Radical tax reform

[Nchangeo]

Lots of talk on here about taxes, HE, wealth taxes etc.

Countries a mess. Something needs to change. But with current levers to pull everyone feels it’s unfair.

I ran the numbers on a radical idea last night.

Universal Income (non-means tested and non taxed): £500 per week per adult.
Replaces all benefits.

Flat rate of tax for all earnings replaces all other income taxes; National Insurance, Student Loan repayments etc.

To balance the books as currently stands this would mean a flat rate of 61% on income.

If we put it to 70% then we could pay off the deficit in 11 years and start a national wealth fund.

Would you be better off or worse off under this system.

Would you mind being worse off if it means it’s fair to everyone and hopefully the country improves?

What do we think? I was quite surprised the numbers worked.

3 YABU votes? I assume you would be worse off? What is the change in your take home?

I ran this for low and medium earners and it actually works out quite well for them

It's a silly idea and an impossible question because no-one can say how well off they would be without considering such a radical change's effect upon inflation, the housing market etc.

It attempts to deal with economic problems purely via income tax, whereas the real source of those problems is not income but wealth inequality.

I'm on the left, have always thought that UBI is a bonkers idea contrary to every progressive instinct about what government is for, and had many arguments with other lefties who seems to think that massively increasing taxes and then evenly distributing them between a homeless guy and the Duke of Westminster will somehow make society fairer.

This hasn't changed my mind.

I suppose the idea of a national wealth fund is great if you think the government is capable of saving and investing money better on your behalf than you are.

The tax system in this country needs to be shifted more onto unearned income. That's the long and the short of it, and certainly the situation we have at the moment isn't going to change until this happens.

We also need land value taxes and stronger inheritance taxes to claw back wealth over the last decades that should have been paid in tax but instead was substituted by borrowing and therefore made it into the coffers of older cohorts.

As far as I can tell there is no electorate appetite for any of this, and therefore we are stuck where we are with no capability to extend the tax base and poor services as a result.

For me what the government really needs to do is demonstrate it can use tax money wisely. Then it might actually give the electorate some confidence that if tax is raised it will be spent on their greater benefit.

Yes that is the idea behind this. To promote wealth creation and personal agency & responsibility. On a personal level and on a national level.

For the average person; wealth is solely made by delayed gratification when earnings outstrip basic living expense or through entrepreneurial risk taking. So under this model the idea is to enable/reward work, and enable/ reward wealth; rather than penalise it.

Why the fuck would anyone bother working to hand over most of it, when they're getting £4K a month per couple anyway?

Under your proposal, my income would be halved. I’d lose my house. If this was implemented, I’d be working full time for 1.5k. Might as well work part time in a supermarket instead.

Work has to pay OP, or nobody will bother.

We need a way to tax wealth but I can't see that it will ever happen.
The wealthy and powerful are (by virtue of their wealth and power) able to control things for their benefit. No one cedes power willingly and so they will always push back against anything which limits their ability to accumulate more and more wealth and power

Well the problem is if you tax work at 70% then nobody will work. I certainly wouldn’t. We would quit our jobs and enjoy our tax free £50k p.a. joint income.

Buy if everybody does that and therefore nobody pays any tax…how does the state fund that £50k?

No one is going to work if 70%, before any pension contributions, is taken off them and based on your minimum universal income no one will work in shops, restaurants, care homes, factories and many other places. So the country wouldn’t function.

I agree a flat rate tax and simplification of the tax code would have some benefits, but you have to consider the total tax take which includes tax on spending (VAT, duty etc) which are in part to influence behaviour, and taxes on profits which also need to be at a level to encourage investment.

So, perhaps there’s a case to be made for a personal allowance set at the level of the living wage, no other allowances or ‘credits’ and a flat income tax rate of, say, 30% above that, which VAT at 15% on everything and corporation tax at a flat 20% as well. No NI and much higher duty on alcohol, fuel, cigarettes, vapes and other things that we want to discourage. Then change per mile for driving, limit cars to those who have a parking space and better public transport. I haven’t run the numbers, but I’m sure there’s a plan there 😂

I agree that high tax rates are too much of a disincentive.
I think we need a way to control wages so that the people at the top don't vastly out earn the rest of us, but I can't think of a way to make that happen.

I'd be better off.

But i think I'd find it quite hard to motivate myself for the bit i earned myself if I was only keeping 30% of it.

Can you rerun the whole thing but with a 49% tax. How much would we all get as universal income then?.

Wow! Economists and Finance Ministries across the globe with sophisticated modelling tools to test thousand of different scenarios struggling with these questions for decades.

But OP has “run the numbers” and come up with a workable plan!

I can see a home for you with Corbyn and the party with no name!

I’d be worse off, I’d lose about £30k a year take home. I couldn’t afford to stay in my home on that income, so would need to downsize. I’m in three bed at the moment, so not a mansion. I’d have to cut back on my investments and would have no money spare to save. I’d probably end up moving abroad if my income was taxed at a flat 70%. Or I’d stop working and live off the £2k per month from the state, or work part time as if I can’t afford to save and have to live somewhere smaller I’d rather just live more frugally and with more free time. So I’d be paying less tax in to fund the proposal.

Ooof, what’s your income if you don’t mind me asking? I have not encountered this scenario yet.

You would have a minimum of 26k already. So with 1.5k per month your take home would be 44k in a single earner household.

Exactly. I don’t know anyone on this low an income. Nor do I know anyone who could live on this except those who are retired and don’t have a mortgage or rent to pay.

I’d rather just live more frugally and with more free time
@Venalopolos this is also my preference but it's difficult to live frugally when the basics of life (such as housing and fuel) are overpriced/unaffordable🤬

Do pensions come out before tax, OP?

What about tax-free childcare vouchers?

Does your plan keep or drop VAT? Stamp duty? Council tax? Road tax?

What happens to the cash-in-hand employees paying no income taxes, while the rest of us PAYE mugs pay 61% income tax?

Is state pension taxed at 61%

@Nchangeo
A big problem with your plan is that no one would work if taxed so heavily on the proceeds thereof!

Maybe just make politicians accountable for what they waste current tax receipts on.

Perhaps I need to lower the Universal income. We could then drastically reduce the tax %. The idea is it replaces UC safety net but equally for all. So those on it aren’t discouraged from exiting, saving, or owning a home; and middle earners who work FT and seem to earn very little difference in take home with people having rents covered on UC are treated more fairly.

We need to tax much less, reduce benefits significantly and massively cut public sector spending

So people who don't work get the money to afford to buy a house because the people who actually work are handing over 60-70% of their wages?
Fuck off!

I think the whole taxation rules needs completely scrapping and rewritten for a modern era.
Too many archaic tax rules, exemptions and random taxes to consider.
Just start from scratch, make it progressive and properly tax corporations creaming it in but funneling the sales in Ireland to avoid UK taxes.

I’m retired, though not drawing my pension yet, so in the short term it’d make no difference to me as I’d just spend my savings / investments more slowly.

But when I do start drawing my pension at 55 I’d be considerably worse off under this scenario, with limited opportunity to increase my income. So, I think I’ll take the Italians up on their flat rate of 7/10% for 10 years for those that retire there instead and let someone else luck up the tab in the U.K. 😂

Everyone would be getting the same money. And everyone would be getting taxed the same 60-70%

Whats the minimum you need to live in U.K. out of poverty. If anyone has suggestions I will rerun but with UI at these levels and see what flat tax rate is then.