Proposed change to the tax system, 30% rate for all....

Angilion said:
I'm refering to not paying taxes. Whether the method used happens to be legal or illegal doesn't really matter. It's a fairly arbitrary distinction (laws can change and have to be interpreted) based to a large extent on how good your lawyer is and both have the same effect on tax revenue.

The only difference in meaning is that "evade" more strongly implies deceit. Like, for example, paying yourself a high salary and pretending that it's a low salary and high dividends. Like, for example, nominally basing your company headquarters in a place that has lower taxes even though it's not really where your company is operating from. Many legal ways to not pay taxes are evasive.
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Sorry but the distinction is very clear. Most tax avoidance comes due to people taking advatage of benefits actually written into the tax system, depending on who's doing the counting it is still tax avoidance. Things like tax breaks or reduced rates are part of the system , put there on purpose so people can legally reduce their tax bills in exchange for them doing something desirable for society. That is completely different to people deliberately not declaring earnings to avoid paying tax that they should.

But the simplest way to explain the clear difference between the two is this...

Tax evasion = You're doing something wrong.
Tax avoidance = The government is doing something wrong.

If you are angry at tax evasion then fine, it's like being annoyed at muggings or the existance of disease but if you're against tax avoidance then blame the government for making the rules that encourage them to do so.
 
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estebanrey said:
Sorry but NIT doesn't provide a flat rate of tax as it proposes that people below a certain level would pay no tax at all so all you've done is reduced the amount of levels to 2. Those that pay the basic rate and those that pay nothing so how do you square that circle in terms of your equality argument that everyone should pay the same rate regardless of income?
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I think you need to read what I wrote more carefully. Allow me to break it down for you.

That's why I'm a proponent of NIT, which combines flat taxation (1) with universal benefits (2) to create a progressive end result (3) without discrimination or unequal treatment either in state support or taxation rates.
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So, to break it down.

1) NIT uses a flat taxation rate on all earned income, hence treats everyone's income the same.
2) NIT uses a universal benefit system, where everyone gets the same flat payment from the government (Variation possible for things like disability if desired)
3) The combination of (1) and (2) creates a system that, overall, behaves in a progressive manner, with a marginal tax rate that varies from negative at the lower end (where the tax paid on income is less than universal payment), through a zero rate (where the tax paid on income is equal to the universal payment), through to a marginal rate that is effectively the same as the flat tax rate)

Worked example using £7.5k payment and 35% flat rate

So the statement I made is absolutely correct, Every individual is treated the same, yet the result is progressive.

From everything you've argued so far I don't see how that system fits with your idea of a flat rate for everybody (which isn't progressive by the way)
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See above, as I'm fully aware a flat tax isn't progressive without the additional parts of NIT.

Which is why I used food as an example, hardly a 'voluntary' transaction is it? Unless you consider starving to death a viable option.

Furthermore, people aren't forced into jobs or particular vocations, they have a free choice so I don't see where the difference is anyway.
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Who you purchase food from, what food you purchase, the option to grow your own, forage or whatever, is voluntary. Taxation is not voluntary, what services you are forced to contribute to is not part of your choice and so on. Furthermore, taxation applies to all jobs, so the idea that they have a choice of jobs making taxation different is flawed.

So why shouldn't income tax just be a set charge, the same for everyone like the television license fee. Surely that would be the absolute in terms of equality, if that's your goal.
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There's a couple of reasons, the first is practical, to raise enough money, a poll tax would have to be large, which in turn is very regressive. The second is ideological, because if we're going for absolute fairness, then the only fair system is a payment by service model, where the cost of the service is spread exclusively among those who use the service. I don't actually buy into this view, and consider the NIT model to be the best compromise between unfair and inappropriate use of the state monopoly of force, and the obligation of the state to provide a minimum standard of living.
 
Dolph said:
I think you need to read what I wrote more carefully. Allow me to break it down for you.

So, to break it down.

