Tax Credits

antrobus

zagfles wrote: »

As I said - you could have some form of conditionality, similar to the WTC & JSA conditionality.
You only get it if you are working a certain number of hours, or seeking work. Obviously with the current exceptions such as over state pension age, disabilities, caring for a young child etc.....

That's not Green Party policy. The defined basic income (aka citizen's income) as a "guaranteed, non-means-tested income, sufficient to cover basic needs, payable to every woman, man and child legally resident in the UK."

Perhaps Green Party policy isn't as "sensible" as you think it is?

zagfles wrote: »

... You don't need any thresholds. You probably don't need NI at all, it serves no purpose without contributory benefits. It would be rolled into income tax. CI would apply to pensioners too (at a higher rate).

Accept that, of course, for the small matter of the £110bn or so raised in the form of NI contributions.

zagfles wrote: »

...Pensions tax relief wouldn't really serve any purpose in a flat rate tax environment, you get relief on contributions but then pay tax at the same rate on your pension. Other than the PCLS, that could be preserved in some form as an incentive to save for old age.

What "flat rate tax environment"? First of all, a flat rate tax is something else entirely, and secondly, it ain't Green Party policy.

zagfles wrote: »

...It's all theoretical anyway - no chance of it happening. Politicians on all sides are obsessed with getting headline tax rates down, this would be a massive hike in tax rates. They prefer underhand ways of increasing marginal rates such as benefit/tax credit withdrawal rates, NI on both employers and employees (real "tax rate" on a basic rate taxpayer in a normal job is 45%), withdrawal of personal allowance for high earners etc.

As long as headline tax rates are kept low to con the gullible into thinking their taxes are low.

That's about it. There is "no chance of it happening" because it "would be a massive hike in tax rates". That would be the point.

It would be why the Liberal Democrats abandoned the policy after 1992. They apparently crunched the numbers and came up with a basic rate of 70%, and decided that wasn't such a good idea.:)

zagfles

antrobus wrote: »

That's not Green Party policy. The defined basic income (aka citizen's income) as a "guaranteed, non-means-tested income, sufficient to cover basic needs, payable to every woman, man and child legally resident in the UK."

Perhaps Green Party policy isn't as "sensible" as you think it is?

I don't know (nor really care) about the specifics of Green party policy. I was suggesting a particular form of CI which combines with a flat rate income tax.

Accept that, of course, for the small matter of the £110bn or so raised in the form of NI contributions.

NI is basically a tax, so why not just admit it and call it one?

What "flat rate tax environment"? First of all, a flat rate tax is something else entirely, and secondly, it ain't Green Party policy.

As above. Don't care about Greens policy - CI combined with a flat rate tax is what I was talking about.

That's about it. There is "no chance of it happening" because it "would be a massive hike in tax rates". That would be the point.

It would be why the Liberal Democrats abandoned the policy after 1992. They apparently crunched the numbers and came up with a basic rate of 70%, and decided that wasn't such a good idea.:)

That was 20 years ago, it would be nowhere near 70% now particularly with conditionality attached as I said above.

If you include conditionality, the current tax & benefits system is pretty much identical to having a CI, but instead of flat rate income tax there's a much higher "tax rate" (ie including benefit withdrawal rates) on the poorest, those with big families etc.

It's smoke and mirrors. Just like the personal allowance withdrawal for those on high incomes is identical to having a 60% tax rate starting at £100,000 and dropping back to 40% £121,200. So instead of withdrawaing the PA, why not just set a 60% tax band there?

Because it would make a mockery of a supposedly "progressive" income tax system with rates going up and down. And the govt would have to admit to a high tax rate instead of convincing the stupid that income tax rates don't exceed 45%.

Same applies to tax credits withdrawal rates, same to benefit withdrawal rates.

CI simply replaces benefit withdrawal with tax. You know, pretty similar to how the NHS, schools etc work. People seem quite happy for the state to provide some of our basic needs such as healthcare and education in a (mostly) non means tested way paid for by taxation. Why not other even more important basic needs like housing, food etc? Just because people pay directly for those :rotfl:

Meanwhile, people with a bit of nouse like michaels will find ways to spread their income over their lifetimes to take full advantage of the difference in "tax rates", getting "tax relief" when they're subject to high marginal rates of "tax", eg getting tax credits for a family, then paying the tax when they're subject to lower rates, eg when kids have grown up. And numpties will sit in moral judgement rather than looking at the warped system which it results from.

michaels

I am actually very much in favour of both combining tax and NI and a citizens income. What I have in mind is something that gives a very basic quality of life - shared accommodation etc with the state or third sector providing this at a rate that reflects the level of 'income' for those who can't find or don't want private sector provision - ie all adults gets £80 per week towards housing (40 for each child), if they can't find housing for this they can forgo the benefit and stay in the govt hostel, similarly with a food allowance / state kitchens etc.

The govt cold also provide fair priced unemployment etc insurance for those who want to avoid the risk of only ending up on the basic income if they lose their jobs, against which the private sector could obviously compete.

The bit I do disagree with is whether the required income tax should be progressive or not. I agree all 'allowances' should be removed but I can still see a place for a couple or 3 rates, but time to do the maths to see what rates would be needed.

Would 35% 0k up to 40k, 45% up to 100k and 50% thereafter generate enough to pay for it? Hopefully there would be big gains from deterring the black economy, benefits cheating and disincentives to work.

I wish I had time to do some sums. Anyone willing to say whether they would be better or worse off under this scenario? Lets assume we abolish pension tax relief at the same time but instead allow pension ISAs of whatever value people wish each year.

