflect the actual costs involved. Set up National Health Insurance fund to cover 70% of medical cost, balance paid direct by patients or topped up from private complimentary insurance. Those on low incomes get 100% State cover.

    Reduce corporation tax to 10% to 15% and make it zero in specific areas outside the South East to attract business location/start up/expansion there.

    Progressively, radically reform employment and business regulation. radically cut back numbers on government payroll.

    Apply the 10% to 15% tax on all capital gains on the sales of houses. This helps buyers, particularly first time buyers who currently in effect borrow the stamp duty and pay it back as part of their mortgage. It has no effect on those with negative equity and is not an impediment to purchasers.

    Keep 20% VAT consumption tax, on utilities too, except for current zero rated essentials. Get rid idiotic green taxation and bogus climate change regulation.

    Remove tax exemption for religions and charities.

    The introduction of this properly managed would lead to much lower costs of government, needing lower levels of taxation and borrowing. It provides incentives to work and to invest and create jobs. It certainly would encourage inward investment.

    • uanime5
      Posted December 15, 2011 at 4:18 pm | Permalink

      “The mess “Europe” is in and the UK shows what a flawed model this is.”

      Most of Europe works very well with a socialist model (Germany, Denmark, Sweden, etc). Only the Southern European states are having problems.

      “A progressive tax is fair when it means that higher earners are paying a higher proportion and so subsidising lower earners to finance the functioning of government, but not fair when it is de facto a means of paying some people a wage they do not earn.”

      Would you also say it’s unfair to pay their executives a wage they haven’t earned. I doubt any of these executives are 100 times the worth of their employees.

      “Limit unemployment benefits in amount and duration – up to 12 months.”

      Studies have shown that 2.46 million people won’t magically all be able to get a job if there are only 455,000 jobs available. Even if there benefits are cut. Though it does result in increased homelessness and crime.

      “Privatise healthcare provision and schools to take that expense off the budget, use proceeds of the sale to cover immediate reduction in tax receipts, whilst government expense is scaled back and to ensure borrowing can be brought under control.”

      So healthcare and education will be restricted to those who can pay for it, rather than available to everyone. Regressing to Victorian times isn’t a good thing.

      “Set up National Health Insurance fund to cover 70% of medical cost, balance paid direct by patients or topped up from private complimentary insurance.”

      You do realise this will be more expensive than the NHS as private companies will charge more so they can make a profit.

      “Those on low incomes get 100% State cover.”

      What about the unemployed?

      “Reduce corporation tax to 10% to 15% and make it zero in specific areas outside the South East to attract business location/start up/expansion there.”

      This will cause the UK to lose billions in tax revenues with no guarantee that new businesses will make up the loss in revenue.

      “Progressively, radically reform employment and business regulation.”

      What is this even meant to mean?

      “Get rid idiotic green taxation and bogus climate change regulation.”

      Well since climate change is real this won’t apply to anything.

      “It provides incentives to work and to invest and create jobs.”

      Not it doesn’t. It just punishes people even though there aren’t any jobs available.

      • libertarian
        Posted December 16, 2011 at 10:43 am | Permalink

        Sorry mate you haven’t got a clue what you are talking about.

        I suggest you go away and learn something about money, enterprise and the job market before you comment anymore.

        Tell us what is it that the business you created and run does?

  19. Alan Wheatley
    Posted December 15, 2011 at 11:06 am | Permalink

    In a recent BC program the points as shown by the numbers were shown in graphical form. The message was the same, but likely more readily understood by the general population.

    More use should be made of graphical presentation to get the information across, especially where it is about comparisons.

  20. GJ Wyatt
    Posted December 15, 2011 at 11:11 am | Permalink

    Variations in income and wealth arise from many factors. Circumstances, opportunities, luck and misfortune play a role along with ability, effort, risk-taking and invention. This latter group of factors reflect inputs from the individual, and may respond to incentives within the tax system, whereas the former group of factors may reflect nothing of the individual and arise irrespective of taxes. Of course there is an interplay between these factors. Taxes should not distort incentives for wealth creation. But what has been the focus of popular opprobrium (bankers’ bonuses, excessive boardroom remuneration, fat-cat expropriation in the public sector etc) has often been remuneration awards due to privileged positions. But I think it is ludicrous to try to use taxes as punishments (e.g. the 50% rate) because that sets up incentives to create harmful distortions of economic activity. A simple “flat tax” or Friedman-type “negative income tax” would obviate many distortions, but it should be combined with measures to prevent excessive “milking” of the system of rewards.

  21. A different Simon
    Posted December 15, 2011 at 11:15 am | Permalink

    What about shifting taxation from industry and endeavor to rent collecting activities and taxes on resource usage ?

    A land value tax on the unimproved value of a piece of land , whether developed or not , paid by every land/house owner/business premises owner . Not a mansion tax for the rich .

    Would discourage companies and individuals from sitting on land which others would put to good use :-
    – businesses premises costs could be drastically reduced leading to more jobs and make UKPLC more competitive

    – would reduce the price of land and thus bring accomodation costs down and leave people with more money to put towards provision for old age .

    – endow the younger generation who are currently completely disenfranchised with their little piece of Britain

    – enable taxation on peoples industriousness to be reduced

    – discourage hoarding of land as an investment and encourage it’s utility

    – enable the dividends from the land and resources itself to accrue to the many instead of just the few

    • rose
      Posted December 15, 2011 at 5:13 pm | Permalink

      I don’t like the principle beloved of socialists of taxing things bought with money that has already been taxed. If you save hard to buy a house, paying tax all the way along, why should you then be taxed all over again on the house itself in old age? It is already bad enough with council tax. A widow must pay it, while the students in the HMO next door who make a filthy mess of the street and a lot of noise at night, pay nothing. They will often have cars, and be spending more on takeaways and alcohol in one evening than she will on her housekeeping all week. But they get all the reductions and exemptions that she doesn’t. I suppose you would say she should jolly well move and make way for yet another slummy HMO.

      • A different Simon
        Posted December 15, 2011 at 11:03 pm | Permalink

        I don’t like double taxation either .

        Taxes on labour and industry are damaging , land value tax less damaging .

        I’m no socialist but I am opposed to the principle of exclusive rights to the dividends of the land just as I am to profiteering relating to food , water or air .

        I see land as a limited communal resource which society as a whole should get a dividend from .

        Private land rights are ultimately nothing more than rights of conquest and were originally obtained by either fencing the land in or throwing someone else off it .

        Society (including people who will never own a house/land) pays for the building of roads , railways , schools , infrastructure , reliable legal framework denying others access to that land etc which confers sufficient value to a piece of land to make it worth building house on .

        Ultimately this process serves as nothing more than a way of making sure the have-nots never attain anything and stops the country progressing .

        It’s just like a monopoly game when other players own all the best hotels and houses ; the conclusion is innevitable and our younger generation are not so thick that they cannot see it .

        Why should society not charge exclusive users of resources like land interest ?

        • Realist
          Posted December 22, 2011 at 9:32 pm | Permalink

          Wrong!

