I am being seduced gradually by the attractions of a flat race income tax. Normally this is rejected on the grounds that it does not take account of ability to pay. However it does have a lot going for it - it provides good incentives and is simpler.
That said, I would include four strict provisos -
First the starting point must be quite high.
Second it must distinguish between earned and unearned income with a much higher rate for the latter
Third there would have to be stricter rules on tax evasion.
Fourth there would have to be stricter rules on benefit 'cheats'.
It is becoming apparent to me that Britain's growing aversion to tax has two major causes (I think this also applies to the USA). One is that people believe too much of their tax goes on benefit scroungers. The other reason is that too many rich people get away with paying little or no tax. We need to deal with them before refomr can be attempted.
http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.
Tuesday 27 September 2011
Has Ed got it right ?
Just ahead of Ed Miliband's keynote speech to Labour today (27th), and having seen the leaked reports, I think he may, in my view, be close to an ideal left-of-centre maxim regarding social and economic policy.
My view has been for some time this - We should adopt in the UK a tax and welfare system that differentiates between the deserving rich and the undeserving rich. It should also distinguish between the deserving poor and the undeserving poor. This seems to me to be a simple and clear principle.
Of course, implementation and details are harder. However, there are a few straightforward practical implications. For example - let's look again at an unearned income premium on income tax.
How about this ? (numbers are guesses, the principle is what is important) :
Income 0-15,000 no tax
15,000 - 20,000 no tax on earned/unearned income, 10 % on welfare income (except pensions, disability) so that work pays more through the tax system
20,000 upwards 30 % flat rate. Work and enterprise rewarded.
40,000 upwards unearned income (interest, dividends, capital gains, land deals, property profits, rent, bonuses, inheritance etc.) 50% flat rate.
Something like that ?
My view has been for some time this - We should adopt in the UK a tax and welfare system that differentiates between the deserving rich and the undeserving rich. It should also distinguish between the deserving poor and the undeserving poor. This seems to me to be a simple and clear principle.
Of course, implementation and details are harder. However, there are a few straightforward practical implications. For example - let's look again at an unearned income premium on income tax.
How about this ? (numbers are guesses, the principle is what is important) :
Income 0-15,000 no tax
15,000 - 20,000 no tax on earned/unearned income, 10 % on welfare income (except pensions, disability) so that work pays more through the tax system
20,000 upwards 30 % flat rate. Work and enterprise rewarded.
40,000 upwards unearned income (interest, dividends, capital gains, land deals, property profits, rent, bonuses, inheritance etc.) 50% flat rate.
Something like that ?
Wednesday 14 September 2011
Banks, the euro and well done Gordon
The Government's response to the banking commission report was about as good as I could have hoped for, but also as bad as I feared, i.e. it was accepted with little reservation which is excellent, but bad in view of the huge delay in implementation. Eight years is a ridiculously long time to wait - easily long enough for there to be a further banking crisis, though the new international 7% reserve assets requirement does help in the meantime.
I heard presentations yesterday at the Ham and Hi Festival in Hampstead by Stephanie Flanders (BBC) and Stephen King, former chief economist with HSBC. Both were pessimistic about the prospects for the euro and were all but predicting defaults by Greece and Portugal and probably two or more countries leaving the zone. Both also said how relieving it was that the UK is not in the eurozone.
Now Conservatives must obviously pat themselves on the back that we retained sterling. However, it is Gordon Brown I congratulate most heartily. Why ? Because he was not ideologically opposed to the euro but understood the timing was wrong. He also had to hold out against the euro-enthusiasts in Labour, not least Blair himself. Conservative opposition to a single currency was easy, but for Gordon it was a tough road to take. One shouldn't overdo this, as Brown didn't see the credit crunch coming, but he did understand the British economy was not in good enough shape to join.
Schadenfreude is to be avoided just now. We won't escape the fallout that Flanders and King were predicting.
I heard presentations yesterday at the Ham and Hi Festival in Hampstead by Stephanie Flanders (BBC) and Stephen King, former chief economist with HSBC. Both were pessimistic about the prospects for the euro and were all but predicting defaults by Greece and Portugal and probably two or more countries leaving the zone. Both also said how relieving it was that the UK is not in the eurozone.
Now Conservatives must obviously pat themselves on the back that we retained sterling. However, it is Gordon Brown I congratulate most heartily. Why ? Because he was not ideologically opposed to the euro but understood the timing was wrong. He also had to hold out against the euro-enthusiasts in Labour, not least Blair himself. Conservative opposition to a single currency was easy, but for Gordon it was a tough road to take. One shouldn't overdo this, as Brown didn't see the credit crunch coming, but he did understand the British economy was not in good enough shape to join.
