Flat Rate Tax. Is It A Good Thing?

[Rain'ard]

Has anyone got an opinion on the shadow chancellor’s proposal of a flat rate of tax at 22%

I thought to myself, how is this going to be paid for, then I read this

“It said under this model the Treasury would face a £50bn shortfall during the first and possibly the second year, but this could be filled through either Government efficiencies or short-term borrowing.”

£50b is lot to find by skimping on paper clips, and the short term borrowing.

Edited for too may zeros

Edited September 8, 2005 by wheresmyfoxhole

[Numani]

has the report been published yet?

Its a good idea along with scrapping the complex benefits etc. Streamline the whole thing.

will save loads of costs.

Whether UK can withstand the possible widening of fiscal deficit whilst costs are saved and hopefully an increase in ecomomic activity that will raise tax revenues down the line is another matter.

[FreeFall]

Sounds like another barmy idea to me.

I'm a high rate tax payer, and if I had my way I'd introduce another level of tax at 45% for those who earn more than X per year (say 250k). Heaven knows the government coffers need it at the moment.

Now, if only we could guarantee that our tax money won't be squandered on employing 000's of new government employees to make services even more bloated and inefficient.... :angry:

[ThePiltdownMan]

£50b is lot to find by skimping on paper clips, and the short term borrowing of 100k for every person in the country is a bit mind boggling.

Edited for too may zeros

<{POST_SNAPBACK}>

Shouldn't that be 1k per person? Not so mind boggling really.

Well worth it really for the satisfaction of seeing hordes of public sector parasites forced to make a living in the real world.

[Nijo]

Oh come on, a flat rate tax is utterly bonkers.

[non-FTBer]

I think flat rate tax is a very good idea.

Far more fair, and it gives an incentive to work harder to get a better job.

With the current situation, as someones pay increases they lose tax credits, making it less important to get pay rises (as they have little real effect). Also as people hit the higher tax band, this further reduces the benefits of any pay rises.

WTF would people work harder and get ahead for such minimal returns as we get now??

Although I do understand that under this proposed system it would benefit the higher tax payers more than others.

[delboypass]

Did they not say the flat tax rate would need to be set at 37% to match the tax system in place today.

As just below the higher tax band, I would not be in favour of it as i would be getting taxed double.

The break even point where you are better off is at £250,000k. Should be there soon.....

[MarkG]

Now, if only we could guarantee that our tax money won't be squandered on employing 000's of new government employees to make services even more bloated and inefficient....

That's precisely what will happen to any tax increase! Why would any sane person support stealing more money from productive people and giving it to worthless government make-workers?

If you want to get rid of the inefficiency and bloat, then you should be calling for massive _cuts_ in taxes, not increases. The only way government will become small and efficient is if it's starved of funds... and, even then, it's still probably going to find plenty of ways to waste vast amounts of money.

WTF would people work harder and get ahead for such minimal returns as we get now??

Indeed. For every extra pound I earn, I see about 59p... and then if I spend it, I actually get 50p of value from it if it's VAT-taxed, or about 20p of value from it if I buy petrol.

What's the point of working harder and making more money when the government steal 50-80% of any extra pound I earn? Screw being a slave to 'government workers'.

[brownbear]

That's precisely what will happen to any tax increase! Why would any sane person support stealing more money from productive people and giving it to worthless government make-workers?

If you want to get rid of the inefficiency and bloat, then you should be calling for massive _cuts_ in taxes, not increases. The only way government will become small and efficient is if it's starved of funds... and, even then, it's still probably going to find plenty of ways to waste vast amounts of money.

Indeed. For every extra pound I earn, I see about 59p... and then if I spend it, I actually get 50p of value from it if it's VAT-taxed, or about 20p of value from it if I buy petrol.

What's the point of working harder and making more money when the government steal 50-80% of any extra pound I earn? Screw being a slave to 'government workers'.

<{POST_SNAPBACK}>

A flat rate tax would be grossly unfair. Newsnight looked at it last night and, to sum up, the richer you are the more you benefit. Right wing lunatics from the Adam Smith Institute are in favour, which would worry anyone of sound mind.