1) NIT uses a flat taxation rate on all earned income, hence treats everyone's income the same.
2) NIT uses a universal benefit system, where everyone gets the same flat payment from the government (Variation possible for things like disability if desired)
3) The combination of (1) and (2) creates a system that, overall, behaves in a progressive manner, with a marginal tax rate that varies from negative at the lower end (where the tax paid on income is less than universal payment), through a zero rate (where the tax paid on income is equal to the universal payment), through to a marginal rate that is effectively the same as the flat tax rate)

Worked example using £7.5k payment and 35% flat rate

So the statement I made is absolutely correct, Every individual is treated the same, yet the result is progressive.
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My point was this doesn't tie up with the definition of what economists would call an NIT system. As the Wikipedia excerpt I posts shows, NIT does not include 'universal benefits' it sets a level of income at which people either pay tax or they don't and those under that income pay no tax at all.

So unless you are using a different definition of 'NIT' there is no flat rate for all, only for those earning over a certain amount.


Dolph said:
Who you purchase food from, what food you purchase, the option to grow your own, forage or whatever, is voluntary. Taxation is not voluntary, what services you are forced to contribute to is not part of your choice and so on. Furthermore, taxation applies to all jobs, so the idea that they have a choice of jobs making taxation different is flawed.
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Sory I still don't see the big difference here. People can choose wear they buy food? Sure and people can choose where they work or whether they want to work or not.

No tax is compulsory because you are choosing to undertake or use the things that come with it. Don't want to pay 45% of any of your earnings? Fine go work in a job that doesn't pay the amount where you'd have to pay it or do what you love but just refuse any pay rises that take you over the amount.

People aren't being forced to pay these rates, they are paying them because they want the job and massive increases to general wealth despite the extra tax that come with it. If you don't want to pay income tax at all fine, then don't work at all or only take a salary of £8000.


Dolph said:
There's a couple of reasons, the first is practical, to raise enough money, a poll tax would have to be large, which in turn is very regressive. The second is ideological, because if we're going for absolute fairness, then the only fair system is a payment by service model, where the cost of the service is spread exclusively among those who use the service. I don't actually buy into this view, and consider the NIT model to be the best compromise between unfair and inappropriate use of the state monopoly of force, and the obligation of the state to provide a minimum standard of living.
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I think we need to establish if you are actually talking about NIT or your own made up system which doesn't sound like it first.
 
estebanrey said:
Why can't your wife support herself out of interest?
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she is at home with my 9 month old son. she didnt earn much so it would be cheaper for her not to work than to pay childcare (our childcare is the most expensive in europe). i would rather she brought him up than childcare anyway

the problem is that we hadnt budgeted for all the increased costs we are all now incurring so things are getting a little tight. especially when my car cost me £850 yesterday

we will be ok as we have a nice house and own the car etc but things are tighter than i thought they would be.
 
estebanrey said:
My point was this doesn't tie up with the definition of what economists would call an NIT system. As the Wikipedia excerpt I posts shows, NIT does not include 'universal benefits' it sets a level of income at which people either pay tax or they don't and those under that income pay no tax at all.

So unless you are using a different definition of 'NIT' there is no flat rate for all, only for those earning over a certain amount.
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Erm, no. As Wikipedia clearly states...

http://en.wikipedia.org/wiki/Negative_income_tax#Flat_tax_with_negative_income_tax

The effort for reporting and supervision can be significantly reduced by combining basic income with flat income tax. The relationship between gross and net income for individuals can be adjusted to correspond roughly to current relationship at all income levels, implying that income tax is effectively progressive.[5] A flat rate income taxation with tax exemption implements a negative income tax as well as maintaining an actual tax rate progression at extremely low administrative cost. This is achieved by paying a tax on the tax exemption to all taxpayers, e.g. in monthly payments. The tax on the tax exemption is computed by applying the nominal flat tax rate to the exemption. The tax on the income is drawn directly from the source, e.g. from an employer. The tax on income is computed by applying the nominal flat tax rate to the income.
This simple method results in an effective progressive rate taxation (although the tax rate for the taxes drawn at the source is flat) which is positive once the income exceeds the tax exemption. If, however, the income is less than the tax exemption, the effective progressive rate actually becomes negative without any involvement by any tax authority. As for the positive progression, only very high incomes would lead to an actual tax rate which is close to the nominal flat tax rate.
The tax on tax exemption also can be understood as a tax credit, which is paid back once an income has reached the level of the tax exemption. This level marks the point where paid taxes and the tax credit are equal. Above that point the state earns taxes from the taxpayer. Below that point the state pays taxes to the taxpayer.
Flat tax implementations without the provision of a negative income tax actually need an additional effort in order to avoid negative taxation. For such a tax, the exemption only can be paid after knowing the earned income. Flat tax implementations with negative income tax allow to pay the tax on the tax exemption independent of the amount of the actual income.
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describes exactly what I've described, only using the term tax credit instead of universal payment.


