Time to increase taxes?

[darkgen]

It does make you wonder; where the hell does all the money go? Revenue from tax receipts has been increasing every decade, with over 100b increase by year over the last decades.

EDIT- over same numeric year in previous decade

 

[Irish_Tom]

Not necessarily.

That's really interesting — can you plot those figures against population/income figures to work out how much tax revenue this system would generate vs the current system and what it would cost vs the current system of tax credits and benefits?

 

[Trifid]

Not necessarily.

https://docs.google.com/spreadsheet...j2E2rjulugi6MMLUvpB0QiRJ92E/edit?usp=drivesdk

Example of a £7500 payment with a 35% tax rate, 0 personal allowance (So you pay tax on every penny you earn), the effective tax free allowance (where you pay more in tax than you receive in benefit) works out around £23k.

The system ends up progressive, as the effective rate of tax tends towards the marginal rate the higher the income goes.

In my mind, this is also accompanied by social housing reform (move to percentage based rents on standardised, non modifiable properties available to anyone), and some form of system whereby disability or children can be factored in via tweaks to the UBI rate.

At those rates, everyone is better off. Where will the extra money come from? Efficiencies? Seems very wishful thinking.

 

[Dolph]

That's really interesting — can you plot those figures against population/income figures to work out how much tax revenue this system would generate vs the current system and what it would cost vs the current system of tax credits and benefits?

I can, but I don't have it to hand, will look at it this afternoon. We can also include state pensions and all the associated running costs for everything in the calculations.

 

[Shoza]

Tax does need to increase a bit alongside serious efficiency improvements in the NHS & local government. I earn £37k and my wife earns £85k and neither of us feel like the tax we pay is too high and would comfortably pay more per month. We donate to charities each month as there's only so much money you need for a comfortable lifestyle.

 

[Dolph]

At those rates, everyone is better off. Where will the extra money come from? Efficiencies? Seems very wishful thinking.

Well for one, simplification would mean any income is treated the same, so closing tax gaps plays a part.

I would add that the above was a hypothetical prepared a number of years ago, not an fully worked example. I will try something more detailed later.

 

[Fusion]

That is interesting Dolph. Will be good to see how much the two systems generate.The tricky bit I can see is the initial point of agreeing how much should be spent in the first place, unless it was just a continuation of current spending.

 

[Irish_Tom]

I can, but I don't have it to hand, will look at it this afternoon. We can also include state pensions and all the associated running costs for everything in the calculations.

That would be great, thanks.

I've just finished a book by Rutger Bregman relating to UBI. It seems to make a lot of sense but the book didn't really explain how it would work practically.

Your spreadsheet starts to fill in the gaps in terms of actual figures, so seeing how they can be applied to society as a whole would be very interesting.

 

[Trifid]

Well for one, simplification would mean any income is treated the same, so closing tax gaps plays a part.

I would add that the above was a hypothetical prepared a number of years ago, not an fully worked example. I will try something more detailed later.

The cost of providing every adult with £7,500 is around £400Bn... The best figure I have found so far that this will replace is about £260Bn (including state pensions). It will be wishful thinking to assume that only a extra £140Bn would be needed to provide UBI. I'd expect the required tax rate to need to be around 50% which would mean those earning over £25k will be paying more tax.

 

[Aa83]

Taxing everyone that same percentage may seem fair, but without other taxes in place what that does is hamper lower earners' ability to afford basic living costs, or deprives tax income from higher earners that can afford it.

Ultimately it comes down to the fact that not everyone in the country earns a good wage, and society is reliant on people that do earn to prop up the lower end.

This may not seem fair, but those people at the lower end may not just be there due to laziness or other perceived negative traits. Maybe they went to a bad school, had to care for a parent or relative, or a myriad of other reasons for not achieving as highly as others. At the other end, higher earners may have had a boost in life from coming from a wealthy family (private tuition, a network of contacts setup by their family in the business world, etc) that makes their position seem unfair.

I could argue it is not moral to keep money that is purely disposable income that could be used better elsewhere, through tax, to benefit the less fortunate. The truth is probably a balance between the two, hence the current model of tax brackets.

 

[Trifid]

I will try something more detailed later.

If you have access to better information then I have then I would love to see a spreadsheet that has a UBI of £8060 (full state pension rate for every adult) and a flat tax of 50%. How does government income and expenditure compare and assume no efficiencies (this can be invested into the deficit/debt)

 

[Dolph]

The cost of providing every adult with £7,500 is around £400Bn... The best figure I have found so far that this will replace is about £260Bn (including state pensions). It will be wishful thinking to assume that only a extra £140Bn would be needed to provide UBI. I'd expect the required tax rate to need to be around 50% which would mean those earning over £25k will be paying more tax.

Actually, it would mean everyone paying more tax, and the break even point being lower. The 35% hypothetical was chosen because it's not that far off current rates when you look at national insurance and income tax combined.

What's the current cost of the tax free threshold? It has to be included because under this system, there is no formal tax free threshold, every pound earnt is taxed at the marginal rate.

 

[Trifid]

Actually, it would mean everyone paying more tax, and the break even point being lower. The 35% hypothetical was chosen because it's not that far off current rates when you look at national insurance and income tax combined.

What's the current cost of the tax free threshold? It has to be included because under this system, there is no formal tax free threshold, every pound earnt is taxed at the marginal rate.

That is true, it would.

Just a simple table I made for reference, current tax rate taken from listentotaxman, no pension or student loan specified.