The point of a flat rate tax is political. The government takes less tax, and either has to reduce public spending, or increase its deficit. Spending eventually has to be reduced anyway, and essential services (like paying for flood protection in New Orleans) are cut back or privatised.

But you're OK MarkG, because you are paying less tax. it doesn't matter that you pay far more money to private medical insurers than you would for the NHS, to private security firms than you would for the Police , higher insurance rates, etc, etc. Its your money and not the State's and you can spend it how you will. Who cares if the country is a little more squalid afterall?

Perhaps we could look at tax avoidance schemes created by the Big 4 accountacny firms which cost the UK billions. Perhaps CSR could include large corporations actually paying their share, and rich individuals paying their dues to society. These two measures would be worth several pence on our progressive tax system.

[MarkG]

Who cares if the country is a little more squalid afterall?

HOW COULD THIS COUNTRY BE ANY MORE SQUALID THAN IT CURRENTLY IS?!?!?!?!

The police are worthless, the NHS is a shambles... and you want to throw _MORE_ money at them? This country is a mess precisely because governments have been stealing more and more money and giving it to 'public services' which achieve less and less.

At least with private security the poor would have someone to look after them, because the police sure don't give a damn.

Democratic governments exist to steal money from some groups and give it to others to buy votes. That's all they do. Any actual good that's achieved in the process is a coincidence.

Edited September 8, 2005 by MarkG

[erd]

Did they not say the flat tax rate would need to be set at 37% to match the tax system in place today.

As just below the higher tax band, I would not be in favour of it as i would be getting taxed double.

The break even point where you are better off is at £250,000k. Should be there soon.....

<{POST_SNAPBACK}>

I would expect it to be around 35%. But think about it, that includes tax + NI payments (22 + 11%). Also remember that the tax free limit would be at least double what it is now. A much simpler tax system requires much less work by the government and every company employing people in the country after the first year that is.

Long term it is the only way to go.

[Rain'ard]

Shouldn't that be 1k per person? Not so mind boggling really.

Well worth it really for the satisfaction of seeing hordes of public sector parasites forced to make a living in the real world.

<{POST_SNAPBACK}>

Okay, sorry was using English billion 10 x power 12

Financial reports use US billion 10 x power 9

Sorry to mislead

[laughing_goat]

Has anyone got an opinion on the shadow chancellor’s proposal of a flat rate of tax at 22%

I thought to myself, how is this going to be paid for, then I read this

“It said under this model the Treasury would face a £50bn shortfall during the first and possibly the second year, but this could be filled through either Government efficiencies or short-term borrowing.”

£50b is lot to find by skimping on paper clips, and the short term borrowing of 100k for every person in the country is a bit mind boggling.

Edited for too may zeros

<{POST_SNAPBACK}>

I believe Estonia paid off their national debt by having a flat rate of tax. Not sure how long it took though.

The savings are apparently in admin and encouraging high earners to stay in the country.

[brownbear]

HOW COULD THIS COUNTRY BE ANY MORE SQUALID THAN IT CURRENTLY IS?!?!?!?!

The police are worthless, the NHS is a shambles... and you want to throw _MORE_ money at them? This country is a mess precisely because governments have been stealing more and more money and giving it to 'public services' which achieve less and less.

At least with private security the poor would have someone to look after them, because the police sure don't give a damn.

Democratic governments exist to steal money from some groups and give it to others to buy votes. That's all they do. Any actual good that's achieved in the process is a coincidence.

<{POST_SNAPBACK}>

Clearly you are writing from Louisiana, not London. I mean, obviously the only way forward for us is to privatise everything that hasn't been sold off. We'd pay no tax at all then. (Apart from the icreased subisdies for private companies in the railways, major projects etc to cover the extra "risk" they take. LOL)

And, of course, business is altruistic. I know they're obliged to put shareholder value above everything, and are not democratically accountable in the sense that we can actually vote for them, but clearly they worry about the environment, and greater public good. Take Tesco for example. They don't really want to destroy the average High Street with. It just an unfortunate by-product. Or Jarvis. An ultra efficent company that only used sub-contracted engineers for the best of reasons (sorry about Potters Bar and all that).