Sory I still don't see the big difference here. People can choose wear they buy food? Sure and people can choose where they work or whether they want to work or not.
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It's simply not the same thing, and even if it was, taxation is independent of the choice, because you have no choice but to pay it, or risk forcible enforcement action.

No tax is compulsory because you are choosing to undertake or use the things that come with it. Don't want to pay 45% of any of your earnings? Fine go work in a job that doesn't pay the amount where you'd have to pay it or do what you love but just refuse any pay rises that take you over the amount.
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Again, this doesn't make sense. The taxation aspect is independent of the choice to earn, and is compulsory as a result. The idea that you can 'choose' not to pay taxation by refusing to work is somewhat of a crazy position.

People aren't being forced to pay these rates, they are paying them because they want the job and massive increases to general wealth despite the extra tax that come with it. If you don't want to pay income tax at all fine, then don't work at all or only take a salary of £8000.
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No, they are forced to pay them. Their employment choices are utterly independent of the taxation rate applied afterwards by the state. To associate the two as if to imply consent is to create a Post hoc ergo propter hoc, by using the false position of implying that the taxation is a result of the employment, when it is not, it is a result of the choices of the government to take the property, not of the individual for earning it, especially with the state monopoly of force invoked for enforcement of the property removal.

I think we need to establish if you are actually talking about NIT or your own made up system which doesn't sound like it first.
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I think you need to learn to read your own links before you start accusing people of making things up.
 
Angilion said:
Can you point out anyone in this thread who is saying that we should screw the rich for all we can?

Rhetorical question - I know you can't because nobody is saying that. You're making up an extremist position and assigning it to everyone who disagrees with you. It might be effective advocacy. It's certainly simple to do. It's not very honest though, is it?

It would be trivial to do the same from the other side:

It's a shame that people think that by oppressing the working class as much as we can and making them de facto serfs of big business, everyone will be better off (including the serfs, who are too stupid and lazy to know what's good for them).

It's useful if you want to make sides for a fight, but not so useful if you want a workable, sustainable solution.
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No one has disagreed with me. No one has even quoted my original post so not sure what you're talking about.

I also have no idea what you're talking about in your come back. Quite a few people have said flat 30% tax screws the working classes and lets the rich get away with a much lower bill than currently, which is false as the Class 1 NI would also be scrapped by flat rate 30% tax.

Anyone who knows anything about flat rate proposals knows that it would either be 20% flat rate with NI or 30% flat rate without or it would punish the lowest earners and wouldn't work. Every flat rate tax proposal agrees with that position. There is extensive research that suggests a flat rate tax would attract skilled labour. It wouldn't be THE deciding factor but it would have a huge influence when choosing between the US, France, Germany, etc. It would also prevent a lot of avoidance as the reliefs would be simplified and the cash tax benefit would be reduced. (kinda putting fellow CTAs out of the job)
 
Kemik said:
No one has disagreed with me. No one has even quoted my original post so not sure what you're talking about.
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I was talking about the statement you made. The one I quoted when replying to it. How can you not be sure what I'm talking about when you wrote it and I quoted it?

I also have no idea what you're talking about in your come back.
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I explained it very clearly and I used simple English. You must understand it since you are clearly able to read English.

Quite a few people have said flat 30% tax screws the working classes and lets the rich get away with a much lower bill than currently, which is false as the Class 1 NI would also be scrapped by flat rate 30% tax.
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Which would result in the rich getting much lower tax bills than currently, obviously, since that's the point of the proposal. You disprove yourself.

You are also arguing that there is no difference at all between saying that a flat 30% tax results in the rich getting smaller tax bills and saying that we should screw the rich for all we can.

