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.

@MushMonster Thanks for posting. I have been doing a bit more of a look at this and it’s super interesting. Unfortunately my browser does not want to recognise Finnish for translation though 😂

But I also went looking at other pilots and there’s actually quite a few. All low wage though. The question as people say is what happens when you put people on mid- high wages in this system. Do they change behaviour.

@Imnotgonnamiss I can run whatever you want but you need to let me know what you want to do with benefits. Keep it as is? Scrap it?

So far all I seeing you want is 30% flat tax rate on all earned and unearned income? No personal allowance. Scrap national insurance. Keep the benefits as is?

Tax all estates regardless of size at 20%?

I would be better off under this system. It would more than double what I get in UC now.

Ooo interesting. How do you think this would effect your life?

🤣🤣🤣🤣🤣🤣🤣🤣

I am on UC as unable to work.

UBI (under your scheme) would mean more money, and lessen the constant worry about assessments etc. I would have a nicer life.

@Tryingtokeepgoing

I have run your model. It’s not looking pretty tbh. And as there is no UI I am not sure how we stop those who can’t work whether through disability, caring responsibility or whatever living in poverty. If I have not understood that and you want a UI portion or to keep social spending then let me know.

So your scheme:
Personal allowance = £25,650 (London Real Living Wage assumption)
Flat income tax only above that allowance
No NI, no other benefits/credits
State pension remains
VAT 15% on (almost) everything
Corporation tax 20%
All other existing taxes kept (council tax, business rates, duties, CGT, IHT, etc.)

You need taxes of:
27% flat income tax (above a £25.7k allowance) balances the budget
~35% does that and retires £1 tn of debt in 10 years.
~48.5% would retire ~£2.7 tn (the whole stock) in 10 years

I am glad 😊

If we were to tax unearned assets at 30%, then we may make a lot of money!

I'd quit working if I had 500 per week. Work is impacting my health and quality of life. That said, I'm probably going to be quitting work now anyway, as it's become unsustainable no matter how much the money helps. The 500 a week is more than I'd be eligible for in benefits currently.

If people are given £500 a week, they are not going to bother to get one of the low paid jobs on top if they have to pay loads of tax on it, who will do this work.

It's a terrible idea!

The thing that baffles me about threads like this and other threads I see about things like Social Housing and welfare payments is that there is always an underlying assumption that people in this country should be automatically entitled to something that has objectively cost someone else time, money or energy to create.

Britain exists in a global economy and other countries aren't just going to give us money to fund an expensive universal income. We need an economy that is exporting goods and services, encouraging onward investment etc. Who on earth would be doing this if they know they will get taxed 70% on all their efforts? Like it or not, the commercial activities required to grow an economy are often difficult and high risk. Most new businesses fail, yet you are expecting people to do all of this in the full knowledge that they could get a decent income from doing nothing at all and that the vast majority of the profit that they do make from a business will be taken away in tax. So fundamentally we wouldn't as a country have enough to pay UI at the levels you suggest as the economy would contract too much.

Also, who on earth would want to do the low paid but essential jobs? You would have to pay people a hell of a lot more than the UI to encourage them to work as a bin man, carer, factory worker or pick fruit/vegetables and this would inevitably lead to a huge amount of inflation in goods and services. The UI everyone receives would rapidly be devalued and you could end up in a situation where hyperinflation takes hold.

You are doing nobody any favours pretending that such mad plans can work. The reality is that the vast majority of humans have almost always had to work hard to simply survive. Food, housing, basic amenities require effort and money to create so it doesn't make sense that we think they should be free for us. We might not longer need to go out and hunt or build our shelter ourselves but do we really expect the builder or farmer to work for free? Do we expect that bricks and stone quarried from the ground shouldn't have a value or that electricity can be generated without staff and expensive facilities? If we know logically that all of this costs money then why do we think there should be an automatic right to these things without contributing anything ourselves? Why should we just get money for nothing?

i’d be interested to see how it would look leaving benefits as they are and retaining a personal allowance. I appreciate we will likely never radically change the tax system but it’s super interesting to look at what you could do.

Ideally I guess you started without considering any existing tax or benefit and think if you were building something brand new how would you want it to function & what would ultimately result in the most money for public expenditure. It may feel unfair someone isn’t paying more in any system but if it generates higher tax receipts then it likely works out better overall for the average person and the majority of the population regardless.

I think that's a great way to ensure criminals don't reform. No UI but punitive taxation, continuing a life of crime would probably be the only option to survive.

Not sure people like the man I quoted would be happy to lose the independence they have with their own budget to spend as they wish. Punish the disabled by taking that away seems cruel.

I know let's reopen the poorhouses and all those awkward exceptions can be hidden away.

It wouldn't be just those in low paid jobs that wouldn't work. It would have a massive effect on anyone on less that £100,000 that currently benefits from subsidised childcare. If you're taking a huge chunk of their wage they likely no longer could afford full time childcare and would need to give up work. Most working part time would be better off looking after DC than paying for wrap around. It would mean a large proportion of the country would stop working.