Democratic governments exist to allocate scarce resources, and to provide security for the people (amongst many other things). Your free market fundamentalism is, at last, on the wane, in part thanks to the less than shining

example of its limits from across the Atlantic.

[laughing_goat]

I believe Estonia paid off their national debt by having a flat rate of tax. Not sure how long it took though.

The savings are apparently in admin and encouraging high earners to stay in the country.

<{POST_SNAPBACK}>

Sorry I ment to explain myself but got a bit handy with the 'add reply' button.

From what I gather (I may be wrong), the rate stays the same, so those under the 40% tax bracket would not be effected (not sure what happens at the lower end). The cost of adminstration of the various tax bands and tax credits etc, would be saved (don't underestimate how much that could be), and the retension of higher earners and business investment also generates revenue.

I can understand why on first glance it seems very right wing, but if implimented properly it might be a good thing.

I have to admit, I haven't entirely made my mind up yet. I'm going to have a little scout around the internet in what's left of my lunchtime. I'll get back to you if I find anything informative.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Seeing that Estonia and Russia have adopted flat tax (and the neo-cons in the US think it's a great idea)...............

I suspect more mafia-run E European countries will follow in their footsteps.

Who in Germany is proposing flat tax?

Edited September 8, 2005 by gruffydd

[Guest Guy_Montag]

HOW COULD THIS COUNTRY BE ANY MORE SQUALID THAN IT CURRENTLY IS?!?!?!?!

<{POST_SNAPBACK}>

So speaks someone who has no idea how lucky he is.

[Wishful Thinking]

Why not REDUCE the tax for low income earners, say under £20K a year. Scrap the tax credit system to encourage more people into work = more tax money for the government coffers... Make working worthwile again. No reason why they couldn't also increase the tax for the very high income earners.

I just heard on the news (BBC4 this morning) how lots of people have been overpaid their tax credits, which they will later on have to pay back at the end of the year. The system is obviously not working.... seems a massive waste of resources/admin time spent. Better let the people keep more of the money they earn surely???

[no accountant]

Long term it is the only way to go.

<{POST_SNAPBACK}>

Tax is now so complex that good Cambridge graduates are recruited to the top jobs. Why does my hard work go to pay these people to do what should be such a simple job?! These people should be doing something useful and adding to society rather than being an expensive burden.

The goals of flat tax is to raise more tax, and spend less doing it. And doing it in a way that makes people feel happier and more positive, and want to earn more. There’s nothing unfair about it. If you earn twice as much you’ll be paying about twice as much tax. Why is that unfair? Currently we tax income even if it’s the minimum wage. What’s so fair about that? Doesn’t make any sense to me.

Other countries will beat us to as usual. When we've forced the good high earning entrepreneurs abroad and our tax spend gets to 50% of GDP, there might be some political will to take action.

Labour will never do it because they are voted in on a “screw the rich and give the money to the poor” agenda. (although in reality is seems to be ‘screw the middle classes and give the money to anyone else’)

[IPOD]

Labour will never do it because they are voted in on a “screw the rich and give the money to the poor” agenda

Err, SIPPs? Seems more like a "screw hardworking ordinary people and give exorbitant amounts to the rich" agenda to me.

[homedaq]

The Flat Tax has worked well in Hong Kong for over 50 years. The tax returns there are a simple one page 10-15 line affair. It saves billions in admin and accounting costs.

With the flat tax there is no longer any 'tax favours' for party donors, no tax avoidance through dividends (corporation and personal tax set at same rate), no non-domiciled resident super-rich loophole, that Labour has kept open for their friends (think a certain steel billionaire etc).

Flat Tax should be loaded in the tax free amount to instantly benefit the poor and low earners. The middle to high earners actually should pay more at first to cover any drop in income, but they claw it back with the drop of all the other taxes like on savings, inheritance etc.

That means no more stamp duty as well.

So, when implemented properly it is the poor not the rich who benefit first, then after time, every one should gain with clawing back from the removal of stealth taxes, and admin savings, and even productivity gains.