Do you really believe that or are you just trying to move the goalposts now that I've pointed out you were just making things up?

In any case, reducing the tax revenue (note that the claim from advocates of the proposal is that everyone would pay less tax, so obviously that would mean a big reduction in tax revenue) would make it impossible for the state to sustain anything like its current expenditure. So state-run services would have to be cut a great deal and replaced with for-profit services. So the poor would be screwed. They might save a bit on tax (only if the personal tax allowance is also increased a lot), but just health insurance alone would cost them much more than that.
 
Why are some people so dimwitted that they cannot understand the flat rate tax system. :confused:

Just because income tax for the high earners maybe marginally reduced their total tax bill maybe higher because all their sources of income will get taxed equally at 30%. Therefore the total tax revenue may be higher while ensuring a fairer tax system with everyone paying the same proportion of tax on the sum of all profits rather above the basic living cost allowance.

With the current system the rich may pay 45% at their top rate on upfront income but their capital gains get taxed far less and their other bonuses and benefits are relatively untaxed. A flat rate tax system can help remove tax avoidance increasing revenue, and can decrease illegal tax evasion.

What is ironic is the mindless rich-bashing jealous pseudo-socialites believe the headline progressive tax rates someone equal net income inequality without e slightest understanding of how the rich earn their wealth and tax their various income revenues.
 
estebanrey said:
You're making the assumption that 'the rich' aren't currently over paying themselves to compensate for the current amounts of tax they are paying and that if they had to pay less they may well demand lower base salaries, leaving a bigger share of the pit for everyone else.
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The rich are all going to give themselves pay cuts? Bwahahahahahaha!!!!

And meanwhile back in the real world...
 
This proposal is incredibly awesome.

Flat rate tax, especially on all the other 'income streams' people can have means an end to sneaky pay and 'image rights' issues and less enforcement costs for HMRC.

I'd imagine the savings mentioned only touch on the tip of the potential.

However, the lack of understanding that people would be paying LESS tax in this thread as a low earner scares the hell out of me. Do people not realise how much they pay in NI !?
 
D.P. said:
Why are some people so dimwitted that they cannot understand the flat rate tax system. :confused:

Just because income tax for the high earners maybe marginally reduced their total tax bill maybe higher because all their sources of income will get taxed equally at 30%. Therefore the total tax revenue may be higher while ensuring a fairer tax system with everyone paying the same proportion of tax on the sum of all profits rather above the basic living cost allowance.

With the current system the rich may pay 45% at their top rate on upfront income but their capital gains get taxed far less and their other bonuses and benefits are relatively untaxed. A flat rate tax system can help remove tax avoidance increasing revenue, and can decrease illegal tax evasion.

What is ironic is the mindless rich-bashing jealous pseudo-socialites believe the headline progressive tax rates someone equal net income inequality without e slightest understanding of how the rich earn their wealth and tax their various income revenues.
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Why are some people so dimwitted they don't realise that the CGT rate is lower than income tax rates at the moment for a reason - to promote investment?

Since a lot of the morally ambiguous tax avoidance is carried out through the use of offshore vehicles I don't see how adopting a flat tax will help to curb that.
 
Really? Did a body that exists to represent the interests of society's richest propose cutting taxes for the richest?!? Why I'm genuinely shocked.
 
Conanius said:
This proposal is incredibly awesome.

Flat rate tax, especially on all the other 'income streams' people can have means an end to sneaky pay and 'image rights' issues and less enforcement costs for HMRC.

I'd imagine the savings mentioned only touch on the tip of the potential.

However, the lack of understanding that people would be paying LESS tax in this thread as a low earner scares the hell out of me. Do people not realise how much they pay in NI !?
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Perhaps if you didn't ignore the sales tax (which would offset the gain & the likely-hood of the removal of services which only the poor rely on).

It's giving with one hand while taking much more with the other.

The average idiot (which is very well exemplified in this thread) will look at the net wage and go "ZOMG I GOT MORE MONIES" while drooling like an imbecile.

Forgetting that after the additional expenses (sales tax, paying for services) that will have a LOWER disposable income at the end.
 
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