I get about 60k plus 5k pension so would pay 35% x 40k and 45% x 25k = 25,250k tax. Compared to now 18,900 (assuming 5k of pension taxed at 20% when I get it after retirement). But then I would also get my citizens income of say 3k and then so would my wife get her 3k and my 3 kids their 1.5k each.

Thoughts?

zagfles

michaels wrote: »

I am actually very much in favour of both combining tax and NI and a citizens income. What I have in mind is something that gives a very basic quality of life - shared accommodation etc with the state or third sector providing this at a rate that reflects the level of 'income' for those who can't find or don't want private sector provision - ie all adults gets £80 per week towards housing (40 for each child), if they can't find housing for this they can forgo the benefit and stay in the govt hostel, similarly with a food allowance / state kitchens etc.

The govt cold also provide fair priced unemployment etc insurance for those who want to avoid the risk of only ending up on the basic income if they lose their jobs, against which the private sector could obviously compete.

The bit I do disagree with is whether the required income tax should be progressive or not. I agree all 'allowances' should be removed but I can still see a place for a couple or 3 rates, but time to do the maths to see what rates would be needed.

Would 35% 0k up to 40k, 45% up to 100k and 50% thereafter generate enough to pay for it? Hopefully there would be big gains from deterring the black economy, benefits cheating and disincentives to work.

I wish I had time to do some sums. Anyone willing to say whether they would be better or worse off under this scenario? Lets assume we abolish pension tax relief at the same time but instead allow pension ISAs of whatever value people wish each year.

I get about 60k plus 5k pension so would pay 35% x 40k and 45% x 25k = 25,250k tax. Compared to now 18,900 (assuming 5k of pension taxed at 20% when I get it after retirement). But then I would also get my citizens income of say 3k and then so would my wife get her 3k and my 3 kids their 1.5k each.

Thoughts?

The problem with "progressive" tax rates is they create anomilies, such as why should someone with variable income who earns, say, £60k one year then £20k the next, pay more tax than someone who earns £40k both years? Why should a family with one earner on £50k and the other on £10k pay more tax than a family with 2 earners on £30k? Same total incomes, different tax.

I'd go for a higher CI with conditionality, perhaps at the level of out of work benefits now, and flat rate tax. Together they are highly progressive since the net contribution to the state (tax minus CI) is a higher % of income the higher the income is. Far more progessive than the current system. And no anomilies, the gain from earning the same wage is the same for everyone.

cells

michaels wrote: »

I am actually very much in favour of both combining tax and NI and a citizens income.

Would 35% 0k up to 40k, 45% up to 100k and 50% thereafter generate enough to pay for it?

would need income data for a true go at it but a basic go is...

Income tax is ~£165B
NI ~£110B

Assuming the NI split is roughly half employee and half employer tax it would be a stright 33.3% increase in a 'super income tax' without the NI

0% upto £10,600
26.7% for the next £31,800
53% for the next £118,000
60% for anything over that

anyone earning less than ~£70k would be better off
Someone earning £100k a year would be ~£3k worse off
Someone earning £1m a year would be ~£165,000 worse off

Edit: As a pure guess you can scrap the 60% band and reduce the 53% band to 50% if you upped the 26.7% band to 30%. In which case it would be 0% upto £10k 30% for the next £32k and then 50% for anything over. the break even point would be ~£50k income.
EDIT 2: actually investment income isnt charged NI and would fall into this new tax so the 50% rate or 30% rate can be reduced by i have no idea how much but down for sure

cells

zagfles wrote: »

The problem with "progressive" tax rates is they create anomilies, such as why should someone with variable income who earns, say, £60k one year then £20k the next, pay more tax than someone who earns £40k both years? Why should a family with one earner on £50k and the other on £10k pay more tax than a family with 2 earners on £30k? Same total incomes, different tax.

I'd go for a higher CI with conditionality, perhaps at the level of out of work benefits now, and flat rate tax. Together they are highly progressive since the net contribution to the state (tax minus CI) is a higher % of income the higher the income is. Far more progessive than the current system. And no anomilies, the gain from earning the same wage is the same for everyone.

I always thought the tax bands should be accumulated over the years past age 16

So any years you don't work all the tax bands are available in the years after

likewise if you don't make full use of your 20% band this year it would be available the next year

so that would help greatly the problem you identify. of course there would have to be huge changes to the rates and bands etc.

cells

Maybe a way to help the workers would be to increase the personal tax allowance band to £15,000 and also the point of NI to the same figure.
Double council tax or fuel duties to pay for it.

Mistermeaner

I would prefer more tax on consumption and lifestyle - just me being selfish but I earn 'ok' but spend little living well within my means; I'd like to see more 'wealth' tax but on the spending eg much higher council tax for higher value homes and higher vat, especially on luxury goods and even a punitive 'decadence' tax for pointless tat like jewellery and tattoos.

When I run for pm I might keep this stuff quiet.

cells

Mistermeaner wrote: »

I would prefer more tax on consumption and lifestyle - just me being selfish but I earn 'ok' but spend little living well within my means; I'd like to see more 'wealth' tax but on the spending eg much higher council tax for higher value homes and higher vat, especially on luxury goods and even a punitive 'decadence' tax for pointless tat like jewellery and tattoos.

When I run for pm I might keep this stuff quiet.

if everyone spent very little living well within their means (and presumably savings other peoples debt) the system would collapse and what you would have is people spending very little and also earning very little too

Mistermeaner

I never thought of myself as an anarchist. Smash the system man!