Friday, October 05, 2007

How to Abolish Income Tax

I'm a bit slow off the mark with this, but I have just read the most fascinating post on tax by Devil's Kitchen. He calculates that if we went back to 2002-3 spending levels we could in fact abolish income tax completely. Now there's a thought. Memo to George...

34 comments:

AnyoneButBrown said...

That would mean sacking a lot of Labour voting state employees and quangocrats.
To be honest I'm not sure anyone would notice.....It would also make our public services far more efficient
Great idea DK

Anonymous said...

And it works if you inflate the 2002/03 government spending in line with CPI inflation

Anonymous said...

If the government did, and we all suddenly had a great deal more money to play with; what effect would it have on the economy?

Anonymous said...

But to do that you'd also have to remove 5-6 years of population growth which means ejecting rather a lot of immigrants. Are the Tories really going to advocate that?

Anonymous said...

Income tax should be abolished and replaced with higher consumption taxes (vat). It encourages saving, everyone benefits, especially the low paid who pay more tax as a proportion of their income. See www.fairtax.org

Anonymous said...

On second thoughts, the Tories SHOULD advocate it. Kicking out immigrants and abolishing income tax would be huge vote winners. I'd say they'd guarantee an election win.

Anonymous said...

These spending figures and the resulting debt make Brown look totally incompetent, extravagant and innumerate.

I cannot believe a £150 000 000 000 debt is not a vote loser for Prudence Brown, he should be reminded of it every single time a Government minister tries to slur Tory costing.

I wonder if Jeff Randall's article in the Telegraph today was inspired by DK's post.

Alex said...

Of course coming from UKIP, we shouldn't be surprised that the figures don't add up. Most of that expenditure increase goes on paying salaries, so cutting £160 billion from the payroll would see around £60-70 billion in income tax/NI receipts disappear, so there would be a big gap. Still it does show what a big Ponzi scheme this economy is. With government spending rising at £35 billion a year, the economy would show 3% growth with the private economy flatlining every year.

Anonymous said...

Iain, don't keep us in suspenders, give us your latest and totally wrong poll forecast, can't wait!!

Steven Ronald said...

"replaced with higher consumption taxes (vat). It encourages saving, everyone benefits, especially the low paid who pay more tax as a proportion of their income."

Why do I see this rubbish so often on blogs?? It only benifts the rich because it is regressive taxation. The Rich will get to spend what they like because they can afford to and the poor won't because they don't have much to spend in the first place.

Anonymous said...

Alex

No.

State employees don't actually pay any tax. For each £100 a bureaucrat receives the government pretends to have paid him a bit extra and then pretends to have taken it back in the form of tax. No money changes hands.

The net effect of firing them is that you replace their salary with benefits. This is a large net saving to the exchequer, particularly if they then go and get a real job.

Anonymous said...

The entire method of revenue gathering is antiquated and totally absurd. The method of gathering revenue without a million page of rules is the Transaction Tax. By that taxation system nobody pays anything whatsoever to the government directly, no income tax, no National Insurance, no VAT, no fuel duty. A flat rate of, say, 1% is levied on all bank transactions - in or out. The rate can be adjusted quarterly.
Instead of thousands of Inland Revenue inspectors one needs only one at the HQ of each bank.
Unfortunately, virtually all chartered accountants and all tax lawyers would be redundant - they could pick fruit perhaps?

Victor

Madasafish said...

So
who's going to reduce doctors' salaries by 40% (the rise since then) and nurses' as weel?

And cut MP's salaries..

And cut private sector pensions?
And stop funding Railtrack?
And put all the single mums back to work.?

And tell the Post Office to cut wages by 50%..


And cut teh Armed Forces wages? (big increase there)

And of course cancel the two new carriers.

And stop the Iraq war NOW
And abandon Afghanistan NOW.

Just a few examples.

I'll do it..
Bet MPs will not...

Anonymous said...

Steven Ronald said "Why do I see this rubbish so often on blogs?? It only benifts the rich because it is regressive taxation. The Rich will get to spend what they like because they can afford to and the poor won't because they don't have much to spend in the first place"

The rich would pay more tax as they consume more. Why are people on mimimum wage being taxed?

Anonymous said...

madasafish, are you any relation to bagaoffrogs?
seriously, though, you have a fundamental disagreement with anonymous (crazy name, crazy views!) of 8.18pm. This absurd idea to replace income tax with indect "consumer" tax depends on society accepting that poor people want to be poor, and will feel sograteful for not having to pay £5 per month paye that they will happily forego the vatable consumables that those of us on £squiilkions (net /gross) are , martyr-like, expending on fattening goods.

Laurence Boyce said...

Why stop there? Let’s go back to nineteenth century levels of spending, then we’d have such a massive surplus that no-one ever need work again.

Anonymous said...

laurence - love to max!
King John remind you of GB?
That magna carta thing was such a pain, we were so much happier in the 12th century.

Anonymous said...

Anonymongs advocating cutting income taxes rather than transaction taxes you really are woefully ignorant of basic economics - the point is that the rich spend a smaller proportion of their income than do the poor. Cutting transaction taxes benefit the poor far more than the rich.

Furthermore, transaction taxes have a heavily distortionary effect on the transactions themselves reducing the effeciency of the economy, by reducing the ability of the market to function effectivly. While the same may also be said of income taxes, levying them at a single location (the point of income) and at a predictable rate reduces the impact tax has on efficiency. Such is the argument for tax simplification and tax flattening once a favorite of George O.

If you would like to understand this (with helpful diagrams &c.) I can recommend a simple A-level text book like Begg, Fischer and Dornbusch 'Economics', it might be a productive read for you.

Anonymous said...

