The Budget™ 2009

[Dolph]

That's uncharacteristically childish of you.

Perhaps, but it's the same thing in every thread where tax is discussed, there is a fair sized group of posters who want to increase the tax burden, but on other people. That's not something I can agree with. Taxation should treat everyone equally.

Cost of living is high and public services are abysmal. It's hard for lower earners to get by as it is, without the government ripping them off to cover for other peoples' screw ups.

That's a case for significant reform, not increasing taxes on other people.

The same reason you pay more if you earn over 40k - you can afford it.

See what I mean? Spending other people's money is easy, forcing other people to hand over their money instead of yours is even easier.

A fair tax system has one tax band for everyone. People pay more if they earn more, that's how percentages work. There is no justification for stepped bands that doesn't, deep down, come from jealousy, especially when backed up by arguments like the above.

 

[scorza]

What if I have a bigger mortgage to pay for, nicer cars? Should I not have these becuase I should be paying more tax?

I already pay more tax than those not earning as much - why skew it even more?

How you spend your money after tax is up to you.

Increasing the tax burden on low income earners so that you can have a nicer car would be neither politically or morally acceptable.

 

[Dolph]

How you spend your money after tax is up to you.

Increasing the tax burden on low income earners so that you can have a nicer car would be neither politically or morally acceptable.

How about dealing with the underlying cause of the tax burden? Reform of the tax and benefits system (through the removal of means tested benefits and the introduction of negative income tax) would enable a massive reduction in civil service staff, as well as providing a fair means of taxation and state support for everyone.

Increasing the income tax burden on any group of taxpayers (rather than all taxpayers) should be considered politically and morally unacceptable.

 

[Solari]

What if I have a bigger mortgage to pay for, nicer cars? Should I not have these becuase I should be paying more tax?

I already pay more tax than those not earning as much - why skew it even more?

Agree 100% - If you work your nuts off to better yourself and earn your money, it's fair that you should be able to afford things to reward yourself, rather than the extra money you earned being creamed off to pay for bone idle people who don't even want to work.

There's already a disincentive for me to do loads of overtime, as the crazy amount of tax takes a huge chunk out of it - just by doing a tonne of overtime I'm throwing plenty more money into the taxation system thanks.

Tax me any more and I would just take time in lieu instead and stick a finger up to the taxman.

 

[scorza]

How about dealing with the underlying cause of the tax burden? Reform of the tax and benefits system (through the removal of means tested benefits and the introduction of negative income tax) would enable a massive reduction in civil service staff, as well as providing a fair means of taxation and state support for everyone.

Increasing the income tax burden on any group of taxpayers (rather than all taxpayers) should be considered politically and morally unacceptable.

The rules are the same for everyone, no single group of people are targeted unfairly.

 

[muon]

Flat tax puts an increased burden of taxation on the middle class and a reduced burden on the wealthy. Will never happen.

As for negative income taxation, that is pretty much what we have if you include working tax credit. However benefits are more targetted (families, kids etc.) than simply having a negative income tax and therefore not an ideal way to think about it. Benefits, specifically working tax credit is trying to create a participation response for those who would not otherwise work. You introduce a negative income tax, you might hope to reduce administrative costs, but you may also lose the ability to tailor the benefits themselves.

 

[Dolph]

The rules are the same for everyone, no single group of people are targeted unfairly.

Yes they are, they are being targetted on income and treated differently.

Remember, the post I replied to said that targetting low income people was politically and morally unacceptable. You made the income distinction in your own post and are now trying to claim it doesn't exist?

If an increase in income tax is necessary, it should fall on everyone.

 

[Dolph]

Flat tax puts an increased burden of taxation on the middle class and a reduced burden on the wealthy. Will never happen.

Unnecessary spending puts an increased burden on everyone.

As for negative income taxation, that is pretty much what we have if you include working tax credit. However benefits are more targetted (families, kids etc.) than simply having a negative income tax and therefore not an ideal way to think about it. Benefits, specifically working tax credit is trying to create a participation response for those who would not otherwise work. You introduce a negative income tax, you might hope to reduce administrative costs, but you may also lose the ability to tailor the benefits themselves.

The working family tax credit is not negative income tax, it's horrifically expensive to administer, means tested and targetted.

The benefits system in this country works in exactly the opposite way you say it should, we have a huge problem with the benefit trap that NIT would eliminate. The idea of tailoring benefits doesn't save money by the time the increased overheads and administration are taken into account. Furthermore, should we be tailoring benefits at all, or should we be treating everyone fairly and equally?

 

[platypus]

So if you earned 120K with anything above 34k (or whatever the current 40% threshold is) taxed at 40% and this was changed to 50 above 100K with 45% from 60 onwards then the extra would suddenly leave you destitute?

I think not unless you where up to the debt just to keep up with the Joneses.

It's not a question of leaving someone destitute, it's a question of being fair.

