to think we need to scrap National Insurance and increase income tax to pay for it

[AgaPanthers]

For a basic rate tax payer to receive £68 of net wages costs an employer £113.80 (£100 plus 13.8% employer's national insurance, minus 20% income tax, minus 12% employee's national insurance)

This is an effective tax rate of 40.2%. AIBU to think that this is little more than a trick to say we have 20% income tax, when in fact the tax on earned income is at least 40%?

A flat tax of 50% on all earnings and a CI/BI would be fairer than the current system. A lot of low earners end up on effective marginal tax rates of over 90% now, today. I don't call that fair. The complexities of the benefit system and I subsisted on benefits for years and still engage with the system so I do know how it works are not fair, not progressive, and not productive.

Just to go over a few quick examples, not wishing to hijack the NI thread but:

Taking out HB (I'd also build a shitload of council housing and transport links) there are not many people that would get more. Frex, my DH gets the highest rate of Disability Living Allowance, absolute top whack as he's tetraplegic, and that's £6k pa, and most people that disabled have that levied by the council for care contributions anyway so it's not money in their pocket. Carer's Allowance (minimum 35 hours a week caring) is just over £3k pa, but if you're on benefits they subtract most of it (from the other benefits) and if you're not on benefits you lose the lot if you earn over £100 in any week (So earn £101 lose £61 straight away, plus your NI, so work 50 hours for £100). If you're working but need social care, in many councils only the minimum income (£131pw for a couple) is protected and all the rest of your income can be levied for care, even if it's not spent on providing care. It's a pretty hard luck system that we have already, and part of it is this piecemeal system of giving with one hand and taking away with the other. It's a merry go round, a sleight of hand, and it makes it really hard for people to plan their lives sensibly and get on.

Let's be honest here, what we're really talking about is shifting the burden of taxation more onto higher earners. It sounds very nice to give lower earners more money, but it brings into question the definition of 'fair'. The obvious point to make is that higher earners already pay more tax both on a gross and a proportionate basis. National insurance is paid for pensions and various benefits which are available equally to non. low and high earners.

You have a table of taxation input according to earnings, but for the sake of fairness, you need to consider outputs too - child benefit, income support, pension credits, tax credits, jobseekers allowance, housing benefit. If children go to a private school, there is less burden on the public education system. Private healthcare means NHS resources are not spent on those who opt out.

You also need to consider that removing NI will make it easier for high earners to mitigate their tax bill by employing partners and children. Currently, with the NI cap, employing a partner on a salary of £20k entails additional NI contributions which reduce the level of net pay to make any savings marginal at best. Removing NI will encourage this form of tax avoidance which benefits exclusively higher rate tax payers.

Lastly, anyone suggesting that employers wouldn't trouser the 13.8% saving on their NI contributions has more faith in their altruism than me.

Perhaps the current system isn't fair. The scrapping of the 50% income tax rate should be reversed, for example, but a basic analysis of income based tax inputs is just scratching the surface.

YANBU

As the saying goes: "From each according to his ability, to each according to his need"

Who is talking about shifting the burden onto higher earners? As I said the current effective tax rates are 40.2% and 49.0% Bringing those rates in place of the 20% and 40% rates wouldn't change the tax burden at all.

National Insurance is just a tax, it doesn't truthfully speaking fund pensions any more than tobacco duty funds pensions.

And I'm not talking about outputs, I'm talking about the fact we have a dishonest taxation system that purports to tax people lightly at 20%, but in fact charges them more than double that. Whether people use private healthcare or not is irrelevant to a discussion of rejigging the tax rates

I'm not sure where you get your tax advice from, but anyone who is in a position to employ their partner (which is a small minority of the total) already does so, but pays them dividends which don't attract any NI anyway.

With regard to scrapping the 13.8% NI, I don't think employer could simply trouser it, if someone receives £1500 net per month at the moment, they'd certainly notice if that fell to £1350.

Aga if you're not talking about shifting the burden onto higher earners, where do you think the extra money to pay to increase lower earners' net pay will come from? The OP did only talk about making rates more transparent, but implicit in that is the suggestion that other posters have picked up on, that the rate in itself is unfair.

If you're really talking about just making the system more transparent, then what's the point in paying for a change that would bring no benefit to anyone? The initial proposal was rejected due to the cost of integrating two computer systems. If you're not talking about shifting the tax basis, why spend the money to integrate them at all? Why stop at NI - VAT is disproportionately paid by lower income families; should that be lumped in with income tax too? Road tax? To make things fair you need to consider net incomes in a more holistic way rather than picking and choosing what is relevant to a discussion you say you're not having anyway.

I think this is something that can only be done in stages...

The first one being to get all payslips to show the following items

Cost to employer
Employers NI
Gross salary
Employees NI
Tax

Net salary = Money in pocket!!

Then it would be simple to ensure that the first number gets renamed gross salary, with the two NI figures and the tax rolled into one amount. The sums to include that in the tax calc aren't that difficult for PAYE income (ie income from employment).

At this point the net amount to the treasury from employment is the same, but the concept of NI has been removed. Then you can simplify all the tax bands, exemptions etc. This should also prevent employers keeping the current employers NI contribution for themselves.

You can do the same thing for self employed who are already doing a tax return and paying NI contributions.

As for the concept of linking pension entitlement to payment of NI that's very simply changed to an entitlement from having been in employment/self employment (which is all it is now anyway). And there is no reason you couldn't pay for your "stamp" anyway same as you can now even if you're not employed.

Pensions/benefits are not paid for from the payments you have made on the past - they are paid for by current NI payments... Which won't be enough as people live longer anyway.

I'm sure it would be cheaper in the long run to have one tax.

And I think it would lead in the long term to lower basic tax rates, which is a good thing - because at the moment we perpetuate this nonsense that our tax is only 20%, by correctly redefining this as 40% it paves the door for lower taxes.

The government should not make it expensive to employ people.