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.

You don't know anyone on as 'low' an income as 44K?! That's my salary and I'm fairly sure it's quite a bit above average? (Though it's no longer the good salary it once was as we've been on pretty much a pay freeze for the last 10 years and it's barely changed at all!) More than half the working population earn under 44K! I get that the majority of people probably have 2 incomes going into one house but there are millions of us single adults out there too! Are you in a high earning industry and only know people in the same circles or something?

Oh it got better than that 🤣 we tweaked the model to £350 per adult per week. And it meant we could reduce the tax to 50%, pay off all the national debt in a decade and have some spare.

So you would take home £40,200 or £3350 a month.

It’s interesting because some people here are saying hell no, why am I paying for everyone else. And that’s obviously a natural reaction. But if you’re doing it anyway under this system, and your take home pay change is either more or very little loss. But it means we can pay off this debt. Then honestly I don’t get the objection.

Obviously there’s also the legitimate concern about lack of productivity; however I think with AI looming we are going have shifts there anyway and will need to do something like this. Lest we all want to be busy fools; just for the sake of it.

No I just live in London and it’s honestly nuts! I mean, I am in a high earning industry, but I know people in all sorts, and here wages are all higher than country average, but we all pay so much for housing that we are all still skint and wondering what the hell we are doing!

@Nchangeo Yes, sorry, I didn't read your updates.

That would make me better off and it would still feel worth working for as I couldn't live well on £1350 a month. But if I couldn't, as a single adult, then how could families and disabled people currently living on benefits manage on just universal basic income if they weren't able to work. £2000 feels fine for almost everyone but £1350 doesn't. I wouldn't want some people sinking deeper into poverty just so that I, as someone with an above average professional job, could get nearly half my salary just given to me for nothing. I'd rather continue to work for my current take home pay and not get any benefits and all the benefits go to the people who can't work.

But the higher tax leading to improved public services is very attractive.

Idk thee answer but I can see why all governments struggle to find one!

Eg one local friend is a civil servant on £80k, her husband is a solicitor (don’t know his salary but it’s not going to be low), another is an engineer on a high salary and married to a doctor (consultant not GP) and they have mentioned chucking lots in pensions to avoid going above £60k salary each per year, it’s all that kind of thing.

Fair enough @AllTheChaos - that does sound rough!

Thank you @miniaturepixieonacid - it is! It feels like we all did what we were ‘supposed’ to, and the reward is to be working all hours, stressed, counting the pennies, and wondering where it all went wrong. It honestly feels like a swizz. I’m glad to be in London for now as there is good provision for my SEN child, but otherwise I would be gone in a shot. Even if my salary was lower elsewhere it would go so much further. There’s a 2 up 2 down terraced house on my road just rented out: nice, small, nothing special, not zone 1 or near a tube or anything, more than £2 grand a month - it’s crazy!

Okay, a flat rate of £500 a week, I’ll just give up my job then? Because I’m on £400 a week and paying tax on that at the moment!

As it is a theoretical exercise, radical change, let's run the numbers with both.
If we can get the pertinent data.
When they were discussing the inheritance tax on farms, the fact that massively huge states belong to private individuals and are dedicated to hunting (that not farming, when they are suitable for farming) came up. As an example of how much potential could be locked away on outdated ideas.

our household net income would be exactly the same as it is now……

HOWEVER…… if DH left his job and instead claimed your Universal Income we’d be £300pm better off.

This means we’re taking £24,000 per year OUT of the system instead of putting £21,350 IN. Thats a bonkers idea!

So I’d get £500 per week anyway, plus my salary which would be taxed at 70%?

I’d be better off and so would my DH. I’d go for that!

No that doesn’t make sense. Under this system you are ALWAYS better off in work. You would not earn more by your DH quitting. You get the payment regardless of whether you work or not. It replaces personal allowance as a personal unconditional income.

What are your salaries

I put that YABU, it's not strictly true, but there isn't a 'lunacy' option.

70% tax???

We have moved on slightly from there. But yes that was the original idea 😂

So you get universal basic income and then your wage on top?

In that case our combined household income after tax would be £129,000, currently it’s £83,000 so we’d be better off…….

We’d be taking £48,000 from the government and putting in £84,000 so net contribution of £36,000. Currently we pay £38,000 in tax and NI.

So I guess in theory your proposal works because we’d be net contributing the same amount but we’d personally be financially better off.

But somebody somewhere has to be paying more to cover that……. who? is it the super rich and that’s where the “redistribution of wealth” is?

I am not sure you’re still correct. As a two person household the gov gives you 18.2k each. So 36.4K.

Now take your pre tax current salary. You give 50% to gov as a flat tax on the entirety. So if you earn combined 168k pre tax. Then yes you give the gov 84k.

Total take home is 120.4k

So your net contribution is actually higher at 47.6k. And I assume you are still better off with the 120k take home?

I know! I don’t know where it’s come from either (well I do it’s a combination of not spending on existing benefits and slightly higher tax for 100k+ earners). But I have checked the math multiples times. It seems correct. And I am surprised it seems to be working out to make such a big difference like this.

And having just tried to do your maths; I think because there is no personal allowance and it’s fully transferable (as flat) it can make a big difference in a family to have flexibility and doesnt penalise a higher single earner.

We are are on one low income. Not sure survive if tax was 60%? Take home would be £1000 pm for food for six, mortgage, clothes, car, bills. We could pay the mortgage at at our current fixed rate that ends soon and buy food just about but we have no car ( rural) so no transport and kids wouldn't be able to get to school. I'm sure it works out better if you earn more. But we'd go from being ok into poverty. I could go back to work but my disabled child would have to go to residential boarding sen school. Cost for his level of need would be around 100k pa. Tax payer pays for his education.

So your current salary is 20k pre tax?

If so under our latest model of 50% flat tax plus universal income of £350 pi you would now take home £28.2k or £2350 a month.

Is that better or worse than your current situation?

@DyslexicPoster

Is this a one adult household? There is no child benefit under this system. You’re illustrating the need for a child benefit here and perhaps I need to add that back into the model.

They need to start taxing wealth that comes from British assets, rather than work. Thats where the superwealthy get most of their money and dodge all the taxes. Thus why inequality is growing, more billionaires than ever whilst there are more and more people living below the poverty line.
50 families have more wealth than 50% of the population. that is an utter disgrace, no one should be hording that percentage of resources

Yeah I don’t agree sorry. In the same way they never go after big business; they won’t go after the elites. Whether it’s the right thing to do or not it ain’t happening.

So I don’t like this wealth tax idea. Because it will be just another hammer to hit the middle class and high earners with.

The idea of generating some wealth is the main reason I work. As I said our family take home is not far off what those with UC credit plus rents paid. It’s potentially better. But the idea of being able to pay off my home and be secure, have savings, have something to leave to my kids etc. That’s why I am working.

They have already said they are not doing a wealth tax because people have their wealth in different ways like art and fine wine.

This, why would I work? I would have a bigger income than I have ever had, without working, and working would not add much to it, so why would I bother anymore? I would just take the £500 a month and take the rest of my life off

Not what I was saying, the idea is to tax wealth not work...i.e people that own land, properties, mortgages etc....things that cant "leave" if you tax them. Passive incomes that come from ownership not work. Not higher tax for people that just have worked their way into higher paying careers.
Other countries do it.