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.

Two things make me think you'd have mass tool downing which would blow a crater through your numbers

1. the number of people who refuse promotions, extra hours or pile money into pensions to avoid the £100k loss of personal allowance threshold. I'm in Scotland so higher tax rates anyway, and so anyone in that bracket faces a nearly 70% total tax rate (on the 100-125 band I mean). Lots of people actively try to stay under.
2. trying to get low paid staff back to work post furlough. We reopened our business, but a huge number of staff had been happy on furlough and were very reluctant to return to work for 20-30% (depending on timing) of their salary.

The retained percentage of wages needs to be high enough to still motivate working.

Others may have already said it but this is why communism doesn’t work. I have a colleague who is from Cuba - no-one wants to do the hard work or high risk work, as there is little incentive and a huge amount of disincentive.

I earn 200k. Are you suggesting I pay 140k income tax every year?

If so I can assure you under that regime I’m not going to make the effort to maintain my job let alone work hard over many years to obtain it in the first place.

Exactly!!

These situations need further thought

Haha, no way am I accepting £500 per week. Both DH and I take home £750 a week after tax/NI etc plus we have very generous employer pension contributions. I’ll stay how I am thanks.

Yes this is the only big flaw I can see being a problem. Hopefully they would be priority for social housing and we would either have move the carer bill to nhs (which would be good as would be needs based assessed by actual doctors to provide correct care level); and/ or do something with the wealth fund/ a disability endowment. However the latter you run the risk of the current PIP drama so I think actually bringing back to nhs makes sense.

Which yes would make nhs rise but that’s currently 2% of our uk expenditure. If we went with the 50% model and waited longer than 10 years to pay the deficit then you could really do exciting things with nhs.

🤣 in 10 years we wouldn't have an economy to bring in tax receipts to pay the UI!

You might want to rerun the math. You will be better off in this system.

Originally yes. It’s now 50% so 100k. So you take home 118,200. And have no one coming after your unearned wealth & assets accumulating. I don’t think it’s a bad deal.

Yes and sorry just reading through. Single mums also potentially an issue.

They could be prioritised for social housing.

An other idea whilst just doing my shop: Anyone convicted of a serious crime is no longer eligible for UI. And will be taxed on a highly punitive progressive scale to cap their earnings until their conviction is spent. Or never depending on severity.

So you aren’t taxing CG or dividends.

Still a big open question about private pensions but otherwise sounding like a damned good deal for high earners. Too good. I think lots of income in private industry will be diverted into stock options, reducing the tax base.

That’s pretty much what I pay now. Is there still full pension tax relief on offer up to 60k pa? If so then not much changes as top rates are already average around 50% when you consider headline rate + NI + removal of personal allowance.

An other idea whilst just doing my shop: Anyone convicted of a serious crime is no longer eligible for UI. And will be taxed on a highly punitive progressive scale to cap their earnings until their conviction is spent. Or never depending on severity.

You’d have to be careful that doesn’t just lead to further crime, though.

In this model CG and Dividends have stayed the same. I just wanted to simply see could we balance the books with only income for simplicity.

Dividends for fairety should be adjusted to bring it more in line (obviously you have to take into account the Corp tax %; and also that people have risked their capital). There should be reward for that.

CG I would want to keep c. the same. I want to promote people to save, get assets. Grow personal wealth.

A salary of £31,200 currently has take home pay of £26,000 after tax and NI. In this proposed UI/70% scheme, if someone is satisfied with £26,000 they would never have to go to work. Anybody on less than £31,200 could take home more money and not have to work.

The current minimum wage is £12.21/hour. Under the proposed scheme they would take home £3.66/hour.

A salary of £55,000 currently takes home £42,500 and under the proposed scheme they would also take home £42,500 (0.3x55,000 + 26,000). Anybody on a salary over £55,000 would take home less under the UI/70% scheme. Someone on £75,000 would take home £5,500 less under the scheme.

We have changed it to £350pw UI and 50% flat tax rate (this rate would enable us to pay down the national deficit in 10 years with a bit extra left over).

