Citizen's Income Financing..

[tomandlu]

The problem is that once you get a tax rate of over 40% you're intoducing strong disincentives to work, which kind of undermines the whole point of CI.

You're making an assumption about human nature that I'm not sure is correct. I would agree 100% that any tax system that means you reach a limit or lose money as a higher earner isn't going to fly, but tapering at the high end isn't just good economics, it's not necessarily unattractive to high earners (who don't earn so much any more). It just means you get deflation in luxury goods. Think about it - the sort of disparity in earnings that exists now just didn't exist 30 years ago. To me, CI isn't just about setting up a sustainable benefits system that doesn't torpedo the economy and people's aspirations - it's about dealing with a world in which we have increased production but increased unemployment as a direct result.

[Goat]

Again, is this necessarily a bad thing? Do we want to encourage child birth into families where the parents (single or not) aren't ready, because that is what currently happens under this system? Any reform (again, which is necessary as we can't afford to support it) of child benefit will penalise the single parent, because we sure as hell aren't going to give them more money.

Not saying it's a bad thing, just saying that if we want a CI we need to accept that it amounts to a massive cut in benefits to single parent families to fund a giveaway to high earners.

I can accept such a thing but I'm not sure many of the louder CI proponents are willing to do so.

[Goat]

You're making an assumption about human nature that I'm not sure is correct. I would agree 100% that any tax system that means you reach a limit or lose money as a higher earner isn't going to fly, but tapering at the high end isn't just good economics, it's not necessarily unattractive to high earners (who don't earn so much any more). It just means you get deflation in luxury goods. Think about it - the sort of disparity in earnings that exists now just didn't exist 30 years ago. To me, CI isn't just about setting up a sustainable benefits system that doesn't torpedo the economy and people's aspirations - it's about dealing with a world in which we have increased production but increased unemployment as a direct result.

I think the evidence for the disincentive effects above 40% is reasonably strong; I don't think deflation in luxury goods would offset this, a Ferrari is expensive because it's expensive to make, likewise most luxury goods are traded in an international market so I don't think any effect on UK demand would have a significant effect on their price, otherwise one could make a profit by buying in the UK and shipping it over to France/Germany/Wherever.

[snowflux]

The problem is that once you get a tax rate of over 40% you're intoducing strong disincentives to work, which kind of undermines the whole point of CI.

The other problem is that to avoid penalising the single mum you'd need such a huge basic CI that it would be unaffordable for everyone to receive it, at which point it isn't a CI at all.

Finally it's worth noting that wealthy families do well out of this scheme because they're so badly f***ed over by the current system in that they lose 32p for every extra pound they earn but also lose entitlement to benefits as well.

I think you're missing the point of CI a little. The primary purpose of CI is not to reduce absolute taxation; it's to reduce marginal taxation. Many countries have higher top rates of tax than 40% (e.g Netherlands: 52%) without disincentivising their workforce, even without CI! In his opening post, Fluffy suggests a flat rate of 45%, which sounds fairly reasonable to me.

[Damik]

I think you're missing the point of CI a little. The primary purpose of CI is not to reduce absolute taxation; it's to reduce marginal taxation. Many countries have higher top rates of tax than 40% (e.g Netherlands: 52%) without disincentivising their workforce, even without CI! In his opening post, Fluffy suggests a flat rate of 45%, which sounds fairly reasonable to me.

1/ with 45% flat rate and no tax allowance your income tax on £27k pa would be about £12k pa, but you would receive 2x£6k pa of CI for you and your partner staying at home; so you would not pay any income tax

2/ plus the employers would not pay the full £27k pa but less as now with the working tax credits

3/ also with cash in hand nobody would be paying 45% income tax; people at the bottom are OK to 20% or less, but not 45%

I am afraid that your income tax receipts would collapse

[Damik]

1/ It would solve high house prices as it would force rents down. If there is no ever-increasing housing benefit, there are no BTL slumlords.

2/ House prices are a separate issue to CI anyway, and would be paired with a LVT for maximum effectiveness.

3/ What is wrong with flat rate pensions? (yes, I would like an answer rather than a story about a cat or something)

1/ you can also force rents down by reducing the housing benefit, scraping the planing regulations or replacing the private rent HB by building on free council land

2/ agreed; your point 2/ invalidates the point 1/

3/ pensions should be based on your previous income. you know, stuff like "work pays"

Edited October 25, 2013 by Damik

[tomandlu]

Not saying it's a bad thing, just saying that if we want a CI we need to accept that it amounts to a massive cut in benefits to single parent families to fund a giveaway to high earners.

I can accept such a thing but I'm not sure many of the louder CI proponents are willing to do so.