 

[Dolph]

So, found some info the will be useful for modelling this, still working on the details, but thought I'd share as I'm not the only person interested and it answers some of my questions above.

https://www.google.co.uk/url?sa=t&s...ggoMAA&usg=AFQjCNEQZtqWVEh4QEI4uvzGj_108Gx_Pw

From page 19

According to HMRC (2015, 2016), changes to various tax rates and allowances would
increase revenue by the following amounts:
• Increase in base rate of income tax by one percentage point: £3.9bn.
• Increase in higher rate of income tax by one percentage point: £0.785bn.
• Elimination of personal income tax allowance: £72bn.
• Elimination of National Insurance lower earnings threshold: £21.2bn.
• Elimination of National Insurance upper earning threshold: £25.1bn.

So we are looking at an additional income on of at least £120bn from the removal of the allowance and the NI earnings thresholds, which suddenly makes a significant dent in those figures.

Add in taxing capital gains at the same rate (as they are income) and the approach looks more feasible, although I still need to do more distribution analysis.

The actual study I'm linking to doesn't seem to be that great, because they are focusing on a UBI in addition to the current benefits system in many cases, rather than instead of.

 

[Dolph]

Bit more work done.

Finding taxpayer distributions is ok, the gap at the moment is earnings of those below the tax threshold, which as it covers some 20 million adults is quite a gap, but there is some interesting stuff here.

Rough workings here

https://dropbox.com/100498650/dropbox/Public/negative income tax details.xlsx

Original data source - first document.

https://www.gov.uk/government/stati...-and-tax-by-age-range-and-gender-2010-to-2011

So the summary looks like this

Net income with a UBI of £7.5k and 35% flat tax on all income is £111,968,100,000.00, based on all current income tax payers taxpayers.

Net income with a ubi of £7.5k and 50% flat tax on all income Is £258,633,000,000.00

But there are circa 20 million people who didn't pay income tax for one reason or a other, and these figures look at the income tax eligible income, so are excluding capital gains, dividends, and so on.

So with 20 million adults, we know we have an additional bill of £150bn, but working out what revenue we raise from these people is much harder, and I'm struggling to find the numbers needed.

To be fair, this sort of analysis you can write entire research papers on, but the headline figures don't make it look impossible, especially with the corresponding savings in other areas.

 

[kibblerok]

A never from me. Can't imagine a scenario where I would consider more taxes.

Just under 30% of my earnings straight out of my wage
20% on VAT able items
5% on my energy bills
£1.2k in council tax
The tax others pay baked into the price of goods and services (fuel etc)
65% on the fuel I need to drive to work to pay the above
40% (varies) on the bottle of wine I drink to try and forget I pay so much

They have more than enough out of me.

 

[Irish_Tom]

To be fair, this sort of analysis you can write entire research papers on, but the headline figures don't make it look impossible, especially with the corresponding savings in other areas.

Couldn't get the Dropbox link to work but may just be my phone.

Really interesting though, definitely looks like it has potential.

 

[Dolph]

Couldn't get the Dropbox link to work but may just be my phone.

Really interesting though, definitely looks like it has potential.

Hah, let me swap it to Google drive and try again.


https://drive.google.com/file/d/0Bzh2jAuYTQSHV1Y0Mk9qdGlfeUU/view?usp=drivesdk

 

[Trifid]

Hah, let me swap it to Google drive and try again.


https://drive.google.com/file/d/0Bzh2jAuYTQSHV1Y0Mk9qdGlfeUU/view?usp=drivesdk

Current income tax receipt: £167Bn

50% flat tax income: £489Bn
UBI cost: £380Bn
Net tax take: £109Bn

Shortfall from current tax income: £58Bn

But you need to add on the loss of revenue from National Insurance (I assume you don't want to pay this on top of 50% income tax?) which is £110Bn, so a total shortfall of £168Bn. Or, alternatively (and much better put) £168Bn of savings need to be found.

Personally, I'd say set it at the full state pension of £8060 a year, so costing £409Bn. This will result in a shortfall of £197Bn. Take off current state pension costs and it is £105Bn. I suppose the real question is, can we reduce the bill shown below to just 10% of what it is currently with UBI?

https://fullfact.org/wp-content/uploads/2014/06/benefits_and_tax_credits.png


*I used this as my source for NI, the income tax matches your spreadsheet: https://static.guim.co.uk/sys-image...95326815809/Budget-2013-the-governmen-010.jpg

 

[Dolph]

Current income tax receipt: £167Bn

50% flat tax income: £489Bn
UBI cost: £380Bn
Net tax take: £109Bn

Shortfall from current tax income: £58Bn

But you need to add on the loss of revenue from National Insurance (I assume you don't want to pay this on top of 50% income tax?) which is £110Bn, so a total shortfall of £168Bn. Or, alternatively (and much better put) £168Bn of savings need to be found.

Personally, I'd say set it at the full state pension of £8060 a year, so costing £409Bn. This will result in a shortfall of £197Bn. Take off current state pension costs and it is £105Bn. I suppose the real question is, can we reduce the bill shown below to just 10% of what it is currently with UBI?

https://fullfact.org/wp-content/uploads/2014/06/benefits_and_tax_credits.png


*I used this as my source for NI, the income tax matches your spreadsheet: https://static.guim.co.uk/sys-image...95326815809/Budget-2013-the-governmen-010.jpg

You seem to have completely missed my caveats around not being able to put numbers on income from people below the current tax threshold, and other sources of tax currently at different rates such as capital gains which would have to be factored in. I'd even be happy to include inheritance in the income column if everything else is equal.

On the spreadsheet, we are treating 20 million adults as if they have zero income, this is not going to be true.

You also seem to have forgotten that this replaces pretty much the entire benefit system as currently exists, which is around £100bn.

So the shortfall isn't much of a shortfall in reality.