 

[platypus]

There's nothing magic about it - you can afford to pay a higher rate because you earn more. I don't see why that's so hard to understand? In case it matters, I pay tax in the 40% tax bracket too.

So; we're already paying more tax. Lets pay even more?

 

[scorza]

Yes they are, they are being targetted on income and treated differently.

Remember, the post I replied to said that targetting low income people was politically and morally unacceptable. You made the income distinction in your own post and are now trying to claim it doesn't exist?

If an increase in income tax is necessary, it should fall on everyone.

Keyword in my post: unfair. No one is being targeted unfairly. It is not unfair to treat people differently, therefore it is not unfair to tax higher earners at a higher rate. However it would be unfair to tax low income earners at a higher rate than higher earners despite the fact that basher could get a nicer car that way.

 

[muon]

Unnecessary spending puts an increased burden on everyone.



The working family tax credit is not negative income tax, it's horrifically expensive to administer, means tested and targetted.

The benefits system in this country works in exactly the opposite way you say it should, we have a huge problem with the benefit trap that NIT would eliminate. The idea of tailoring benefits doesn't save money by the time the increased overheads and administration are taken into account. Furthermore, should we be tailoring benefits at all, or should we be treating everyone fairly and equally?

EISSA & LIEBMAN (1996) on targetting of the EITC on single mothers has shown large participation responses but no significant hours-of-work responses. The finding of stronger participation than hours-of-work effects is consonant with the labor supply literature in general. Meyer and Rosenbaum (2001) paper confirms their findings. Targetting is very efficient. You attempt to create a redistribution system which is outside of labour supply decisions, since if it is endogenised you get the problematic distortions.

What you fail to understand is that the major costs of redistribution of income is through labour supply responses rather than administrative costs. That is what the EITC and WTC attempt to reduce. You might reduce administrative costs by an NIT schedule but all you may end up doing is create a larger number of people who end up claiming JSA and additional benefits. These people not working is a major cost on the system.

I don't understand exactly how the negative income tax schedule would be, but I presume you'd have a fixed payment i.e. similar to JSA, and then when someone earns say 10k, they would earn 15k because they are on an average income tax schedule of -50%? The problem with that as I see it, when you look at the marginal rate of income taxation and it would be identical to say income tax + working tax credit with appropriate values.

In addition, as far as administrative costs go, you'd still have to have childrens' tax credits (so would have to look at ages and number of children), council tax credits (so which band you are in) and housing benefits which also are means tested and location based(although done by councils rather than DWP). I don't see how simplfying working tax credits will reduce costs very far.

 

[scorza]

So; we're already paying more tax. Lets pay even more?

Well given that the alternative is people who can't really afford it paying a lot more tax, yes?

 

[platypus]

Well given that the alternative is people who can't really afford it paying a lot more tax, yes?

Yep, thats a great solution. Are you a labour mp?

 

[muon]

Economics and politics although entwined should be seperated here. I think people have done so pretty well in this thread.

Politics will determine how much redistribution takes place. As far as economics is concerned, it doesn't matter if everyone ends up with equal incomes as long as the efficiency is 100%. Economics attempts to optimise the set of efficiency-equity trade off values, and its upto the electorate's preferences on what point in the set they decide to be on.

 

[scorza]

Yep, thats a great solution. Are you a labour mp?

No, just someone who tries not to be selfish.

 

[platypus]

Ah the old selfish argument. Someone who has worked hard for their money wanting to keep some of it? Aye must be selfish. Whats selfish about already paying more tax? Paying to use public services and still being taxed? Subsidising people on benefits?

Do you give all your money away once your bills have been paid every month?

 

[scorza]

Ah the old selfish argument. Someone who has worked hard for their money wanting to keep some of it? Aye must be selfish. Whats selfish about already paying more tax? Paying to use public services and still being taxed? Subsidising people on benefits?

Do you give all your money away once your bills have been paid every month?

Under the current rules even those earning over the upper limit threshold keep 60% of their earnings after income tax.

And sorry, but it is pretty selfish to be asking low income earners to pay more income tax so that high earners can keep more of their earnings.

 

[platypus]

I'm not asking low income tax earners to pay more income tax so that high earners can keep more of the their earnings.

The government are planning to make their own shortcomings up by forcing higher earners to make it up.

 

[elroberto]

Under the current rules even those earning over the upper limit threshold keep 60% of their earnings after income tax.

And sorry, but it is pretty selfish to be asking low income earners to pay more income tax so that high earners can keep more of their earnings.

They already pay far less tax anyway (The lower earners). Higher earners pay far more tax. I still favour moving to a flatter tax system whilst simultaneously closing loopholes. Some earning £200k a year would pay far more tax than someone on £20k if they were taxed at the same percentage. And this isn't me tring to keep more of my money. I've never gone above basic rate tax in all of my employment history, but I think 'fair' should mean fair to everyone. Can't rich people be 'hard-working families' too?