  22. Joe McCaffrey
    Posted December 15, 2011 at 11:22 am | Permalink

    My immediate priority with the tax code would be simplification – I would want to abolish every currrent tax leaving only council tax (on the grounds that I believe that local jurisdictions should be able to raise their own revenues) and put in place a single tax on income and a single tax on corporate profits. [that first is slightly off topic but I include it as it is necessary as an assumption step for my next points]
    As far as the ‘progressive’ question goes: I would say firstly that we must, in a fair and free society, reject entirely the notion of punitive tax rates – such as the highest marginal income rate of 62% (50p tax plus NI) which is a net revenue loser – designed to punish ‘the rich’, from a pragmatic point of view they are ineffective at raising revenue and are very damaging to wealth creation but fundamentally they are quite immoral. I would levy both my proposed single income tax and corporation tax at marginal rates significantly lower than today’s and in a format of a flat tax with lower limit exemption – somewhere in the region of a 15% flat tax on income above £15,000 annum and a 10% flat tax on corporate profits above £500,000. In this system lower earners would pay less money than higher earners – and lower marginal rates as the exemption limit would make up a greater proportion of their income – the same being true for small corporations vs large corporations.
    I would pay for this with permanent spending cuts – actual spending reductions not just increasing spending less speedily than was planned by previous governments – measures in particular being: following our friends in Canada in withdrawing from the Kyoto protocol and stopping the expensive subsidies of ineffective ‘green’ energy sources, abolishing the current aid budget and replacing it with a smaller fund of £100m which would be used for disaster relief, a medium term plan to scrap job seeker’s allowance (something that would also boost employment), reducing the size and scope of regulatory agencies and in the process reducing numbers of staff employed in these agencies (as well as saving taxpayer’s money on salaries, and administration costs this would allow economic growth to increase without as many expensive and complex restrictions, whilst freeing up more workers for the labour force and potential productive employment)

    • uanime5
      Posted December 15, 2011 at 4:27 pm | Permalink

      “reject entirely the notion of punitive tax rates – such as the highest marginal income rate of 62% (50p tax plus NI) which is a net revenue loser”

      NI is 2% for those in the 50% tax bracket. Also reducing this rate would reduce revenue, not increase it.

      “a medium term plan to scrap job seeker’s allowance (something that would also boost employment)”

      Unless you plan to have more people work in the public sector you won’t achieve this.

      “reducing the size and scope of regulatory agencies and in the process reducing numbers of staff employed in these agencies”

      These agencies do useful things, such as ensuring that places that sell food have to by hygienic. Also firing a large number of people who work in the public sector doesn’t result in private sector job creation (as the Conservatives have recently discovered).

  23. Iain Gill
    Posted December 15, 2011 at 11:23 am | Permalink

    I would merge the tax, national insurance and benefits systems. I would give everyone positive contributions for those not earning, dependant on family size, and I would start debiting the account the more people earn. I would boost positive contributions if someone is seriously ill with dependent children. I would remove all benefits that people have to actively claim, as many decent folk don’t claim what they are entitled to and this distorts the system. I would tax foreign nationals here on work visas at least as much as Brits (and insist they pay for their own medical insurance and children’s education). I would tax all money the same regardless of whether it is capital gains, dividends, or straight earnings. I would increase tax on a sliding scale so that the more folk earned the higher percentage they paid. I would run it all through a web portal so that people can easily declare any kind of earnings as and when it happens. It would always significantly pay to work on my scales. It would not disincentivise couples declaring their true status, i.e. no more incentives to be claiming to live apart etc. Tax discounts for any amount you spend on your own training. Tax discounts for any amount you spend on relocation for a new job. Higher positive pay-outs for folk who have spent the majority of their adult life being contributors. Higher tax rate if you have been a sustained high earner over many years than if you are just a high earner in occasional tax years.

  24. sm
    Posted December 15, 2011 at 11:48 am | Permalink

    I note your example included children,you should also run the numbers for a single person family, no kids, before looking at incentives/disincentives.

    The tax/benefit system is worthy of review, to encourage
    1)work 2)minimize bureaucracy 3) stable planned population around an average UK family size. Low taxes are good, low taxes with massive avoidance are not.

    GDP would be higher if the actual substance of the economic activity that took place was recorded where the reality or decisions really took place. We need to ensure we do not move to a Greek situation where taxation is viewed as corruption.

    Tax rates are irrelevant if you are not working, the unavoidable costs of living are not. Housing,Energy,Water,Food,transport, and indirect taxes.

    When we have a government can stop voluntary spending 1) on the EU 2) Overseas Aid to Rich Countries 3) on indirect subsidies of banking which facilitate and allow uneconomic salaries and distributions. 4) on immigration (forced spending) which increases infrastructure demands,overcrowding,overdevelopment. 5) A pause in the relentless government subsidized low wage labour costs of immigration which drives wages down to the minimum legal level and below. 6) A rational and explained policy for printing money to counter deflation caused by banking malinvestments when restructuring and loss taking is the answer.

  25. Bernard Otway
    Posted December 15, 2011 at 11:51 am | Permalink

    Off topic I know.
    But watching Mr Cameron making his speech on Sky this morning ,about problem families
    and plans to help reduce the problem.The painted backdrop behind him looked to me more like Istanbul or somewhere in the middle east,a space traveler from the planet Xingu
    450.6 light years away looking at it would think that this country had been TOWED down into the eastern mediterranean and plonked down in front of the Nile delta.The COVERT insiduous PROPAGANDA practiced in this country is quite frankly SCARY,George Orwell
    would recognise what is happening in a NANOSECOND,his foresight was incredible
    I just wish he had left a prediction to me alone of the lottery winning numbers from friday’s euromillions. I was on doorsteps in Feltham this week and this issue is ENORMOUS
    especially amongst LONG TIME BRITISH [more than 3 generations] BUT BUT BUT
    was also recognised by the immigrants in this area as a big issue as well,(etc etc)especially as I asked the two questions
    1]would India allow the same percentage of migrants into themselves from Pakistan or vice versa AND WHAT would the majority DO. and 2] would INDIA allow the same as a percentage allowed in here to come from CHINA.The LOOK on their faces was ENOUGH
    most canvassers don’t ask these type of questions I do,the responses are INSTRUCTIVE
    to both me AND the ASKED.

  26. L Edwards
    Posted December 15, 2011 at 11:51 am | Permalink

    I find the notion of a flat tax very attractive, however would make one small point in favour of the non-flat system – the different bands do actually act as a benchmark for aspiration. Earning enough to make the next tax band up becomes a goal and an achievement. I am not sure if this effect would ever counteract the other disadvantages of banded taxes, but it is perhaps worth bearing in mind when considering all the factors involved.