Hi
I'd like to make it clear that I'm no way related to "john", and dissociate my self entirely with his shameless peddling of distorting tracts relating to "Econonmology" or whatever that strange sect is called. He has reminded me, however, that my workplace door-pass contains an unused weekly meal allowance of £3.94 which my company won't carry over to next week, so I'll have to try and remember my cashpont PIN if I'm to buy my kids their crisps this week-end.

Anonymous said...

Memo to George from Iain Dale:

1) Advocate cutting salaries to nurses, doctors, teacher substantially (by around 20%).

2) Renege on pensions to people in these groups who have retired since 2002/3.

3) Cut lots of other things

4) Abolish income tax.

5) Establish "clear blue water" between you and the other parties.

6) Lose the next election handsomely

7) Accept the gratitude of all other parties.

Anonymous said...

I'd like to dissociate myself entirely from John and his shameless peddling of socialist propaganda in the form of a ITV-drama-able sob story. I have one thing to say to him:

You children need to get on their bikes, and start looking for jobs, and not get off their bikes until they find them.

Anonymous said...

Seriously, for which I have to thank tim, can you provide me with chapter and verse on why the IHT is not a "double" tax? I kow IHT is the most singular of all taxes, because the IH it has not been earned by the beneficiary at all, but I'd like to be able to point out that all taxsation is ee-taxation, my wages come out of taxed profits, which come out of taxed spending, etc, but I can't think of the pithy words my eminent co-thinkers are capable of. Any ideas?

Anonymous said...

"john" - you've mistaken "peddling" with "pedalling" but I forgive you.
I wonder if Tebbit's dad would approve of all this communication? ps
My last effort came from Typo-Hell, but I hope you get my drift, and would appreciate some brains on the subject.
Yours from the Close
John

Ed said...

Furthermore, transaction taxes have a heavily distortionary effect on the transactions themselves reducing the effeciency of the economy, by reducing the ability of the market to function effectivly.

Which is presumably why Labour insist on raising so much money from property transactions, capital gains and stamp duty on shares?

Glad someone at the Treasury reads books.

Anonymous said...

Slash the number of quangos and you could save a packet without having to touch the wages of nurses, doctors, soldiers etc.

Put a stop to the consultation culture as well. What are we paying the Government and civil service for if all they do is absolve themselves of responsibility by getting a consultant to report exactly what they want?

Anonymous said...

nice one, ed! Are you the editor,or moderatrix of this stream of rubbish? I sense we might vote differenntly, but I'm happy to listen to sense. Any ideas on how I can explain to my numpty friends that a £270k gift to estates worth £1m or more is anathema to communal prosperity? Or that a £2500 present to First time purchasers of £250k mansions is a spit in the acceptable face of capitalism? I can't find teh words, all I;m getting is "voting Toru is nothing to be guilty about" and, wealth trickles down to the needy. Help!

Anonymous said...

git to go, jonathan ross is on.
How much could we save if we abolish him and his like?

Mulligan said...

And abolish the BBC.

But not until 2012 after they've moved into their new media centre on Salford Quays and upped the price of my nice off plan apartment. (procured on sub prime loans that Gordon encouraged me to take on)

Anonymous said...

I think worrying about double taxation is not the most appropriate thing to do. At one level IHT is clearly double taxation (because capital is being taxed, not just interest), but on the other hand there is no CGT on owner occupied property, so you could argue that IHT is supposed to approximate to that, with the large allowance to cover the double taxation element.

Instead we should ask:
1) Is the tax revenue raised at low administrative cost to government, tax payers and their agents (employers for PAYE)
2) Is it distortionary in a bad way (we can all agree that window taxes are silly)
3) Is it distortionary in a good way (market correcting, such as green taxes, alcohol, tobacco)
4) Is the overall tax system appropriately regressive/neutral/progressive (delete according to political preferences). There is little to no point looking at the stance of a particular tax, only at the overall effect.
5) Does it raise the amount of money you want with the minimum amount of complaints (cf Colbert).

Anonymous said...

Why are non doms not having to pay income tax on worldwide income then?

Anonymous said...

One of the many Johns recommended to me an A level text [at 9pm].
I am a little beyond that, thank you, John. Your counter is specious. Poor people would only pay as much transaction tax as their income allowed. The rich, who spend much more, will pay a very much greater proportion of the tax. For example, they would pay over their Transaction Tax on anything other than money permanently saved. I wish I could underline permanently. Moreover. they would have paid the transaction tax when they acquired.

The great bonuses attached to this form of taxation are the elimination of some billions of hours annually on collating inforamtion for taxation procedures and perhaps even more startling that tax avoidance or evasion becomes impossible. Even a brothel keeper will eventually have to do something when every mattress has becomed stuffed with currency.

But, perhaps you are a Chartered Accountant or a tax lawyer? If so, the thought is too horrendous to contemplate. Or perhaps you are employed by HMCR and fear for your job?

If you wish to learn something about this then you can Google - ATT Tax or Professor Feige.

Victor

Anonymous said...

David said...
"But to do that you'd also have to remove 5-6 years of population growth which means ejecting rather a lot of immigrants. Are the Tories really going to advocate that?"

Of course not. The tories haven't got the balls for it.

Anonymous said...

by putting forward admitedly timid proposals on inheritance tax and stamp duty, the Conservatives have very cleverly managed to turn the media spotlight on Labour government spending *without* becoming victims of the Labour traditional "cuts in public services!!" dog whistle.

Taxation and government waste is now firmly on the agenda (listening to "Any Answers" on Radio 4 now)

Devil's Kitchen said...

Before we get into an argument, I wasn't advocating abolishing income tax.

I was merely pointing out that enormity of the growth on government spending in only few years. Income tax is a useful measure, because the vast majority of us pay it.

DK