Come to think of it, there likely wouldn't be any childcare available as nursery workers, wrap around leaders, holiday club leaders would likely give up work. So having a family would mean one parent giving up work for a decade or so.

Yes exactly, i would be quitting tomorrow as i earn this for 40 hours plus 10 hours commute job

I said earlier that I read an article in praise of Finland’s experiment - we would have time to study/hang out in cafes/visit gym etc etc. But author failed to see that no one would be working in any of those places. There would be millions of UBI people milling around or more likely slumped at home scrolling or being angry on social media!

What is an unearned asset? We already have IHT and it is higher.

A 30% tax on assets is too much even for me!

No, i'm not willing to sacrifice my lifestyle to fund other people "equally"

Those not from an work income...

I would carry on as I am, but maybe get a job with a shorter commute. The only reason why I am not doing so now is because my current family and finance circumstances does not make it a good option at present. But if I did not need to worry about yhe baseline of my finances, I would start looking now.
Not having to worry about money will diminish the overtime, I think. People will favour time with the family. So companies will have to finally contract that third shift, instead of charging two shifts with 12 hours.
There are some positives to be had.
But I do not think it will be sustainable for the country. The incentive to improve, get more qualified, excel.. will be more self fuelling than backed up by money incentives, as you will only keep 30%. Starting that path will be tough at the beginning. For lower earners, is almost like working for nothing. So you will need a very self driven, motivated, achievements driven society. And our society is quite money driven. I think the changes in mentality will need to preceed the UI.

I am not here as some kind of campaigner. As I said it was just a thought experiment and I couldnt believe the numbers actually worked. Not only worked but that we could easily pay the national debt.

Yes the entitlement is a BIG problem but equally as a society we have agreed that we don’t want people living in poverty. However due to the low wages and high COL more and more of the country is living a subsidised life. So it’s not actually that wild. This is already happening.

The only difference is that under UC that portion of society is not able to save their way out. They are trapped.

Above that you have the middle earners who get no subsidised living even though they are taking home the same equivalent as UC part time workers with rents paid. Often all workers in a home working FT. Have little capital left to grow personal wealth so are skirting with falling into the subsidies tier at any given time.

Then you have high earners, capped in by huge ledges in tax. Getting increasingly pissed off. Also being targeted increasingly now for additional wealth taxes. Even this group wants something for free. They are angry they don’t get the free childcare hours.

And none of it is comparable. Because you have someone say 30k earning getting nothing taxed at standard rates. Someone getting 30k on UC because they have kids in childcare. Someone with UC + x because they rent in London. Someone on 30k getting nothing because they rent in Derby. Someone paying standard rates plus student loan. Someone getting PIP with a questionable condition. Or any combination in between. It’s complete chaos!

I have worked in care homes and low wage jobs. Purely because I did enjoy the work so I am not sure that it is true we wouldn’t have any of these workers. I would also say from my time there that a lot of people I met in the low wage jobs had a crisis of confidence for lack of better word. Many were capable of much higher wage jobs with a vast array of transferable skills. They just didn’t think they were. That’s a separate issue really but these people still do want to own homes, go on holidays, better themselves.

And you know I have actually just done all these calculations on AI in probably a total hour now. Something which would have previously taken weeks of research. Complex spreadsheets. A lot of brain energy and mathematical know how with algebra and equations. Has taken minutes. Morrisons man and Carol at the care home are arguably going to be more valuable workers than a lot of professional roles in the very near future. Will their salaries reflect that? Will previous white collar professional who no longer have jobs still want the same quality of life they are accustomed too? Is working in a care home below them?

As I said I am no expert on any of this but my gut is starting to move to something like this being a better solution. Everyone gets the same, everyone pays the same, and everyone has the same agency and opportunity to improve their lives.

It is radical 😂

Do you mean inearned income, or the assets from which it flows? Quite a difference!

I voted YABU because I misread it as £500 a month basic income. But £500 a WEEK - on a personal level, yes please! On a societal level, I still don't think it could possibly work.

I'd consider myself to be a very average worker (teacher, salary approx 44K)

30% of my monthly take home is a little under £700 a month. Add that to the £2000 per month basic income and my overall monthly income is almost identical to my net monthly salary. I'd be better off by literally £1!

BUT - I work 50-60 hour weeks in term time. To do that for £700 a month doesn't seem worth bothering. I'd rather get a part time or lower paid job and cut back slightly. Surely, the majority of people will be in that position and therefore we'd have a huge issue filling jobs.

£2K a month is perfectly liveable on for me (single adult, no kids) without needing to work at all. A couple would be on at least 4K which is a huge monthly take home even with kids. It would only be single parents/single earner families who would 'need' to work and they're probably the least likely to able to juggle a full time job so that doesn't seem right.