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What George Osborne Should've Said

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"Our system of tax is too complicated. Our tax code is 11,000 pages long. That is too long. By about 10,990 pages I'd say. It makes blunders and fraud inevitable.

But it's worse than that. Our system of tax is immoral, it is inconsistent and it creates inequality.

So I am simplifying it. Here's how.

http://www.independent.co.uk/voices/comment/autumn-statement-2013-what-george-osborne-should-have-said-8985921.html

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Yep, instead we got yet more complication added to the system like the married couples tax allowance, no employer NIC for under-21s, reduced business rates if you move into a previously empty shop etc. Lots of conditions to qualify for these things so the state will need to employ people to verify them and monitor for changes and individuals who want to benefit will need to fill out lots of lovely paperwork. Plenty of scope for perverse incentives (e.g. sacking people on their 21st birthday).

Unfortunately our society is still in an anabolic phase where we just keep piling more and more schemes and rules on top of what's already there when what we really ought to be doing is going back and having a good clearout of things that cost more resources to maintain than they return in value. This won't happen until we reach a critical state of disgust with the status quo. The disgust is building, but we are not there yet.

Edited by Dorkins

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A land value tax would better reflect the true value of land, at least what NIMBYs believe it to be. If they value 'their' views that much, fine. But 'they' are going to have to pay for it. LVT would indeed encourage more efficient land use and reduce sprawl.

However, despite the fact the only party talking about LVT (the greens) seriously, my nearest NIMBY 'green' councillor is rabidly against infill building, or 'garden grabbing' as she refers to it as.

We have an immoral tax code because we are an immoral, hypocrite populace. The central offices of most parties produce some nice manifesto literature now and then, but the reality is they dont have the conviction of most their own members, let alone the country as a whole.

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Could a huge increase in VAT replace income tax?

No it wouldn't generate enough revenue.

Unless it was really huge. At which point the true cost of government would become apparent. And people wouldn't stand for it.

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No it wouldn't generate enough revenue.

Unless it was really huge. At which point the true cost of government would become apparent. And people wouldn't stand for it.

Income tax generates about £150bn, NI about £100bn, VAT about £100bn. A VAT rate of 50% could replace income tax if nobody changed their spending patterns to compensate, though obviously they would to some extent. This rate of tax sounds high until you consider that a VAT rate of 50% would mean that the final price of a VATable item would contain 33.3% tax whereas the final price of employing a worker on £25k pa contains about 28% tax when you include employer's NI.

Out of wages, profits, consumption and land it seems like wages are overtaxed and land is absurdly undertaxed (even to the point of landowners actually being subsidised instead of taxed), so if you wanted to rebalance the tax burden it should probably move from wages onto land. Given that the majority of the population are workers and not major landowners it is quite amazing that our "democracy" has not delivered this result already.

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Income tax generates about £150bn, NI about £100bn, VAT about £100bn. A VAT rate of 50% could replace income tax if nobody changed their spending patterns to compensate, though obviously they would to some extent. This rate of tax sounds high until you consider that a VAT rate of 50% would mean that the final price of a VATable item would contain 33.3% tax whereas the final price of employing a worker on £25k pa contains about 28% tax when you include employer's NI.

Out of wages, profits, consumption and land it seems like wages are overtaxed and land is absurdly undertaxed (even to the point of landowners actually being subsidised instead of taxed), so if you wanted to rebalance the tax burden it should probably move from wages onto land. Given that the majority of the population are workers and not major landowners it is quite amazing that our "democracy" has not delivered this result already.

Even the exercise in subprime obfuscation that passes for a car industry in the UK couldn't wear 50% VAT.

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Even the exercise in subprime obfuscation that passes for a car industry in the UK couldn't wear 50% VAT.

50% VAT might be easier to wear if income tax was zero. Anyway I don't think it would be a good idea, better to spread the burden out to avoid distorting incentives and encouraging avoidance.

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Income tax generates about £150bn, NI about £100bn, VAT about £100bn. A VAT rate of 50% could replace income tax if nobody changed their spending patterns to compensate, though obviously they would to some extent. This rate of tax sounds high until you consider that a VAT rate of 50% would mean that the final price of a VATable item would contain 33.3% tax whereas the final price of employing a worker on £25k pa contains about 28% tax when you include employer's NI.

Out of wages, profits, consumption and land it seems like wages are overtaxed and land is absurdly undertaxed (even to the point of landowners actually being subsidised instead of taxed), so if you wanted to rebalance the tax burden it should probably move from wages onto land. Given that the majority of the population are workers and not major landowners it is quite amazing that our "democracy" has not delivered this result already.

I though income tax revenues were much higher. V. Interesting.

So, yes, assuming no change in spending patterns, you would need 50% VAT to have zero income tax.

Flat rate income tax of 15% (20% if you must) above, say £10k. Same for corporation tax. Probably 15% VAT too. Plus LVT. That's my preferred option.

Lose inheritance tax, and lose business rates.

1. Tax should be simple.

2. Tax should be transparaent.

3. Tax should be low.

4. Tax should be flat.

5. Land should be taxed

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I though income tax revenues were much higher. V. Interesting.

This is why when you hear that 30% of income tax is being paid by 1% of taxpayers it isn't as impressive as it sounds. 30% of £150bn is £45bn, only about 8% of total tax revenue (£550bn) or 3% of nominal GDP. The proles are stumping up £26bn in council tax alone.

Boris' favourite myth that the 1% are carrying the welfare state on their backs is an accounting trick.

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This is why when you hear that 30% of income tax is being paid by 1% of taxpayers it isn't as impressive as it sounds. 30% of £150bn is £45bn, only about 8% of total tax revenue (£550bn) or 3% of nominal GDP. The proles are stumping up £26bn in council tax alone.

Boris' favourite myth that the 1% are carrying the welfare state on their backs is an accounting trick.

Your last line should be used in his opposition's manifesto

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