Alternatives to income tax

[Jerrek]

I read an interesting idea in a political science book the other day. How about we abolish the unfair income tax thing altogether. Why? Why should you pay more percentage in taxes the more you make? That is really discrimination based on wealth. Why should you pay taxes if you can barely feed your children?

So instead, move away from an income tax system towards a consumption tax system. Abolish income tax. (except on interest, capital gains, and dividends) Instead, raise the sales tax to 15% or whatever rate you want. The more you consume, the more taxes you pay. Don't put any sales tax on food though, and other necessities. This way you don't have to pay any tax if you are poor, and you pay a lot of tax if you're spending like mad.

[Stuart]

Surely, by definition, a lot of wealthy people will buy more, so will still pay more tax.

Admittedly you can choose not to buy any more things, but if you do choose not to buy any more things, what is the point of being wealthy?

Even if you put your extra wealth in the bank, you will still pay tax on it.

While I don't like income tax, I can't see the point in changing the system.

Apart from that consideration, I think it sounds like a good idea.

Originally Posted by Jerrek

I read an interesting idea in a political science book the other day. How about we abolish the unfair income tax thing altogether. Why? Why should you pay more percentage in taxes the more you make? That is really discrimination based on wealth. Why should you pay taxes if you can barely feed your children?

So instead, move away from an income tax system towards a consumption tax system. Abolish income tax. (except on interest, capital gains, and dividends) Instead, raise the sales tax to 15% or whatever rate you want. The more you consume, the more taxes you pay. Don't put any sales tax on food though, and other necessities. This way you don't have to pay any tax if you are poor, and you pay a lot of tax if you're spending like mad.

I suspect people would stop purchasing anything made in this country,business's would lose income and go out of business shedding workforce at the same time.Higher unemployment leading to higher costs in providing welfare to an increasing unemployment group.There would then be less money all round to pay for the infrastructure and everything goes downhill....

At least with income tax a government has a GUARANTEED INCOME to spend on running the country.

Incog.

[Jerrek]

Why would people stop spending money?

[Xaccers]

So get rid of income tax and crank up VAT?
Are you mad?

So someone on £100K a year could pay the same amount of tax as someone on £10K a year if they buy the same things? (not that the £10K person would be able to afford to live given how much things would cost with the new VAT)


So the rich get richer and the poor get screwed?


People would buy less because in the past that new DVD that cost £20 now costs £30 so they aren't gonna just splash out.
That new car they had their eye on at £15k, now costs £25k, well they can't afford that.
Less people buying, less money for the retail sector, more businesses go bust.

[Jerrek]

Food and basic necessities would be exempt from any sales tax. On the rest, slap a 15% sales tax on and get rid of income tax. The more you spend, the more you're taxed. What is wrong with that?

How does the rich get richer? Perhaps. But what good is it if they don't spend it?

Originally Posted by Xaccers

People would buy less because in the past that new DVD that cost £20 now costs £30 so they aren't gonna just splash out.
That new car they had their eye on at £15k, now costs £25k, well they can't afford that.

Yes, things would cost more, but people would have more money to spend. A DVD costing 50% more is irrelevant if you have 50% more money to spend. The net result is the same.

[MikeyB]

Originally Posted by Jerrek

<snip>Instead, raise the sales tax to 15% or whatever rate you want. The more you consume, the more taxes you pay.

VAT (sales tax) is already 17.5% here in the UK.
And we still get income tax as well!!!

Income tax was introduced in Britain (possibly actually invented here) to pay for one of our wars against France. So as usual, when you look hard enough at any subject, it's usually the French to blame.

[Stuart]

Zut Alors!

[downquark1]

Originally Posted by towny

Income tax was introduced in Britain (possibly actually invented here) to pay for one of our wars against France. So as usual, when you look hard enough at any subject, it's usually the French to blame.

Giving the finger was another british invention to p*ss off the frence.

[Ramrod]

It's a good idea but they would never do it as they would lose control over the ammount of money they get in tax.

Originally Posted by Ramrod

It's a good idea but they would never do it as they would lose control over the ammount of money they get in tax.

precisely.a bird in the hand is worth two in the bushes.

incog.

[Xaccers]

Originally Posted by pem

Yes, things would cost more, but people would have more money to spend. A DVD costing 50% more is irrelevant if you have 50% more money to spend. The net result is the same.