I vaguely consider myself a leftie, and I have no problem with the notion that having a child means that you have less disposable income. That aside, if anyone on a high income comes out a winner, then the tapering/taxation needs adjusting. Essentially, CI should be irrelevant to anyone on an average or higher wage.

However, as others have noted, it's no good taking a snapshot of the current situation and just imposing CI on top of it. It will require a massive change.

[Damik]

Are you trolling or just plain thick?

I've done this in as many bright colours as I could find to help you understand.

Take note: there are no numbers because it is theoretical and will change over time following its inception, until it is at the correct level.

picture without numbers is useless on the thread "how to finance CI"

I am aware that we can potentially finance CI by giving people at the bottom more money via higher taxation of the middle classes

only problem is that we tried that in the Eastern Europe and people really did not like it for obvius reasons. as it just does not work

Edited October 25, 2013 by Damik

[fluffy666]

1/ with 45% flat rate and no tax allowance your income tax on £27k pa would be about £12k pa, but you would receive 2x£6k pa of CI for you and your partner staying at home; so you would not pay any income tax

So you'd pay 12k in income tax - which would most certainly show up in income tax receipts - and receive £12k in CI.

You seem to have some maths blindness here, where you are cancelling out the CI and Income tax when it comes to revenues, but bizarrely keeping the CI when it comes to costs.

This is wrong. As in 2+2=3 wrong. It just makes you look stupid to keep restating it.

2/ plus the employers would not pay the full £27k pa but less as now with the working tax credits

So, you are saying that they are not paid £27k right now (because of WTC)? This is crazy. You are just making up numbers and behaviors to suit yourself.

Right now, WTC encourages people to work the minimum number of hours to qualify. CI removes this disincentive.

[Damik]

1/ So you'd pay 12k in income tax - which would most certainly show up in income tax receipts - and receive £12k in CI.

You seem to have some maths blindness here, where you are cancelling out the CI and Income tax when it comes to revenues, but bizarrely keeping the CI when it comes to costs.

This is wrong. As in 2+2=3 wrong. It just makes you look stupid to keep restating it.

2/ So, you are saying that they are not paid £27k right now (because of WTC)? This is crazy. You are just making up numbers and behaviors to suit yourself.

Right now, WTC encourages people to work the minimum number of hours to qualify. CI removes this disincentive.

Please read my posts carefully and reply with numbers - a typical problem of people with humanities ...

1/ if only people earning above £27k pa start to pay something back (tax > CI), who is going to subsidise the CI for people at the bottom and not working (tax < CI). Where is this money going to come from?

2/ we have already agreed that WTC reduce wages. why the CI would not reduce wages even more? such as for singles?

[fluffy666]

picture without numbers is useless on the thread "how to finance CI"

I am aware that we can potentially finance CI by giving people at the bottom more money via higher taxation of the middle classes

only problem is that we tried that in the Eastern Europe and people really did not like it for obvius reasons. as it just does not work

No.

If you actually thought about things, you would realize that a CI involves removing a lot of state control from people's lives. You would realize that it encourages people to found small businesses, or take temporary/seasonal employment - both of which are discouraged by the current system. It discourages welfare dependency because no one need fear loss of benefits.

Now, there are people who are obsessed with controlling others, and those people will instinctively hate the notion of CI. People who want unemployment to be a threat, who think that anyone who falls on hard times should be forced to jump through hoops just to survive, that it's acceptable to use these subhuman unemployed as slave labour even if it displaces paid workers, that inspectors should visit the houses of the poor and force the selling off of every possession they have. In which case it ceases to be a matter of economics but becomes entirely about control. This seems to be the state of affairs that you are keen to defend.

[tomandlu]

Please read my posts carefully and reply with numbers - a typical problem of people with humanities ...

1/ if only people earning above £27k pa start to pay something back (tax > CI)

Bzzttt... you "start" at a much lower level.

[fluffy666]

Please read my posts carefully and reply with numbers - a typical problem of people with humanities ...

1/ if only people earning above £27k pa start to pay something back (tax > CI), who is going to subsidise the CI for people at the bottom and not working (tax < CI). Where is this money going to come from?

The current welfare budget. As per the numbers in the original post. Which you haven't read carefully.

[Damik]

The current welfare budget. As per the numbers in the original post. Which you haven't read carefully.

there would not be money left as:

- people (couples with single earner) earning under £27k pa would not pay anything back to the state. now they are paying back upto £5.7k pa

- people (couples with single earner) earning now £40k pa pay about £10k pa in the income tax and NIC now; they would be paying just £6k pa with CI

--------------------------------------------

and you still need to provide CI for couples earning less than £27k pa

Edited October 25, 2013 by Damik

[dkujsbap]

picture without numbers is useless on the thread "how to finance CI"

I am aware that we can potentially finance CI by giving people at the bottom more money via higher taxation of the middle classes

only problem is that we tried that in the Eastern Europe and people really did not like it for obvius reasons. as it just does not work

Damik, don't forget that we already have a kind of CI. It's the personal allowance, which means that everyone paying tax essentially gets a free £1.8k a year.

