The labour Leader thread...

I wonder if we will ever get a debate about VAT. It is one of the most regressive taxes there is.
It depends how you measure the impact. If you do it by income, there's some truth in that. If you do it by expenditure, it's progressive. If you do it by household income, it's mildly progressive. If you do it in comparison with utility bills, and effect on income, it's very regressive.

Don't forget, it's not a simplistic comparison. The effect of VAT far easier to mitigate than utility bills. We can all cut utility bills to the bone, and the poorest already do, but beyond a certain point, we all need to heat homes and cook. We can't avoid that. But we can avoid the vast bulk of VAT. All you need to do is to concentrate on what you buy in supermarkets. Most foodstuffs are zero-rated, but I wonder how many people have ever noticed the little asterisk, or "V" on some items on their bill? Don't buy items with that, typically 'luxury' items, and your bill's VAT drops.

Of course, as soon as you start buying computers, fancy smartphones, TVs, cars, etc, you start to get clobbered by VAT, and the more you spend, the more you get clobbered. Buy a £50k Mercedes and you'll pay more on that alone than the average family does in several years.

Of course, one exception to that is petrol/diesel. But then, the poorest can't afford cars anyway. Neither rent nor mortgage are subject to VAT, and a fair few other essentials aren't either.

The biggest single factor, though, is that any conventional definition of regressivity relies on a simple comparison of income, not allowing for the fact that the percentage of income that is expenditure drops rapidly as income rises. The so-called regressive effect of VAT relies almost entirely on that, and ignores the effect on the impact of the tax on income levels.

If you load up tax increases on VAT, the bulk of that increase will be paid by the better off simply because their expenditure is much higher, and the proportion of tgat expenditure on VAT-able items, like TVs or £50k Mercedes is far, far higher. The poorest, on the other hand, spend virtually their entire income on essentials, like rent, food, etc, which either have no VAT the first place, or where the effect can be minimised by choosing what to buy or not buy in the supermarket. They can minimise or avoid VAT, but can do very little about green charges loaded onto energy bills.

The wealthier, of course, can impact energy bills. You can thoroughly insulate your home, have argon-filled double or triple glazing, you can run solar panels, ground-source heat pumps, etc. You can even switch to induction hobs, and LED lighting, etc. If you can afford to.
 
In my ideal world, a man could live modestly on a modest income, in a modest house, and not struggle all the time to make ends meet. He might not have every material possession known to man, but he wouldn't be living in debt or fear for the future.

That man could be a cleaner, a road sweeper, or a factory worker. All jobs that need doing.

I don't believe that you need to punish those at the bottom to incentivise study and hard work. Nor do I believe that low-earners don't work hard.

In the real world, a man on a modest income gives most of his money to those better off than he is. Ie, his landlord, etc.

And then of course you have the ridiculous situation where some people can choose to not work, but instead have a few kids, and the state will pay for everything.

You have to accept that there is a lot wrong with our society at both ends. The massive wealth gap between rich and poor, and the stupidity of making benefits more attractive than work for a whole generation of chavs. No idea why we lurch from one extreme to the other.

problem is you cant really punish kids for thier parents asshattary.
 
It deepends how you measure the impact. If you do it by income, there's some truth in that. If you do it by expenditure, it progressive. If you do it by household income, if's mildly progressive. If you do it in comparison with utility bills, and effect on income, it's very regressive.

Don't forget, it's not a simplistic comparison. The effect of VAT far easier to mitigate than utility bills. We can all cut utility bills to the bone, and the poorest already do, but beyond a certain point, we all need to heat homes and cook. We can't avoid that. But we can avoid the vast bulk of VAT. All you need to do is to concentrate on what you buy in supermarkets. Most foodstuffs are zero-rated, but I wonder how many people have ever noticed the little asterisk, or "V" on some items on their bill? Don't buy items with that, typically 'luxury' items, and you bill VAT drops.

Of course, as soon as you start buying computers, fancy smartphones, TVs, cars, etc, you start to get clobbered by VAT, and the more you spend, the more you get clobbered. Buy a £50k Mercedes and you'll pay more on that alone than the average family does in several years.

Of course, one exception to that is petrol/diesel. But then, the poorest can't afford cars anyway. Neither rent nor mortgage are subject to VAT, and a fair few other essentials aren't either.

The biggest single factor, though, is that any conventional definition of regressivity relies on a simple comparison of income, not allowing for the fact that the percentage of income that is expenditure drops rapidly as income rises. The so-called regressive effect of VAT relies almost entirely on that, and ignores the effect on the impact of the tax on income levels.

If you load up tax increases on VAT, the bulk of that increase will be paid by the better off simply because their expenditure is much higher, and the proportion of tgat expenditure on VAT-able items, like TVs or £50k Mercedes is far, far higher. The poorest, on the other hand, spend virtually their entire income on essentials, like rent, food, etc, which either have no VAT the first place, or where the effect can be minimised by choosing what to buy or not buy in the supermarket. They can minimise or avoid VAT, but can do very little about green charges loaded onto energy bills.

