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"Single Income Tax"- good idea, or fiscal suicide?

#1
Today, the Taxpayer's Alliance and Institute of Directors published a joint report, advocating a single rate of 30% to be charged for everybody earning above £10,000 P.A., and the abolition of employee's National Insurance and (as far as I can tell at first reading) Capital Gains Tax on private citizens.

To my mind, it makes the system a great deal more transparent and simple, and puts more money in the pocket of the majority of people; whilst the headline basic rate of income tax is 20%, when NI is taken into account, the effective rate is nearly 40%. However, it will necessitate a fall in government spending (or an increase in borrowing), and by extension the shrinking of the State, something I understand some people feel strongly about (not me though- beyond the Armed Forces, NHS, Diplomatic Service, Foreign Office, Police, HMRC, and Education, what bits of the State do we really need?).

But never mind what I think, what do you, the denziens of ARRSE think? are they right, or are they crypto-Thatcherite ideologues seeking to destroy the iron grip of the State over everyday working people?

Report here

Op-ed in the Grauniad here
 
#2
It's incredibly fair.

In countries where it has been adopted tax avoidance & evasion has reduced dramatically. ...thus increasing total tax income.
 

oldbaldy

LE
Moderator
#3
All very well saying 30% & no national insurance but pensions are not liable to NI & anyone of pensionable age does not pay NI on earnings of any kind. I've listened to some commentators today & non of them, so far, have picked up on it being a 10% tax increase for pensioners.
 
K

Kirkz

Guest
#4
What ever the state loses in NI or income tax they will either just up VAT or bang more duty on Cigs, Beer and Fuel!
It's a con just like all the other so called tax simplification measures they dream up.
The rise in the price is to make more money for those with plenty, and the tricks of the trade are to keep the hungry bellies empty!!!
 

jarrod248

LE
Gallery Guru
#5
What ever the state loses in NI or income tax they will either just up VAT or bang more duty on Cigs, Beer and Fuel!
It's a con just like all the other so called tax simplification measures they dream up.
The rise in the price is to make more money for those with plenty, and the tricks of the trade are to keep the hungry bellies empty!!!
Yes, however you'd have more money in your pocket to start with, how you spend it or not is then up to you.
 
#6
Quote from the report:

The overall economic results would be impressive. Dynamic modelling by the
Centre for Economics and Business Research (CEBR) has found that, if the measures
were introduced with no spending cuts:
■■ After five years, GDP would be 1.8 per cent higher; business investment
would be 14.6 per cent higher; and public sector net borrowing would
be £23.1 billion a year higher.
■■ After 10 years, GDP would be 5.9 per cent higher; business investment
would be 26.0 per cent higher; and public sector net borrowing would
be £6.9 billion a year higher.
■■ After 15 years, GDP would be 8.4 per cent higher; business investment
would be 61.2 per cent higher; and public sector net borrowing would
be £35 billion a year lower.

Sounds good to me!
 

Attachments

#8
When I first heard this I wasn't aware they were proposing to bin NI at the same time. For me as a 40% taxpayer it would have made me about £4K worse off. However if we lose NI everyone on basic rate tax would be a little better off. Higher Rate taxpayers would be significantly better off against current income taxed at 40%.

I presume they make the money up with the genuinely high earners no longer bothering with avoidance schemes?

Seems like a nice headline grabber but the Govt will still have to take what it needs, so expect more indirect taxes like VAT, fuel duty, moustache tax, window tax........
 
#9
All very well saying 30% & no national insurance but pensions are not liable to NI & anyone of pensionable age does not pay NI on earnings of any kind. I've listened to some commentators today & non of them, so far, have picked up on it being a 10% tax increase for pensioners.
unless they are currently liable to higher rate tax in which case its debatable.

I like the idea now. How about we do it but I get a referendum on it in another 15 years :)
 
#10
Problem is of course that when you put 10 economists together you get 11 different opinions, so what about just telling the Rothschilds and their mates that the game is up and we no longer intend to pay any interest on their phantom money and that we are going to revalue the realm and start from scratch. Hard times for us but our grandkids will be grateful...it was us that spent it after all.
 
#11
Further quoting from the text, showing extent of all proposed tax reforms and proposed timings (adapted from table 1.2):

- Increase the transparency of Employers’ National Insurance (2013)
- Merge Income Tax and National Insurance and cut the rate to 30 per cent (2016)
- Replace Corporation Tax with a capital income tax (2016)
- Abolish Inheritance Tax (2013)
- Cut Fuel Duty by 1p a litre per year over 5 years (2014-2018 )
- Abolish Air Passenger Duty (2013)
- Abolish Capital Gains Tax (2013)
- Abolish stamp taxes on shares (2013)
- Abolish Stamp Duty Land Tax (2013)
 
#13
The ideology of what constitutes 'fairness' is what stops a single tax rate being widely adopted.

Make 30K pay 3K, make 3million pay 300K. The more you make the more you pay, the less you make the less you pay.

What's not fair?
 
#16
Someone on 30k a year would save about £600. Someone on 100k would save about £10,000. Someone on 15k a year would save about 50 quid. A pensioner on 15k a year would lose £500 a year. But, of course, all the pensioners are rolling in it and can afford it, can't they? If a one size fits all tax rate were to be introduced, it is true to say that countries that have tried have upped the tax take as it is not worth the hassle fiddling it. However, those have tried it reduced it to a lot less than 30%. Singapore was one, I think, but that was only about 10%.
 
#17
The hike on pensioners (old age, or medical) is unfair as that group cannot really do anything to change and up their income, and they've already lost a lot from low interest rates in recent years, and for the newly retired from the private sector lost heaps from more expensive and stingier annuity rates. I don't think it's right to hit them again.

And selfishly, no NI on AFPS either. So ready for that increase?
 

FORMER_FYRDMAN

LE
Book Reviewer
#18
Uncapped NI is income tax by another name and a cyclops-inspired scam. Let's call tax by what it is and argue about the rate without the deception. Completely in favour of merging the two, not so sure about dropping the overall rate so dramatically though.
 
#19
Uncapped NI is income tax by another name and a cyclops-inspired scam. Let's call tax by what it is and argue about the rate without the deception. Completely in favour of merging the two, not so sure about dropping the overall rate so dramatically though.
National Insurance is also paid by Employers so it is not entirely accurate to call it an "Income Tax"

And there are different rates depending on gender and other factors.
 

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