If you currently earn over a certain amount you pay 40% tax on everything over that amount that you earn.
So if you earn £250K a year, that a hell of a lot of tax you're giving to the goverment.
So under Jerrek's plan you're much better off.
However, if you earned say £15K a year, then you currently aren't paying much in tax, so under Jerrek's plan you wouldn't be that much better off when it comes to your take home pay.

Now, suddenly the gov has lost all that tax income and needs to get it back.
I don't know how much VAT would have to go up (btw Jerrek neccessities aren't subject to VAT, so food (exept restaurant) and kids clothes etc are excempt) but in order to recoup the tax loss it would be huge!

Lets say at the moment that the rich pay 70% of the income tax bill.
Under Jerrek's plan this tax burden would be equalised over everyone, so the poor will potentially end up paying more tax.
The rich will have the benifit of buying things from abroad and therefore pay less tax.

PS Two fingers is an insult to the French as it says "i've still got these and can still kill you" as they used to chop our first two fingers off so we couldn't use longbows, however IIRC we'd just learn to use our other two fingers

Originally Posted by Jerrek

How about we abolish the unfair income tax thing altogether. Why? Why should you pay more percentage in taxes the more you make? That is really discrimination based on wealth. Why should you pay taxes if you can barely feed your children?

I don't know how things work where you come from, but in the UK if you can "barely feed your children" you don't *pay* much, if any tax!

I suggest you look at http://www.inlandrevenue.gov.uk/rates/it.htm for some more information.

A single person can earn up to £4,615 before paying any tax. A couple can earn up to £5,565. If they're married they can earn a minimum extra £2,150 (actually *this* is the unfair bit as it penalises unmarried couples). There is also a system of "child tax credits" which give extra, tax-free, allowances.

The next £1,960 is charged tax at only 10% and then all earnings from £1,961 to £30,500 are taxed at 22%. Earnings above that last amount are taxed at 40%.

(NB ADDENDUM back in the 1970s under the last left-wing Labour government, the top rate of income tax actually reached around 90%!! This resulted in a large number of wealthy people leaving the UK to go into "tax exile". Such an option would not be available to poor people if the taxes they pay on basic goods were to go up)

So instead, move away from an income tax system towards a consumption tax system. Abolish income tax. (except on interest, capital gains, and dividends) Instead, raise the sales tax to 15% or whatever rate you want.

As others have pointed out, VAT (Value Added Tax) is already at 17.5% in this country and higher in some other EU countries and there are suggestions from the EU that we "harmonise" it at anything up to 22.5%!!

VAT is supposed to be a "luxury" tax(!) (any women here agree that sanitary protection is a "luxury" item?!) so when the UK joined the EU they managed to get exemptions for items such as printed papers (newspapers, books etc) and childrens' clothing, but the EU want us to broaden the scope to add this tax to *everything*!

The more you consume, the more taxes you pay. Don't put any sales tax on food though, and other necessities. This way you don't have to pay any tax if you are poor, and you pay a lot of tax if you're spending like mad.

VAT doesn't go onto *all* food items, however it's a long known fact that there are several absurdities in the system, eg chocolate coverered biscuits have VAT charged on them, but cakes are exempt.

This caused problems for the makers of Jaffa Cakes (a chocolate covered "biscuit sized" cake) because the VAT man decreed (of course) it was a biscuit and thus VAT-able, but the makers argued that it was a cake and thus exempt.

Evetually, when the case got to court, McVities, the manufacturer, produced a 12" Jaffa Cake, thus convincing the Judge of the general cake-iness of the item!

However the point is that what the system that you read about proposes is that we somehow determine what is a "necessity" for poorer people and what is not, and thus use that to determine how much tax they pay and that, trust me, would lead to a *much more* iniquitous and unfair tax being levied on the poor who would have no alternatives, whilst the rich would be able to afford alternatives and would end up better off.

If you've ever read Discworld, think about Sam Vimes "Boots" theory of economy. It works like this. A poor person will buy a cheap pair of boots costing ten dollars that will last a year, then wear out, requiring them to buy a new pair. A rich person will buy a good quality pair of boots for 100 dollars that lasts 10 years and will then need replacing.

So, over 10 years, the net amount each will have spent the same amount of money on boots, but during that 10 years the poor person will, for a large proportion of the time, have cold, wet feet.

Effectively what this ill-thought out theory proposes is that the poor are forced into a "subsistence level" existance where they live from hand to mouth, only able to afford the most basic items because everything else that they may desire is taxed to put it at a level which puts it out of their reach.

I don't know about you, but I consider that much more unfair than taxing on income with a sensible system of personal allowances.

Nice theory, Jerrek, but no cigar.