  27. Robert Christopher
    Posted December 15, 2011 at 12:03 pm | Permalink

    The tax system explained in beer!
    http://wmug.co.uk/blogs/scambler/archive/2010/05/07/the-tax-system-explained-in-beer.aspx

    It is such a good story, here it is so you don’t even have to click on the link:

    The tax system explained in beer!
    Suppose that, every day, ten men go out for beer and the bill for all ten comes to £100.
    If they paid their bill the way we pay our taxes, it would go something like this…

    * The first four men (the poorest) would pay nothing
    * The fifth would pay £1
    * The sixth would pay £3
    * The seventh would pay £7
    * The eighth would pay £12
    * The ninth would pay £18
    * The tenth man (the richest) would pay £59

    So, that’s what they decided to do.
    The ten men drank in the bar every day and seemed quite happy with the arrangement; until one day the owner threw them a problem.
    “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by £20.” Drinks for the ten now cost just £80.
    The group still wanted to pay their bill the way we pay our taxes.
    So the first four men were unaffected. They would still drink for free.
    But what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share?
    They realised that £20 divided by six is £3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.
    So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

    * And so the fifth man, like the first four, now paid nothing (100% savings)
    * The sixth now paid £2 instead of £3 (33% savings)
    * The seventh now pay £5 instead of £7 (28% savings)
    * The eighth now paid £9 instead of £12 (25% savings)
    * The ninth now paid £14 instead of £18 (22% savings)
    * The tenth now paid £49 instead of £59 (16% savings)

    Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
    “I only got a pound out of the £20,” declared the sixth man. He pointed to the tenth man, “But he got £10!”
    “Yeah, that’s right,” exclaimed the fifth man. “I only saved £1 as well.
    It’s unfair that he got ten times more than I!” “That’s true!!” shouted the seventh man. “Why should he get £10 back when I got only £2? The wealthy get all the breaks!”
    “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
    The nine men surrounded the tenth and beat him up.
    The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they
    discovered something important. They didn’t have enough money between all of them for even half of the bill!
    And that is how our tax system works.

    The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just
    may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
    For those who understand, no explanation is needed.
    For those who do not understand, no explanation is possible
    Now who’s round is it ?????

    • uanime5
      Posted December 15, 2011 at 4:33 pm | Permalink

      I remember hearing the Swedish version of this. It was much the same expect that they all got paid the same, all contributed the same amount, and didn’t have the problems that occurred in this story. I guess that’s what happens when you don’t have high levels of income disparity.

      Also unless the rich can leave and take their job with them you can tax them as much as you want with only minimal repercussions. I can’t recall there being a great exodus when there was a 98% tax rate for high earners.

      • libertarian
        Posted December 15, 2011 at 6:51 pm | Permalink

        You what!!!!! One of the reasons we have such massive skills shortages now is that so many of our talented people DID LEAVE when we had 98% taxes in 70’s thereby removing people who could teach the next generation.

        So you think a bin man should earn the same salary as a brain surgeon?

      • Robert K
        Posted December 15, 2011 at 7:09 pm | Permalink

        Reading these blog entries prompted this question for me: at what point does an advocate of high tax say that the rate is high enough? Here, we appear to have an answer.

      • A different Simon
        Posted December 15, 2011 at 11:06 pm | Permalink

        Tom Jones left the UK because he objected to singing 10 songs for HMRC and 1 song at the end of the evening for himself .

        • Bazman
          Posted December 16, 2011 at 9:36 am | Permalink

          Not exactly killing himself with work though? 10 songs a few days a week. It’s simply sooo much hard work being a model!

          • A different Simon
            Posted December 16, 2011 at 4:31 pm | Permalink

            I was just using Tom Jones to illustrate Uanime5’s misconception .

            In my experience being on the road is rarely glamourous . Tom Jones will have spent more time in airport lounges (and airport bars) than on stage . Half the places with exotic sounding names turn out to be complete holes .

            The point remains that 98% surtax had everything to do with the politics of envy and punishing the rich and absolutely nothing to do with raising money – everyone without exception knew it cost the treasury money .

          • Bazman
            Posted December 19, 2011 at 6:32 pm | Permalink

            In a democracy the rich are supposed to pay more to cover things like building and maintaining the roads and schools because these are the things that enable their wealth. They actually do use the roads and schools more because the roads enable their businesses to prosper and the schools provide educated employees. But it isn’t just that the rich use roads more, it is that everyone has a right to use roads and a right to transportation because we are a democracy and everyone has the same rights. And as a citizen in a democracy you have an obligation to pay your share for that.
            A democracy is supposed have a progressive tax structure that is in proportion to the means to pay. We do this because those who get more from the system do so because the democratic system offers them that ability. Their wealth is because of our system and therefore they owe back to the system in proportion. (Plus, history has taught the lesson that great wealth opposes democracy, so democracy must oppose the accumulation of great, disproportional wealth. In other words, part of the contract of living in a democracy is your obligation to protect the democracy and high taxes at the top is one of those protections.)

        • Reaguns
          Posted December 16, 2011 at 4:42 pm | Permalink

          I wouldn’t say that everyone did what Tom Jones did, but its not unusual…

          (Boom boom have that Cameron, Milliband and the Lib Dem woman wot did the conference jokes!)

          I had never thought of it this way before – so sometimes high taxes DO benefit all members of society!
          (Though not the society he moved to obviously.)

    • Bazman
      Posted December 15, 2011 at 4:38 pm | Permalink

      Old chestnut used to justify the rich not having to pay any tax. I wonder how this you are smart enough to hold down your job? Not by intelligence and wit for sure.

  28. rose
    Posted December 15, 2011 at 1:05 pm | Permalink

    “Nine out of ten families with children qualify for tax credits, but you don’t need to have children to claim. You may also qualify if you are working and on a low income.”

    This strikes me as sick. It came from the HMRC page. How did we get into this situation? And can we get out of it?

    I would like a flat rate of tax with a high enough threshold for these “tax credits” to disappear. Only a really sick mind could have invented the term “tax credit” for use where no tax has been paid.

    • Bazman
      Posted December 15, 2011 at 4:27 pm | Permalink

      Even if you paid no tax/insurance on national minimum wage you would still only earn six quid an hour, so how would person with or without children live on £240 pw without state subsidy Rose? They would still have to pay any VAT on their purchases too.

      • JT
        Posted December 15, 2011 at 7:54 pm | Permalink

        Income – £12500
        room — £3330 pa (flat / house share)
        other — £1670
        spend — £7500
        (£144 a week)

        won’t be living like a king, but it’s a start.

        Having said that .. they should change payment levels / system for the unemployed
        first 6 months should be a %% of last salary
        next 1 year should be a step down, based on your contributions while working
        next 1 year another step down
        after 3 years, a final step down

        And it would be a single payment
        – covering income, living, family etc

        To avoid benefit inflation, whatever you claim when you enter the system is what you get … ie enter with 1 child, you cannot claim more / ie more housing

        • Bazman
          Posted December 16, 2011 at 10:30 am | Permalink

          In the real world, or at least Cambridgeshire.
          £1000 per month.
          £500 Rent/mortgage
          £100 Council tax
          £140 Utilities including phone and TV licence.
          £150 travel.
          Leaves £108 per month or 25 quid a week for food/clothing/breakdowns/replacements and other such luxuries. All the girls love a struggling artist.
          If you live like an East European, the above is diluted by a factor of five or more. How many British would live like that and certainly none of the contributors to this site.
          Can’t argue with the second point expensive and open to abuse though.

          • Bazman
            Posted December 16, 2011 at 11:31 pm | Permalink

            Come on’.

      • A different Simon
        Posted December 15, 2011 at 11:13 pm | Permalink

        £240 week is beyond the dreams of most people in Poland and quite a few other countries in Europe .

        I think the problem is that the essentials cost too much over here .

        Imagine if we could build a surplus of housing and ensure it did not get monopolised . Accomodation costs would be a fraction of what they are today .

        Sadly I don’t think that is likely to happen in the UK until the younger generation decide they aren’t prepared to pay our pensions .