An actual CI saves money on administration and encourages working as little or as often as people like.

Top rate tax payers will indeed gain from this but only because the existing system screws them so much.

[Damik]

Damik, don't forget that we already have a kind of CI. It's the personal allowance, which means that everyone paying tax essentially gets a free £1.8k a year.

An actual CI saves money on administration and encourages working as little or as often as people like.

Top rate tax payers will indeed gain from this but only because the existing system screws them so much.

the CI effective tax allowance for couples with single earner is £27k pa

27k * 0.45 - 2*6k = 0

meaning the income tax receipts would collapse as we are talking about 60% of the population

[fluffy666]

- people (couples with single earner) earning under £27k pa would not pay anything back to the state. now they are paying back upto £5.7k pa

Does not make sense. Are you saying that these people would not be paying any income tax?

[dkujsbap]

there would not be money left as:

- people (couples with single earner) earning under £27k pa would not pay anything back to the state. now they are paying back upto £5.7k pa

- people (couples with single earner) earning now £40k pa pay about £10k pa in the income tax and NIC now; they would be paying just £6k pa with CI

--------------------------------------------

and you still need to provide CI for couples earning less than £27k pa

So you lower the CI or raise the tax...

You might ask whether that's enough to live, but it will have to be whether people like it or not.

Tell me, what is your alternative for lowering the welfare bill?

[Damik]

If you actually thought about things, you would realize that a CI involves removing a lot of state control from people's lives. You would realize that it encourages people to found small businesses, or take temporary/seasonal employment - both of which are discouraged by the current system. It discourages welfare dependency because no one need fear loss of benefits.

Now, there are people who are obsessed with controlling others, and those people will instinctively hate the notion of CI. People who want unemployment to be a threat, who think that anyone who falls on hard times should be forced to jump through hoops just to survive, that it's acceptable to use these subhuman unemployed as slave labour even if it displaces paid workers, that inspectors should visit the houses of the poor and force the selling off of every possession they have. In which case it ceases to be a matter of economics but becomes entirely about control. This seems to be the state of affairs that you are keen to defend.

you are trying to introduce even more wealth redistribution from the middle class to the lower class

I am begging you - look at the Eastern Europe - it just does NOT work

[fluffy666]

you are trying to introduce even more wealth redistribution from the middle class to the lower class

I am begging you - look at the Eastern Europe - it just does NOT work

No I'm not. You only think I am because you've got your maths wrong.

[Damik]

So you lower the CI or raise the tax...

You might ask whether that's enough to live, but it will have to be whether people like it or not.

Tell me, what is your alternative for lowering the welfare bill?

- cancel planning regulations

- move money from private rent HB to build council housing on free council land

- reduce public sector wages and pensions to 90% of the private sector one; with an income cap of about PM income

- reduce the size of the state from current 50% of GDP to 25% of GDP

- start reducing income taxation from 40% and 45% to 20% in 20 years

- implement social workfare for 1 year unemployed

- reduce benefits so people on NMW are better off than on benefits

- start moving all benefits and tax credits (including children) to tax allowances

- cancel working tax credits

- replace disability self certification by medical exam

[Damik]

No I'm not. You only think I am because you've got your maths wrong.

I showed you my numbers that your income tax receipts will collapse. please disprove them here:

[tomandlu]

- cancel planning regulations

- move money from private rent HB to build council housing on free council land

- reduce public sector wages and pensions to 90% of the private sector one; with an income cap of about PM income

- reduce the size of the state from current 50% of GDP to 25% of GDP

- start reducing income taxation from 40% and 45% to 20% in 20 years

- implement social workfare for 1 year unemployed

- reduce benefits so people on NMW are better off than on benefits

- start moving all benefits and tax credits (including children) to tax allowances

- cancel working tax credits

- replace disability self certification by medical exam

Thought so...

[fluffy666]

I showed you my numbers that your income tax receipts will collapse. please disprove them here:

You made a specific claim that Under CI, people on £27k would pay no income tax.

Is this true or false?

[Damik]

You made a specific claim that Under CI, people on £27k would pay no income tax.

Is this true or false?

false; I said they would not be paying anything back to the state; now they are paying back about £5.7k pa

with your CI they would pay: 27k * 0.45 - 2 * 6k = zero

(assuming couple with single earner)