Schadenfreude is to be avoided just now. We won't escape the fallout that Flanders and King were predicting.
Tuesday 13 September 2011
a footnote on tax collection
Just a footnote on my report of the conversation with Mike Frear and in response to James' comments.
Mike Frear said, and quite correctly, that tax aversion is partly the result of public disquiet over how government spends the money. If it is going to 'benefit spongers' or dubious foreign military adventures etc., it is hardly surprising that they are reluctant to give hard earned money to policicians who 'waste' it. I did point out to Mr Frear that, the problem would clearly be solved under a Conservative Government and was delighted to see a gleam in his eye and a suspicion of scepticism.
Seriously I think there are two points to be made. The first is that, yes, there must be greater public confidence that their taxes are being 'well spent' and welfare reform - real welfare reform, not the rhetoric but little action under Labour - is the best place to start. The second is this. neo liberals, libertarians, T Party people etc. argue that the free market always uses resources more efficiently than government. There is an interesting argument to be had, but I think of this in a different way. If, for example, a premier league footballer earning £5 million a year avoids most of his income tax, what does he typically spend his extra money on ? From what I have heard and read, these guys typically spend it on various forms of conspicuous consumption of no intrinsic value. A certain British retailer who avoids tax through his wife's tax haven status has famously wasted vast amounts of money on lavish parties, over-paying celebrities to perform for him, vulgar yachts and the like. Is this money, spent in the free market, being put to any good use? 'Efficient' perhaps, but 'good' ? Well, employment is created maybe, but largely abroad and not particularly sustainable. I think, if I were in government, I could find better ways of spending a footballer's £million pound tax avoidance windfall than he himself can. One Portuguese star, I heard, bought two identical Ferraris on the basis that he was bound to crash one before long - which he did. I think he crashed them both actually.
I should be fair and report another of Mike Frear's comments which has some validity. I argue that the tax we pay forms part of our relationship with the state and should therefore be in the public domain, as are the wages of public sector employees (note the forthcoming publication of BBC salaries). He pointed out that the relationship was not a voluntary one, and he is certainly right, so there is ineded a civil liberties issue at stake in my idea of making our tax contributions available to all. . I would still argue, however, that the 'greater good' here is more important than the privacy issue. I repeat I would like to see a change in the culture regarding tax where we see it as our proud contribution rather than some kind of punishment.
http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.
Mike Frear said, and quite correctly, that tax aversion is partly the result of public disquiet over how government spends the money. If it is going to 'benefit spongers' or dubious foreign military adventures etc., it is hardly surprising that they are reluctant to give hard earned money to policicians who 'waste' it. I did point out to Mr Frear that, the problem would clearly be solved under a Conservative Government and was delighted to see a gleam in his eye and a suspicion of scepticism.
Seriously I think there are two points to be made. The first is that, yes, there must be greater public confidence that their taxes are being 'well spent' and welfare reform - real welfare reform, not the rhetoric but little action under Labour - is the best place to start. The second is this. neo liberals, libertarians, T Party people etc. argue that the free market always uses resources more efficiently than government. There is an interesting argument to be had, but I think of this in a different way. If, for example, a premier league footballer earning £5 million a year avoids most of his income tax, what does he typically spend his extra money on ? From what I have heard and read, these guys typically spend it on various forms of conspicuous consumption of no intrinsic value. A certain British retailer who avoids tax through his wife's tax haven status has famously wasted vast amounts of money on lavish parties, over-paying celebrities to perform for him, vulgar yachts and the like. Is this money, spent in the free market, being put to any good use? 'Efficient' perhaps, but 'good' ? Well, employment is created maybe, but largely abroad and not particularly sustainable. I think, if I were in government, I could find better ways of spending a footballer's £million pound tax avoidance windfall than he himself can. One Portuguese star, I heard, bought two identical Ferraris on the basis that he was bound to crash one before long - which he did. I think he crashed them both actually.
I should be fair and report another of Mike Frear's comments which has some validity. I argue that the tax we pay forms part of our relationship with the state and should therefore be in the public domain, as are the wages of public sector employees (note the forthcoming publication of BBC salaries). He pointed out that the relationship was not a voluntary one, and he is certainly right, so there is ineded a civil liberties issue at stake in my idea of making our tax contributions available to all. . I would still argue, however, that the 'greater good' here is more important than the privacy issue. I repeat I would like to see a change in the culture regarding tax where we see it as our proud contribution rather than some kind of punishment.
http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.