Also, although perhaps not intuitive, it is still progressive, ie those who earn more don't just pay more in £ terms but also in % take terms. This is thanks to the initial tax free amount which means that everyone pay less than the tax rate as a % of their overall salary, but this amount increases towards the tax rate the more you earn.

I have some example in my flat tax flat tax blog on the progcon.org site

That said, the Tories are not actually proposing introducing the flat tax, but using it to spark debate on the benefit of flatter, simpler taxes, which imho, is a shame.

With a flat tax rate, we would be able to know exactly how much tax the government takes from us overall which is almost impossible at the moment. This clearly works in the favour of the Government.

Flat Tax completely removes a government's ability to meddle and really shows up how much tax we are saving or spending.

It is not a system for reducing tax, it is a system of clarity to simplify the tax collection process, make avoidance more difficult and empower us to compare different government's tax demands on us properly. There is just the tax-free amount and the tax rate. Each party's plans would be simple to cost and compare.

Edited September 8, 2005 by homedaq

[ftb_one_day]

Now, if only we could guarantee that our tax money won't be squandered on employing 000's of new government employees to make services even more bloated and inefficient....  :angry:

<{POST_SNAPBACK}>

Well worth it really for the satisfaction of seeing hordes of public sector parasites forced to make a living in the real world.

<{POST_SNAPBACK}>

That's precisely what will happen to any tax increase! Why would any sane person support stealing more money from productive people and giving it to worthless government make-workers?

<{POST_SNAPBACK}>

This country is a mess precisely because governments have been stealing more and more money and giving it to 'public services' which achieve less and less.

<{POST_SNAPBACK}>

Honestly, I despair. A lot of this kind of sentiment is expressed through this forum. So much bitterness towards government workers, with their "highly" (apparently) paid jobs, who do nothing but waste all the money that all you hard working tax payers earn.

So why don't you work in the public sector yourselves if it's so great?

[no accountant]

Err, SIPPs? Seems more like a "screw hardworking ordinary people and give exorbitant amounts to the rich" agenda to me.

<{POST_SNAPBACK}>

that's why I added the last bit:

2(although in reality is seems to be ‘screw the middle classes and give the money to anyone else’) " Anyone else being chavs and the very rich.

[stillill]

  If you earn twice as much you’ll be paying about twice as much tax.  Why is that unfair?  Currently we tax income even if it’s the minimum wage. What’s so fair about that? Doesn’t make any sense to me.

<{POST_SNAPBACK}>

So you'd scrap the minimum wage then?

Either there's a statutory minimum wage (with the appropriate taxes everyone earning a wage above this pays), or there isn't, and folk scrabble about on £3.50 an hour or cash in hand. Or do you suggest only those earning 20K a year pay tax? Or 40K? or 250K?

You can't have your cake...

[laughing_goat]

The tax rate in Estonia is now 23% (it was 26%, but with high business investment they were able to lower it). It might be worth noting that estonia are giving businesses huge tax breaks at the moment to stimulate business growth. I don't know how much this effects the figures.

Finding are below (last one has a good pros and cons bit);

On the fairness front, it scores highly. If you work hard and earn a lot, that’s fine. You pay more to the taxman than people who are earning less but you still pay the same rate of tax as everyone else. And yet, a flat rate tax does not only benefit and incentivise the well off: if you’re a low earner, you will probably pay less tax than you did before because flat taxes go hand in hand with a higher personal allowance. For example, under a tiered tax system, the personal allowance (the amount you are allowed to earn before you have to start paying tax) tends to be quite low, set at around ¤6,000. Under the flat tax system, this is usually raised to around ¤15,000.

http://easyjetinflight.com/features/2005/aug/debate.html

http://www.telegraph.co.uk/news/main.jhtml.../04/ixhome.html

http://news.bbc.co.uk/2/hi/business/4155907.stm

http://www.economist.com/finance/displayst...tory_id=3860731

http://www.euractiv.com/Article?tcmuri=tcm...26-16&type=News

Hope you find this interesting, I must confess, I won't have time to read them all indepth until tonight.

LG