The wealthier, of course, can impact energy bills. You can thoroughly insulate your home, have argon-filled double or triple glazing, you can run solar panels, ground-source heat pumps, etc. You can even switch to induction hobs, and LED lighting, etc. If you can afford to.

insurance premium tax is one i never understood

Government: "you must have insurance....oh and btw you must pay tax on your insurance!!"
 
problem is you cant really punish kids for thier parents asshattary.

Could cap benefits, and harsh as it sounds, mandatorily put their kids up for adoption. A lot of these "parents" have drug problems, abuse, violence, etc. You see it an awful lot down here.
 
Could cap benefits, and harsh as it sounds, mandatorily put their kids up for adoption. A lot of these "parents" have drug problems, abuse, violence, etc. You see it an awful lot down here.

but they don't get adopted they get put into care and as many recent news stories have shown kids in care quickly become prey to the animals we have here.
 
insurance premium tax is one i never understood

Government: "you must have insurance....oh and btw you must pay tax on your insurance!!"
When governments want to raise revenue, tbey tax things where demand elasticity is low. If it isn't, the effect tends to be behaviour change, and the more elastic, the more behaviour changes. That's why petrol, booze and fags get regularly clobbered. Demand inelasticity.

So, what's more inelastic that something with a statutory requirement to have it? Like car insurance.

You could give up having a car (or motorbike, etc)? No? Thouht not. :D

You could drive without insurance? With the increasing prevalence of both fixed ANPR cameras on major routes, and patrol-car ANPR, you'll increasingly be likely to pay in fines if not insurance tax.

That is, they tax insurance because they have a captive audience, and know it.

Of course, not all insurances are "required". Home insurance isn't .... unless you have a mortgage. But if you opt out, don't get burgled or let your house burn down, get flooded, etc. :D
 
When governments want to raise revenue, tbey tax things where demand elasticity is low. If it isn't, the effect tends to be behaviour change, and the more elastic, the more behaviour changes. That's why petrol, booze and fags get regularly clobbered. Demand inelasticity.

So, what's more inelastic that something with a statutory requirement to have it? Like car insurance.

You could give up having a car (or motorbike, etc)? No? Thouht not. :D

You could drive without insurance? With the increasing prevalence of both fixed ANPR cameras on major routes, and patrol-car ANPR, you'll increasingly be likely to pay in fines if not insurance tax.

That is, they tax insurance because they have a captive audience, and know it.

Of course, not all insurances are "required". Home insurance isn't .... unless you have a mortgage. But if you opt out, don't get burgled or let your house burn down, get flooded, etc. :D

and its going up by 50% this year too :(
 
... and harsh as it sounds, mandatorily put their kids up for adoption. ....
Good luck finding even an MP stupid enough to risk the PR lynch mob that would lead to. However much sense it may make, and I'm not supporting it either, it's politically undoable. It's not even politically suggestible. The media would have a collective conniption fit, and the backlash would make the rodgering Corbyn has been getting seem like a bouquet of flowers from an ardent admirer by comparison. I bet any MP would go pale and break out in a muck sweat at even the thought of advocating that.
 
That's one approach, an alternative approach favoured by Japan is to just not give it to them in the first place.

not being familiar with Japanese economics, how do they stop rich people earning money?

is there a law saying ceos must only be paid X amount? or they can only own a certain number of shares etc?
 
not being familiar with Japanese economics, how do they stop rich people earning money?

is there a law saying ceos must only be paid X amount? or they can only own a certain number of shares etc?

I want the pay gap to close but I don't agree with hamstringing those at the top, we should be aiming to raise opportunity for those at the bottom.
 
I want the pay gap to close but I don't agree with hamstringing those at the top, we should be aiming to raise opportunity for those at the bottom.

ok so you've "raised opportunity", everyone who can be a doctor, or lawyer, or school teacher etc is, brilliant, amazing job pats on the back all round.

you still need the same number of checkout staff, bog cleaners and and hotel maids as you did before?


whose going to do those jobs now?
 
I want the pay gap to close but I don't agree with hamstringing those at the top, we should be aiming to raise opportunity for those at the bottom.

But at the same time, with unlimited opportunity, you still need people to be factory workers, road sweepers, etc.

Why should everyone aspire to be a lawyer or a banker?

Can't we have a society where a worker can live on a modest income and enjoy his life? Without being a slave to his landlord, etc.
 
Not everyone will have those aspirations though.

And since when did opportunity translate to being a doctor etc etc?

i was just picking the generic above minimum wage jobs.

you give all the opportunity you can so everyone moves up a bit, but someone still got to do those low paid crappy jobs.

so no matter how many people you raise up you're gonna end up with exactly the same number as before (if not more) at the bottom creating the divide in equality.

which means you're not gonna solve your problem.
 
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