        • Bazman
          Posted December 16, 2011 at 9:53 am | Permalink

          The problem is accommodation and always has been. Here and in Eastern Europe. In the massive country of Russia most people live in cramped flats with many relatives and often ex-wives. The time must fly by.
          Essentials cost the same in Eastern Europe and often more. Russians are poor because of their low wages and the high price of everything. The only thing that costs less than here is Vodka and tobacco. See how far the average wage of £30 a month gets you. Rent and fuel prices are cheaper out of your thirty quid…You will eat a lot of vegetables often grown by yourself as they are more expensive than Tesco. You can live like an East European if you want to, but don’t put what you do not know on everyone else.

          • A different Simon
            Posted December 16, 2011 at 7:18 pm | Permalink

            “don’t put what you do not know on everyone else.”

            You seem to be trying to put words into my mouth .

    • uanime5
      Posted December 15, 2011 at 4:38 pm | Permalink

      Well as tax credits are only paid to those on low incomes if minimum wage was higher no one in full time employment would qualify for tax credits.

      Also higher taxes would result in the lowest paid needing more tax credits, not less.

      • rose
        Posted December 15, 2011 at 8:04 pm | Permalink

        You have both misunderstood me: it is the muddling up of tax and benefits that I am objecting to. Taxation is one thing. Social Security is another. They should be administered separately, and if they were, as they always used to be, there would be less confusion and maladministration. But then there might be fewer bureaucratic jobs, and that would never do, would it?

        The other thing I am objecting to is the short-sighted artificial enlarging of the population, which has driven down wages and brought this terrifying 9 out of 10 figure about. At the same time, it has driven costs such as housing up, quite apart from the overuse of our trains, roads, parks, schools, GPs, hospitals, and all the rest. And at the end of the line, how much of this “tax credit” income is going abroad? Quite a lot, I should think.

  29. Martin
    Posted December 15, 2011 at 1:25 pm | Permalink

    Risk Taking – given the low rate of saving in the UK I’d like to suggest that folk be encouraged to be more prudent by the tax and benefits system.

    1) Stop taxing savings. Discourage silly consumer borrowing by putting the taxes on the borrower. Dump stamp duty on share transactions.

    2) If a person spends their saving on a say a big car and loses their job next week they get all sorts of means tested benefits. Save your money no benefits.

    • alan jutson
      Posted December 15, 2011 at 10:01 pm | Permalink

      Martin

      Agree with your point, no point in having savings at all if they preclude you from any help when you could really do with it.

      That is exactly what happens at the moment if you have been frugal and not p…ed it away, no help until you have spent your own money first.

      Then compare with someoe sho has p…ed it away, all the benefits you can get, because you have chosen to have nothing.

      CRAZY.

      • A different Simon
        Posted December 17, 2011 at 8:44 am | Permalink

        Alan ,

        It might not have occurred to those people in Whitehall that someone who isn’t on a gold plated pension like they are might move all their savings into a SIPP/private pension the day they are made redundant !

        What do you think ?

        • alan jutson
          Posted December 17, 2011 at 9:00 pm | Permalink

          a different simon.

          and then perhaps take income drawdown (at a level suitable to them, subject to government maximums) to avoid the purchase of an annuity perhaps.

        • sm
          Posted December 18, 2011 at 11:41 pm | Permalink

          Moving all your money into a SIPP vehicle which restricts you the saver from accessing it.

          Risks of asset deflation, excessive admin charges, forced purchase of annuities at manipulated interest rates. The horrors of hyperinflation or wipeout as the fractional banking system implodes.

          Spending it does seem rational if it didnt leave you at the mercy of bureaucracy.

  30. JimF
    Posted December 15, 2011 at 1:43 pm | Permalink

    I would contend that there is an argument for an age-related tax.
    20 somethings need more to get started in housing, employment and so on. You are more incentivised to work and start your own business at that age if you can keep more of what you earn. Also you’re likely to need the health service less than a 60 year old.

    It is crazy that graduates are saddled with high debts, high costs of living and relatively low wages. It was bad enough when we started out; it’s worse now.

    Coming for a 50-something, I say have an age-related income-tax taper. Also transferable allowances to help one half to stay at home when children arrive.

  31. Sue Doughty
    Posted December 15, 2011 at 2:06 pm | Permalink

    Progressive is code for socialist. It means taxing anything tat doesn’t move fast enough – that is the poor, not the rich.

    • uanime5
      Posted December 15, 2011 at 4:39 pm | Permalink

      You’re thinking of capitalist. Socialists prefer to tax the rich more.

  32. pete
    Posted December 15, 2011 at 2:06 pm | Permalink

    I agree with the principle that more you earn the more you pay – no problem with that – higher percentages are ok as long as they are not disproportionate, you do need rich people to live here to spend money which gets passed down in other taxes like VAT and helps keep retailers in business.

    I do think though the system could be far simpler so previous comments about merging tax & NI would be a start – based on the fact the NI pot was raided by Mr Brown why not put everything into the same pot and just call it income tax?

    The road fund license should be scrapped, dvla could still issue disks of some sort based on the MOT and Insurance being valid so the excuse of ‘people wouldn’t bother with insurance’ doesn’t wash.

    I believe that there should be a case for scrapping CGT – particularly as these types of transactions will normally fuel something else that attracts some other tax in the chain like VAT.

    I also agree that all governments of whatever persuasion should not be allowed to run deficits unless theres a v good reason (like a war) – this shoud be backed up as a legal obligation once the current deficit has been cleared in the next parliament.

    In the case of banking crashes like we’ve had should the B of E not have printed money like they did do anyway and lent it to the banks rather than the govt borrow
    huge sums?

    • APL
      Posted December 16, 2011 at 7:50 am | Permalink

      Pete: ” I agree with the principle that more you earn the more you pay ”

      And that is achieved by applying a percentage tax rate.

      Someone on £10,000 at 10% tax pays £1000 tax
      Someone on £100,000 at 10% tax pays £10,000 tax

      That is sufficiently ‘progressive’ raises more tax from the wealthy without being punitive.

  33. oldtimer
    Posted December 15, 2011 at 2:15 pm | Permalink

    The present tax system is far too complicated and too uneven in its application. A very bold Chancellor would reform his way to a flat tax system on incomes after a threshold of c£10k pa. He should also reform his CGT regime which produces some very inequitable results between entrepreneurial types and long term savers, as well as taking no account of inflation when measuring capital gains. I can think of no better way to encourage short termism. It is this kind of fiddling with special measures here or exemptions there that make the tax code one of the most incomprehensible in the world.

    I believe there is a body set up to produce recommendations to simplify the tax system; I hope it reports soon and actually produces a positive response from the government.

  34. Ferdinand
    Posted December 15, 2011 at 2:16 pm | Permalink

    It does seem that middle income earners are hardest hit. I have always been a flat tax supporter but I don’t think there are too many of us. Most people don’t seem to realise that there is tax free element.

  35. Tom
    Posted December 15, 2011 at 2:30 pm | Permalink

    On the road tax/insurance subject I have often wondered why issurance companies do not issue a disc /bar code that has to be displayed on the cars wind screen subject to a hefty fine if not displayed. or is this idea to simplistic.

    • Bazman
      Posted December 15, 2011 at 4:36 pm | Permalink

      To expensive for them they say.

    • alan jutson
      Posted December 15, 2011 at 10:04 pm | Permalink

      Tom

      They have done this in France for years.

  36. NickW
    Posted December 15, 2011 at 2:42 pm | Permalink

    The problem with our society is not with taxation, it is with the Financial Industry.

