Wednesday, 10 April 2013

A Better Basis for Taxation

I don't like tax, but if we absolutely have to raise some taxes, it's better if it's raised in ways that have other benefits.

Fuel taxes reduce pollution and congestion. Tobacco taxation reduces smoking and so forth. Land value taxes increase the assortiveness of the property market. The added benefit is these taxes are extremely unpopular, which limits the amount Government can raise. Now... all we need to do is ban PAYE. Once everyone has to write a cheque for income tax and national insurance, it will be at least as unpopular as fuel duty.


startledcod said...

What is 'assortiveness'?

Jackart said...

It means a market where people have appropriate housing. One of the reasons there's a shortage of family homes is that too many of them have a single pensioner rattling round in them. Stamp duty DECREASES likelihood of moving. Land Value taxation increases likelihood of moving to a bungalow.
Unfortunately we need to increase the incentive for Granny to sell the family home because a family needs it.

Weekend Yachtsman said...

"Once everyone has to write a cheque for income tax and national insurance..."

Couldn't agree more.

Make it up front and in your face.

I also think petrol prices should be quote nett - 35p a litre plus £1.15 tax - that would get people thinking.

John Galt said...

If you really want to go the whole hog then combine Employees NI & Employers NI into income taxes when signing your annual cheque.

When people on moderate incomes start signing a cheque for 30-40% of their income, we'll see immediate pressure for spending cuts to feed through to tax cuts.

Where is Britain's Sir John Cowperthwaite for the 21st century?

JimmyGiro said...

Why not make all grubberment income through VAT. That will make the process automatic at point of sale, whilst rationalizing the bureaucracy that handles such things.

This can lead to people buying what they need rather than what they want, depending on whether you adjust the VAT levels per item; such as zero for essential foods, and high levels for 'luxuries' etc.

John Galt said...

"Why not make all grubberment income through VAT."

Because it would require a VAT rate of about 143% and would utterly decimate sales of any items requiring it.

Even at 20% VAT is far too high.

JimmyGiro said...

@ John Galt

And did PAYE induce people to stop working?

PAYE is economically unfair because it treats all types of work as equal, only judging it on the wage value; whereas clearly some work is more crucial to the national economy than others.

Meanwhile, VAT can be monitored and scaled according to the market, thus allowing the 'invisible hand' to work upon VAT in a way that PAYE does not.

John Galt said...

"And did PAYE induce people to stop working?"

No, but it acts as a disincentive to those who can work in ways which are not subject to PAYE.

For example, all of my work was doing short-term projects (typically 60-70 days) in various countries across the world, mainly Europe, US and South America.

Because I lived in the UK, I paid tax under PAYE at a marginal rate of 36%. Most of it in the 40% tax band.

I thought "Fuck that for a game of soldiers" and moved to the Isle of Man, all of a sudden, my marginal rate of tax is 18%. As the assessment is annual my tax payment is deferred until the following year.

PAYE doesn't apply because the American company that I work for has no establishment on the Isle of Man.

Net effect is that the UK has lost all of my taxes (Income, NI, Council Tax, VAT, etc.) as well as all of spending.

Most workers are trapped in PAYE as they have no alternative. Those who have alternatives take them.

The same goes for companies who pay their owners low salaries (below tax + NI thresholds) and receive dividends instead.

Mark Wadsworth said...

Hehe, "assortiveness", good word (once you explained it).

There was an error in this gadget