So now it is…

By the way OP, your idea is not that crazy. It has been tested. I suppose you know that. I will look for the test report.
And, no, people did not work less when they had a universal income. But they went for that dream, that job they wanted, that qualification, their own business that they had been dreaming off.
But it was a small trial within a country that kept up its normal tax system. I am not sure we can afford to do this....

I will try to get you the link.

Where do you get 2% from, op? This https://fullfact.org/health/nhs-public-expenditure-40-percent/ suggests that it is currently closer to 18% and that doesn’t include a lot of adult or child social care which are funded by local authorities.

Other issues -

inflation, particularly of house prices. Unless there are very stringent (and therefore not acceptable to either the public or the banks which would be stumping up the initial cash) caps on rent costs and house purchase prices, these would just re- equalise at the current values plus £2000-4000 per month so wiping out any benefit of UBI and making it impossible to save any money for people
who don’t currently own.

immigration- would have to be totally banned - there cannot be a bottomless pit of new people coming in if they’re being automatically given UBI so the tax costs of securing borders, paying for the courts and justice system etc would increase.

currently total tax take is £857.8bn, equivalent to about £16000 per adult. Your plan would more than double this, but also find that a lot of people stopped working or reduced their working hours - particularly people in their 50s and 60s with grown up children.

it would disproportionately affect younger people with children, particularly if they’re renting and paying for childcare, or single parents. Currently 24% of people have disabilities. If they are on benefits they will be receiving potentially significantly more than £20k per year. How do you explain to a single mother with 2 or more disabled children that you’re substantially cutting her income?

No I did not know. Your saying it worked 😮

Well that was what I was hoping but I was obviously a bit worried that someone would take the cash and use it to subsidise a drugs racket. Hence my new criminal exclusion idea 😂

https://weall.org/resource/finland-universal-basic-income-pilot
https://www.salford.ac.uk/news/universal-basic-income-wales-is-set-to-end-its-experiment-why-we-think-thats-a-mistake
https://www.dw.com/en/free-money-germany-basic-income-experiment/a-72223009

My worries with this is that in the pilots, the rest of society just carried on as usual. But if we were to scale up to a whole country, will landlords up the rent? Business charge more and inflate their prices? Will the council increase council tax, the energy companies the price, housing even more inflated? Banks charging extortionate rates..... You know what I mean. They will know that they can extract X pounds out of each adult and they would. So soon enough, we would be in the same ship. We would need to regulate the big guys to ensure the value of the UBI is maintained.

Oh, not sure there was any drug issues in the pilots. I have not found anything regarding that. But if someone loves drugs, they will surely use the income for that. Sadly.
The link for the Welsh one is for children in the care system reaching adulthood. So, to give them a start up to cover for the absence of parents. It will shortly be evaluated, as it finishes this year.

Have you tackled the gaping flaw, which is how you in incentivise anyone to do any work. In particular how you replace the approximately 20 million workers that currently earn less than £30k, but who would have no incentive to work under your plans?

Yes sorry, typo. I meant 20% for NHS.

Immigration would have to have a different deal yes for an extended period at least. You dont have to pay for extra security. If they want to still come then they can; just they arent eligible for UI.

Paying for childcare is a tiny portion of time. So not concerned about this scenario too much. They have UI if they want to stay home, or pay childcare, or they can work for break even and keep their careers progressing. It’s your personal responsibility to make whatever choice you want in this system.

24% of people having disabilities is exactly what has been the recent issue with PIP. A quarter of people significantly impaired. Do we seriously believe that?

Single mothers are a group where I think theres going to need to be support. Heavily subsidised social housing I believe is the most effective way. So not giving more cash; but reducing cost so they can free up more of their UI for other things.

I suspect a flat rate of tax applied across the board would make most money. Phase out NI as a separate thing and slowly raise tax in parallel. I’d love to see the numbers if 30% was applied across the board (including on unearned income). Fiddling around the edges or ideas about universal income all aim to get more from the top earners. They may be popular ideas but I bet won’t make anything like as much money as raising income tax by 10% and eliminating NI, which if done gradually would make minimal difference to workers (it would to pensioners and anyone with income from investments) but maybe it should. I’d also massively extend inheritance tax because again getting 20/30% of the majority of all estates would make a huge amount and since you’d be dead by then it’s not like you’d need the money.