    Where does the profit come from on the stock exchange, commodity markets, hedge funds, currency swaps etc?

    It comes from somebody else’s losses.

    Yours and my pension fund.

    Yours and my endowment policy.

    Yours and my tax payments.

    The money is going from the ordinary person to those with inside knowledge; (believe it or not the American Senate is a hot bed of insider dealing which the legislators refuse to do anything about ), to those who are wealthy enough to have their money traded by banks with computer algorithms, and those with connections to global finance. (e.g. European politicians who previously worked for Goldman Sachs).

    No tax system can make things fair when the Finance Industry has complete licence to rob the poor to give to the rich.

    If anybody wants to defend my accusation and explain that the finance industry is NOT zero sum and does actually create wealth, I look forward to hearing it.

    • JT
      Posted December 15, 2011 at 7:57 pm | Permalink

      Leverage swells the pot.

      You’re a little confused on how the finance system works.
      Get out of the common room more often.

    • A different Simon
      Posted December 15, 2011 at 11:29 pm | Permalink

      Yes , a grossly oversized financial sector sucks the life out of the real economy very quickly .

      It’s been going on for so long now that they may have broken it for good .

      They really are tax collectors in a way .

      The spendthrift Govt goes along with their sharp practices so long as it gets it’s tribute .

  37. Barbara Stevens
    Posted December 15, 2011 at 2:50 pm | Permalink

    Well I can’t claim to understand our tax system at all, in fact it’s a mystery to me. I’m now retired, but do not claim anything except my pension. I live on what I’m given, don’t have debt, if I can’t afford it I don’t have it. This is what I was brought up with, make do and mend. I do sleep easy at night, my homes paid for through hard work, no holidays for decades, and no debt. My kids went to college again paid for by us, they’ve always been in full employment and have always been told ‘neither a borrower or a lender be’.
    I understand things are different now, but the fear, yes, fear of debt made us like we are. We carry that fear till this day.
    (argues against the benefit system paying benefits to men with more than one wife-ed) I’ve written to Mr Osbourne about this, when the Daily Mail ran a story about this system of abuse on the welfare system operating. This could be stopped by allowing only one wife, and any children they have should not be paid for, they should be made return to their own country if they cannot be supported. There is lots more going on that I could mention which would make your hair curl in anger, it’s time it was stopped, when will any government stopn it?

  38. Dave
    Posted December 15, 2011 at 2:50 pm | Permalink

    John,

    Honestly the best thing to do is scrap as many taxes as you can and lump it onto income tax. That gives you by far the easiest way to tax people. It would also allow you to remove a great deal of tax credits because you could simply tax people less.

    You could then reassign all the administration required for the old taxes on to tax enforcement to make sure that everybody paid their due.

    It would also, I hope, get around the benefit trap to at least some degree.

    Since the 80s successive governments have tried to spin lower taxes by lumping things onto stealth taxes.

  39. uanime5
    Posted December 15, 2011 at 3:28 pm | Permalink

    As long as benefits are withdrawn at a lower rate than the income earned it will always pay to work. So if you withdraw benefits at 66p for every £1 earned benefits will not discourage people from working. This may also encourage people to become self-employed as they won’t run the risk of losing all their benefits while not making any money.

  40. StrongholdBarricades
    Posted December 15, 2011 at 4:16 pm | Permalink

    I’d go Flat Tax on everything across the board, so everyone knows what they have to pay to be “fair” and add a simple caveat like ‘tax evasion ensures that you will pay twice the amount plus a fine for dishonesty’

    However, the greatest thing that government must do is actually be honest about where they are spending the money raised, and make all those takers of public money fully accountable, with the Gross Misconduct tariff for all.

  41. forthurst
    Posted December 15, 2011 at 4:21 pm | Permalink

    The aim should not be a fair tax system because that would imply that politicians did not waste our money or spend it on activites most of us find rebarbative such as the phony War on Terror or the actual War on Englishness (Cultural Marxism); what should be aimed for is a tax system with ideally no disincentives to work as against voluntary idleness, no incentives to engage in economically futile activies (erecting windmills) or disincentives to engage in ways that genuinely add value, farming etc (this may require taxing banks who apply usurious loan rates to small businesses who seek to expand in order to subsidise bonuses, mortgages and cheap loans to the rentier classes).

    Far more attention should be given also to the consequences of allowing companies to import aliens, preferentially, as against retaining or employing British workers; there needs to be an increase in direct taxes to choke this off; correspondingly, there should also be incentives for firms to train people (or have them trained) whose IQs are high enough for the requisit tasks but whose skills are lacking. This could be paid for by shutting down the Dept for Education whose total uselessness has recently been verified in regard to their supervision of exam standards. Previously, when companies were unable to recruit skilled people, they trained them; now they simply ignore local talent and recruit purportedly skilled people from abroad; this situation is extremely divisive and totally unsustainable, economically.

  42. Bazman
    Posted December 15, 2011 at 4:35 pm | Permalink

    ‘Yet if you look at VAT in the UK, because items like food are exempted’
    Oh really. There are some strange discrepancies between the types of foods that qualify for VAT and VAT is payable on grocery items such as toothpaste and cleaning products as well as sweets, drinks, snacks and takeaways. The products bought by the poor are often the ones with VAT on them as they are not smart enough to be selective and often eat a diet of processed food and takeaways. So much for the disincentive of high taxation. Another middle class idea put upon poor people. Does cake have VAT or not?

    • Alan Wheatley
      Posted December 15, 2011 at 7:26 pm | Permalink

      I think the keyword in what you say is “smart”. If the best solutions come from tackling the cause rather than the symptom, then that is where to focus.

    • Reaguns
      Posted December 15, 2011 at 9:22 pm | Permalink

      Bazman, you make good points usually but you say “The products bought by the poor are often the ones with VAT on them as they are not smart enough to be selective and often eat a diet of processed food and takeaways.”

      I think I’m smart but I’ve also been poor – sometimes when you work a low paying nightshift heavy lifting job, you just havent the energy to cook and shop. And you dont always feel like forking out on a load of groceries, even though you know that MIGHT pay off. So its not always stupidity. Middle class sympathy is often meant well but misdirected.

  43. Bazman
    Posted December 15, 2011 at 4:49 pm | Permalink

    Start taxing the massive profits earned by many companies in this country and if they do do like it then sack them and employ a company that will work for a lower rate, pay their employees a wage that does not need state subsidies and provides a service to the benefit of the state, not just themselves. The idea of everyone running their own wine or antique shop is just a middle class fantasy.

    • libertarian
      Posted December 15, 2011 at 7:02 pm | Permalink

      I’ve read a few of your posts now, and they are all drivel.

      I don’t know if you know this but profits ARE taxed already, twice.

      First any shareholder dividend paid out of profits has income tax applied, then the profit that is left has corporation tax applied.

      In Germany and Finland they don’t do that , up to a certain level company profits that are retained in the business to enable growth are exempt from corporation tax, that’s why they have far more middle sized manufacturing businesses than we do.

      • alan jutson
        Posted December 15, 2011 at 10:10 pm | Permalink

        Libertarian

        Exactly.

        We starve our businesses of money on earned profits, which is future capital which could be used to expand or purchase machinery to become more efficient, to invest to make more profit etc, etc.

        High levels of corporation tax, slows company growth.