Monday 12 September 2011
bank reform
Todays' publication of the report on banking reform is a real test for the government, the coalition and the Lib Dems. It does not need any more time for consideration, because everybody has known for months what its conclusions were likely to be.
The money doen't matter here, does it ? What matters is the public perception of the banks and the politicians who regulate them. I have read that the opponents of such reform argue that too much regulation will drive banks away. This argument has a huge gaping hole in it, which is that the crisis was precipitated by an absence of regulation. Part of the answer, therefore, simply cannot be less regulation.
Vince Cable and the Lib Dems have retreated often enough. One more capitulation could see them looking back anxiously at the edge of the cliff. As to the Government there is a weary predicatbility about the likelihood of delay, delay, delay. This is a myth. The regulation can be legislated immediately, in the financial services bill, even if the implementation comes in a couple of years time.
The money doen't matter here, does it ? What matters is the public perception of the banks and the politicians who regulate them. I have read that the opponents of such reform argue that too much regulation will drive banks away. This argument has a huge gaping hole in it, which is that the crisis was precipitated by an absence of regulation. Part of the answer, therefore, simply cannot be less regulation.
Vince Cable and the Lib Dems have retreated often enough. One more capitulation could see them looking back anxiously at the edge of the cliff. As to the Government there is a weary predicatbility about the likelihood of delay, delay, delay. This is a myth. The regulation can be legislated immediately, in the financial services bill, even if the implementation comes in a couple of years time.
a golden age of backbench MPs ?
I met Mike Frear, the MP for Finchley this morning and, unintentionally, the the conversation came round to the role of the backbench MP. We had been at a presentation by the economists Stephanie Flanders and Stephen King. I engaged him on the question of what the government position currently was on tax avoidance and evasion. he gave me a stock answer from the MPs' briefing card and feigned vague interest in the idea of making everybody's tax payments a matter of public record.
Now Mr Frear may well be a very good constituency MP and, in fact, I believe he has made a good satrt, but the rest of the conversation rather dismayed me. he said something like, 'of course I am just a humble backbencher so I'm afraid I have no influence on such thngs'. I told him, coincidentally I had just been writing a piece for a politics student survey entitled 'are we entering a new golden age for the backbench MP?'. It will refer to the activities of people like Tom Watson on phone hacking, the justice select committee's work and the like, together with the new traction that all MPs have with there being no gurarnteed government majority. I was, therefore, perhapos a little rude in saying to him that if he felt himself powerless he would be powerless. It is dispiriting to think that many Mps, of any party, should think this way.
There is the potential for a golden age of backbenchers, but they have to display two qualities. One is the belief that they can influence things, perhaps over a narrow range of issues , the second is the kind of hard work and tenacity that Tom Watson has demonstrated.
Now Mr Frear may well be a very good constituency MP and, in fact, I believe he has made a good satrt, but the rest of the conversation rather dismayed me. he said something like, 'of course I am just a humble backbencher so I'm afraid I have no influence on such thngs'. I told him, coincidentally I had just been writing a piece for a politics student survey entitled 'are we entering a new golden age for the backbench MP?'. It will refer to the activities of people like Tom Watson on phone hacking, the justice select committee's work and the like, together with the new traction that all MPs have with there being no gurarnteed government majority. I was, therefore, perhapos a little rude in saying to him that if he felt himself powerless he would be powerless. It is dispiriting to think that many Mps, of any party, should think this way.
There is the potential for a golden age of backbenchers, but they have to display two qualities. One is the belief that they can influence things, perhaps over a narrow range of issues , the second is the kind of hard work and tenacity that Tom Watson has demonstrated.
Wednesday 7 September 2011
The 50% tax band
It is an interesting question to ask : what are the earnings of the economists who have recommended the abolition of the 50% tax band ? We need to know to ensure their academic detachment.
We also need to know where in the world one can go in order to pay less than a marginal tax rate of 50% on earnings of over £150,000. USA obviously, but where else where one might wish to live ?
Of course they may well be right, but is it politically possible to abolish it, especially in view of the more common explnations of recent public disorders ?
We also need to know where in the world one can go in order to pay less than a marginal tax rate of 50% on earnings of over £150,000. USA obviously, but where else where one might wish to live ?
Of course they may well be right, but is it politically possible to abolish it, especially in view of the more common explnations of recent public disorders ?
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