      • Bazman
        Posted December 16, 2011 at 10:02 am | Permalink

        Finland, Denmark, Sweden and so on obviously have less insider companies run for the benefit of insiders instead of being run for the benefit of the shareholders, the state and the employees. Having more generous benefit systems higher wages and higher standard of living despite their high prices.

      • sm
        Posted December 18, 2011 at 11:52 pm | Permalink

        This would also encourage the natural share capital buffers of companies which protect against finance induced credit crunches.

  44. Ferdinand
    Posted December 15, 2011 at 5:03 pm | Permalink

    Dave – n fact the reverse is true. Income taxes are regressive. If you want a simple tax on the rich then tax only but all spending. The more you spend the more you are taxed. Income tax could be abolished. (With the usual exemptions for the poor)

    • Bazman
      Posted December 20, 2011 at 8:09 pm | Permalink

      What? They would still have to pay? If you made everything expensive than obviously the price as a percentage of income would be more for the poorest person. Are lottery winners concerned about the price of petrol for their car?

  45. Andrew Johnson
    Posted December 15, 2011 at 5:21 pm | Permalink

    Interesting comments as usual. Here are my thoughts
    1. First, we should should ask what is the tax going to be used for?
    It seems that too often tax revenue is wasted, something Mr Redwood has been very keen to tackle. Government must learn to do more with less, as we all must.
    2. Government expenditure should not exceed total revenue (with a built in contingency for emergencies which must receive parliamentary approval)
    3. The fiendishly complex UK tax system needs an axe taking to it and should be simplified.
    4. As far as practicable, all taxes should be transparent and the government’s take clearly labelled. e.g. fuel
    5. Flat tax is trendy and has appeal, but also has serious weaknesses. What really counts is the amount of money you are left with after tax and living expenses.
    6. We live in a capitalist democracy – We ought to be having a debate as to why we think people who earn more than the median wage should have to pay a higher rate of tax.
    7. If taxes are set too high, many wealth earners and creators can simply base themselves in another low tax country or employ extremely clever accountants to take adavantage of the situation at 3. On many occassions, John Redwood has pointed out that higher taxes result in lower tax revenue.
    8. I am not in favour of anyone not paying some tax, even if all their income is donated by the State (i.e. other taxpayers) for the reason that every citizen ought to be contributing to the common good and encouraged to have an interest in knowing how Government takes their money and spends it.

    • rose
      Posted December 15, 2011 at 8:15 pm | Permalink

      8 – or no representation without taxation – is the most radical of your suggestions, and the concept that was most viciously attacked when the poll tax or community charge as the government called it was introduced. If that tax had been pegged at the rate of the BBC licence fee, it would have been much harder for the BBC and its friends to lead the daily onslaught on it until it was abandoned.

  46. Reaguns
    Posted December 15, 2011 at 6:05 pm | Permalink

    I think the overall size of the state and tax burden is too high.

    So in terms of the public in relation to the government I think our tax system is “unfair”.

    I don’t think anyone should have to pay more than half their total income in tax, and when you consider all our taxes combined, a lot of people do. Why work more than half the year for the government, why work more, why expand?

    I think the lower paid get taxed too much.

    I also think its wrong an disengenious to enforce a minimum wage, but crazy to enforce a minimum wage and then tax it!

    I also think its unfair that income and savings are taxed, rather than consumption.

    Within all those rules, the relative taxes between rich, poor and middle class is not too unfair.

  47. Reaguns
    Posted December 15, 2011 at 6:09 pm | Permalink

    I would also tax Chris Huhne at a rate of 99% on each breath he takes and each piece of food he eats. That oxygen could have been used to power a wind turbine instead and the food could have been used to feed someone who doesn’t despise pensioners in the UK. Some of whom fought wars only for him to up their fuel bills in his green fantasy.

    Don’t worry he won’t be offended, his smugness shield is impervious to attack.

  48. Tedgo
    Posted December 15, 2011 at 6:20 pm | Permalink

    I am against progressive tax because it seems to be based on greed and envy. It distorts pay scales, to give a low paid worker a £100 increase costs the employer about £150 whereas a high paid worker £200. The tax free allowance is more valuable to the high paid worker.

    I believe in combining NI with income tax and having a flat rate tax of about 32%.

    I would do away with the tax free allowance and replace it with a tax free sum, say about £5000. Every adult would have this sum, whether they worked or not.

    It works like this, add up your total income and multiply by 32%. Then deduct £5000. If the result is positive that goes to the tax man, if its negative then the taxman pays it to you.

    There would be no other unemployment benefit, nor any universal child benefit.

    Pensioners could have a higher tax free sum and or a lower rate of income tax, though there is a case they should be treated like everyone else.

  49. Jon
    Posted December 15, 2011 at 6:44 pm | Permalink

    I don’t have a problem with income tax what I don’t like are all the stealth taxes many of which were raised or brought in by Labour. The problem with these other taxes is that they are not linked to earnings and so hit the fixed and lower income people harder, typical labour to target them. I believe that was why we ended up with the term “squeezed middle”.

    Higher earners with larger disposable incomes can take advantage of tax mitigating vehicles. Brown didn’t like those 10 year plus tax efficient savings plans that start at £25pm but the poorer could do with just that to boost savings. I would prefer to pay more tax as a percentage of income and less on the stealth taxes. Doubt people would like a raise in their income tax to reduce fuel and other taxes though.

    • Reaguns
      Posted December 16, 2011 at 1:42 am | Permalink

      Income tax, any income tax, is left wing and anti-capitalist. From Friedman to the Austrian School, none support income tax, do a search to find out why.

      Consumption tax is what you want.

      The greatest system for saving poor people was pre-socialist America. They had no income tax.

      Anyone who believes in income tax is a leftie, anyone who believes in 10% or more income tax is a commie!

  50. Mactheknife
    Posted December 15, 2011 at 6:54 pm | Permalink

    Progressive taxation is an old canard of the left. Witness George Monbiot solution on Radio 4 today to rising energy bills. Because of the stupid policies around renewables i.e. inefficient budget busting wind turbines, our bills are going sky high. Its now affecting middle income earners as well as poorer households and I’m sure if the government continues this suicidal policy the wealthy will be hit quite soon.
    Moving the tax around does not address the problem it merely shifts the problem from one segment to another.

    • Posted December 15, 2011 at 9:02 pm | Permalink

      It is worth pointing out that the renewables policy is highly regressive. It disproportionately reduces the living standards of the poor. George Monbiot is advocating “progressive” taxation to undo the harm of the policies he supports. In my view good policy makers should be like GPs – they first should take care to do no harm.

  51. Posted December 15, 2011 at 7:06 pm | Permalink

    The first tax that needs attending to is employers NI.

    On my blank piece of paper, abolishing that would be point one and I would work all other taxes out from there.

    How can a tax on job provision make any sense at any time? It is levied at exactly the same rate on a job regardless of the state of the employer. Goldman Sachs will pay the same amount of tax on their 20K per annum employee as Fred’s Cafe. Fred will pay the same amount of tax on his employee if he is raking it in or if he hasn’t seen a customer all week.

    It can’t be beyond the wit of man to abolish that tax and to introduce an alternative or increased tax on business profits to balance the loss of revenue.

    As an employer I am relatively relaxed in good years to pay increased tax on increased profits. I have also been around long enough to have experienced tough passages, and I know from those times when belts have to be tightened that there is an added bonus for cutting a job. It comes from the government and it is called employer NI. A perverse incentive.

    Given the shift from west to east, joblessness is here to stay. Actions to ease the tension created by that situation are urgently required and employers need to be encouraged to take on employees, not charged for the privilege.

  52. Bernard Otway
    Posted December 15, 2011 at 7:16 pm | Permalink

    euanime 5,doubt if you were old enough in the 1970’s to remember,BUT I do and the phenomenom was called THE BRAIN DRAIN except it was much more than that,Rod Stewart
    Engelbert Humperdink TOM JONES and many many more from showbiz left,most still spend most of the time in the USA and pay taxes there,TOM JONES once told me way back in the
    70’s that he was going to the USA because he refused to sing 9 songs for the government
    and only 1 for himself,and I am sure the same applied to all who left,remember Michael Caine
    SAME,except remember also every LP recorded by the likes of Jones,Stewart,Humperdink
    and all was conceived and originated in US recording studios for US labels using US musicians,tell your thoughts to OUR musicians and other workers that and ask them their thoughts about how much in earnings they lost. I never cease to be amazed at some peoples
    sheer NAIVETY,you would give Captain Bligh the same rations as the Rowers in the boat off Tahiti and wonder why he THREW HIS SEXTANT into the PACIFIC and you all then Got lost and starved or died of THIRST.

  53. Robert K
    Posted December 15, 2011 at 7:18 pm | Permalink

    Thank you for doing the heavy lifting in terms of providing the figures. I honestly don’t know how you find the time.

  54. Bernard Otway
    Posted December 15, 2011 at 7:24 pm | Permalink

    Minimum wage IMHO sets the BAR LOW,if it applied to the OLYMIC high jump it would be
    about 6 feet and 25000 contestants would turn up qualified to jump,it is not a liebour achievement it is a failure and has held back the lower paid,especially in the supposed boom years up to 2006,employers stuck to it and used it to dampen wages,which would have been higher if they had to compete for staff,also immigration allowed the minimum wage to be set LOW,Some workers probably are out of pocket thousands for the years up to 2007.

  55. Alan Wheatley
    Posted December 15, 2011 at 7:38 pm | Permalink

    The most obnoxious tax is the original “Stealth” tax, the tax on dividends in a pension fund introduced by Gordon Brown in his first budget.

    The singularly distasteful aspect of this tax is that there is nothing that the pension fund holder can do about it as money paid into pension funds can not be moved elsewhere.

    Further, this raid on pension funds destroyed the trust between pension holder and government: having trapped your money the government can decide to do with it what they will with nothing you can do but loose.

    The fact the this tax was not opposed by other political parties would suggest that there is unlikely to be anything different in the future.

    The stealthiness of this tax is illustrated by the lack of objection by all and sundry, including the opposition parties.

    • A different Simon
      Posted December 17, 2011 at 9:09 am | Permalink

      Alan ,

      I used to think that about 1 in 3 private sector workers had made sufficient provision for their old age but apparently it is only about 1 in 5 .

      The short-fall runs into trillions of pounds whatever discounted cash flow method you use .

      Why is it never included in any discussion of the nations liabilities ?

      Because it isn’t relevent to the politicians and public servants or because they are aware of it but are frightened of scaring the horses ?

      If you look at the supposed “boom” it was generated not only by credit but also by spending money which should have been set aside for old age ; another form of bringing consumption forward .

      This shambolic management of our nations finances has been going on for at least 3 decades .

  56. De Recardo
    Posted December 15, 2011 at 7:52 pm | Permalink

    and…..this is why we all can’t agree

    it would be a start to get veryone to pay what they should pay

    the fact that the SIS have had to be used on them naughty offshore bods shows this

  57. Steven Whitfield
    Posted December 15, 2011 at 8:31 pm | Permalink

    Labour and the Liberals whole strategy on taxation is based on bribery and creating bogus notions of ‘un-fairness’. The policy can be easily summed up as ‘if you pay people to be lazy, un-educated and have many children ..don’t be surprised when millions choose that option’.
    Conversely, if like David Cameron you send out the message that people who work hard should feel ashamed of their wealth and should be expected to pay more and more into a bottomless pit….then don’t be surprised if the wealthy do less and the country suffers economically.

    David Cameron is wholly supportive of this agenda because it fits in with his unhinged obsession with improving the image of the party . This despite the fact that anyone who believes the tripe written about the so called ‘nasty party’ will NEVER vote conservative anyway.

    I’m surprised John Redwood didn’t mention the lunacy of the ‘poverty’ debate if we are to have a serious debate on taxation . We have fuel poverty, child poverty etc. that are more a product of the sickly entitlement culture that so rots our society than any serious notion of what poverty actually is.
    The situation is now so grave it would be extremely difficult to reduce welfare as the people involved have been so badly demoralised by generations of the governments sugary kindness and charity. Furthermore there are extremely powerfull lobby group’s and vested interests in stoking up the ‘poverty debate.

    Keep taxes low and globally competitive, always make work pay, pay people enough benefits so that they can afford food and shelter and no more, do not pay people to have multiple babies they cannot bring up properly, do not incentivise couples to break up. In short the present system is a mess and inflicts cruelty on millions on an industrial scale.

    • A different Simon
      Posted December 17, 2011 at 9:58 am | Permalink

      I can’t agree with you about fuel poverty .

      Privatisation of energy retailing has been a failure by any standards hasn’t it ?

      It was always money for old rope .

      Given that the retailers have abused their position to form a cartel to implement blatent price fixing is there any reason not to re-nationalise it ?

  58. Posted December 15, 2011 at 8:54 pm | Permalink

    Might I point out, Mr Redwood, that your justification for “progressive” taxation should (in my view) be seen from a wider, real-world, context. Achieving greater egalitarianism should only be a secondary aim to four other goals that this Government needs to pursue.

    First, is to increase the lot of the poorest sections of society and support those in need.
    Second, is to maximize tax revenues from the richest sections of society.
    Third, is to reduce unemployment and maintain it at low levels.
    Fourth is to eliminate the deficit and ultimately to reduce the national debt as a percentage of national income.

    The first and second points are more general aims, the third and fourth more temporary.

    I would maintain that the evidence shows that flatter tax systems are also simpler ones (you need less exemptions) and they raise the tax take from the richest. Most importantly, particularly in the short term, they foster higher levels of economic growth. Higher economic growth means lower unemployment, particularly of long-term unemployed and young people. I think you will agree (and Mr Alistair Darling when Chancellor certainly did agree) that sustained economic growth is the primary (and most desirable) means to reduce the deficit, with tax rises and expenditure constraint coming second and third. Further in the long-term, (that is over generations), the poor become better off not through re-distribution but through the same sustained economic growth. Try comparing the poorest 10% with the middle third of Brazil, or the second decile of any African nation to see my point.

  59. Phil Richmond
    Posted December 15, 2011 at 9:41 pm | Permalink

    I remember reading an article by Professor Patrick Minford a few years ago. Ever since I have been a believer in Flat Taxes. I actually think it is one of the solutions to our current problems.
    HOWEVER – we would need four things to implement this tax in the UK.

    1) Conservative majority (obviously not)
    2) Strong charismatic patriotic Conservative leader (obviously not)
    3) Leave the EU (money saved could fund the tax for the first year while the economy kicks in)
    4) The BBC would have to be reformed. They control 70% of the newsmedia and would destroy any Tory Chancellor who even mentioned it.

  60. Posted December 16, 2011 at 12:40 am | Permalink

    For what its worth I prefer a poll tax: a truly flat annual payment per person.

    However I am in a tiny minority so I know this will not happen.

    What I also believe is that every person should be taxed, including children from the age of zero. As such, parents would pay more tax with every new child.

    I also think the benefits should be severely pruned.

    • Bazman
      Posted December 23, 2011 at 6:02 pm | Permalink

      Nitwits who support communism for the rich are usually in a tiny minority, but not on this site it seems.
      Pool tax a tax for not having a swimming pool. In effect taxing the poor as an incentive to get rich. Taxing people for having children and cutting their benefits at the same time? What would be the realities of such policies? The mind boggles.

  61. Posted December 16, 2011 at 12:58 am | Permalink

    The UK has been asked to adopt ‘observer’ status in Euro fiscal pact negotiations.

    It seems to me that the Foreign Office (or is it Dame Lucy Doolittle) have got their way and are somehow getting us embroiled in the process.

    Fine if it is an exercise in bridge building but not so fine if we are being drawn in again.

    To me, the combined forces of our civil service, the Lib Dems and German determination to force the UK to share the Eurozone burden seem to be too much for our PM to bear. I hope I am wrong.

  62. Electro-Kevin
    Posted December 16, 2011 at 1:01 am | Permalink

    Mr Redwood,

    I fear it’s all even more complicated than your explanation.

    I’m not sure if you include – not only what each earner gives – but what they get back in credits and allowances.

    A progressive tax on high earners might catch some of those responsible for the credit crunch but then they are so money oriented as to hire the best accountants AND take them for a very expensive lunch.

    Then again a 100k earner may have taken immense personal risk, contributed vastly to society and created jobs and seen very little return relative to turnover. It would be highly unfair and demotivating to spank them.

    It would help a lot if there weren’t such waste in government and if our taxes weren’t going towards things which offend us.

    I’m a law-abiding person but even I say good luck to anyone who avoids paying tax to fund prisoners’ meals at 3x the value of those of Royal Navy submariners* (what else have they got to enjoy at sea ?) Unfortunately we know who will be asked to make sacrifices because of any shortfall but that’s not our fault.

    Why are we discussing more taxation when waste isn’t being addressed ?

    Get British people working again in jobs that are being taken by others. That will help greatly with tax take and reducing welfare expenditure.

    • Electro-Kevin
      Posted December 16, 2011 at 1:04 am | Permalink

      *Per Hesther Bluementhal on BBC TV when he addressed the issue of RN meals.

  63. Pedant1
    Posted December 16, 2011 at 9:15 am | Permalink

    It’s disturbing that you don’t seem to know the meaning of “progressive taxation”.

    A poll tax is regressive.

    A system where the tax rate is 30% up to 20000 income and 20% thereafter is also regressive.

    A flat tax is neither progressive nor regressive.

    Our current income tax system is progressive.

    You suggest the alternative to a progressive tax is a flat tax, which is misleading. You suggest VAT is progressive, whereas every study I have seen suggests it is regressive (although the tax system taken as a whole is still progressive).

    Reply: A flat tax with a tax free allowance is progressive, as I pointed out in my worked example.

  64. Bob
    Posted December 16, 2011 at 1:35 pm | Permalink

    It’s very interesting to hear different ideas about taxation but spending is the elephant in the room. Tackle that and the tax policies will be easily sorted.

  65. LIBBY WILSON
    Posted December 16, 2011 at 1:52 pm | Permalink

    The wealthier spend more thus paying VAT, create jobs – even around their homes – and help keep money circulating. Taxes shouldn’t surely be used too much for wealth distribution. In these difficult times we need to look after our clever, wealth creating citizens too. Not tax them out of the country. Even bankers, fund managers etc who, I agree, seem to earn sums which would make most of us go light-headed, spend and spend.

    The larger the cash cushion for poorer the less hungry for work they become – I know I shouldn’t generalise on this – but are there really that many really poor young people in our country?

    Note: I, myself, have only ever paid basic rate tax – though a work-hungry, highly motivated member of the family got herself into very well paid employment.

  66. lojolondon
    Posted December 16, 2011 at 2:38 pm | Permalink

    Lots of comments, John, obviously a popular question!

    A flat rate is the only way, say 15% of earnings. Ideally I would say no minimum earnings threshold, but the UK system is damaged by the dole, so the minimum threshold would have to be at about double the dole, say 10k as it is now??

    Please note that we need to get rid of fuel tax – the idiotic think it is a great stealth tax, collected by oil companies and they pretend it a good tax on ‘non-green’, but in effect, it is a tax on business, a tax on manufacturing, a tax on families, a tax on the poorest, it makes our economy inefficient and should be scrapped.

  67. Reaguns
    Posted December 16, 2011 at 4:56 pm | Permalink

    I think one of the most important considerations, in order for capitalism to work properly (which even labour, social democrats and david cameron agree it must in order to fund the things we want like the NHS) is to set definite, unchangeable rules, that encourage work and investment, and that won’t be allowed to change.
    I.e. we need some kind of a constitution that dictatorial pms like Tony Blair can’t just change on a whim.

    The rules should be that income tax can’t rise above a certain level EVER, whatever that level is, and that overall taxes cannot rise above a certain level, with necessary provision to stop stealth tax.
    Spending must never exceed revenue.
    So spending should in this way be linked to GDP, then those who want more spending could only get it through more growth.

    It would require a strong-pound policy however and there just isn’t the will or intelligence in this country to support this.

    Apparently a strong currency hurts exports. Even though pre-euro Germany had the strongest currency and was the biggest exporter in the EU.

  68. Posted December 19, 2011 at 11:12 am | Permalink

    Income tax places the citizen in an adverse position to the State.Even the most upright persons employ accountants to minimise their declared earnings ; some years ago even the head of the inland revenue admitted that he had to pay his daily cleaner in cash.It is a tax that penalises those who work and cannot be a good thing.
    National insurance forms approx 20% of tax revenue,and income tax approx 30%,so a new National Insurance rate amounting to 50% of total tax revenue would enable us to abolish income tax, ,and most of the “black economy” in one fell swoop !Naturally some employers would try to avoid this but they would be at the mercy of any disgruntled employees who were sacked and could report the evasion without getting into trouble themselves !
    The self employed would probably arrange for themselves to be paid a low salary by a company they owned themselves to minimise N.I Contributions , but their numbers would be few compared with the present millions that have to be surveyed
    so penalties could be severe for that type of fiddling.
    I live in Monaco where there is no income tax,but “social security” deductions are more than double the UK rates. I prefer this system !!

  69. Posted December 20, 2011 at 1:13 pm | Permalink

    As Marx pointed out, all other things being equal, the rich will tend to save proportionaly more wealth than the poor and wealth will over time get more concentrated. Marx looked forward to this as it would lead to an inevitable revolution. Less bloodythjirsty types prefer some form of progressive taxation to turn the balance in favour of the poor – not by an enormous amount but enogh to produce a tendancy towards equality.

    Which taxes we use is a matter for discussion. Lloyd George thought that taxing the rich when they died was the most proper moment.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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