Tuesday, 14 September 2021

A tax increase to pay for... a tax increase. Brilliant.

From The Mirror:

Almost every person could see their council tax bill rise next year due to the government raising National Insurance to pay for the country's growing social care bill.

The new levy was announced last week, and will see the National Insurance paid by businesses and individuals rise from 12% to 13.25% next April. Councils with directly-employed staff get part of a £2 billion pot from the government to help with this cost. But MPs last night said the issue will really hit councils which outsource services like bin collections to private companies....

This is arrant nonsense of course on an economic level. It's all just the government paying money to itself. If HMRC collects more in NIC from people directly or indirectly employed by the government, they can use some of the revenues to increase block grants to councils and it all nets off. But any old excuse to increase taxes. And of course they should have added the 'social care levy' to Council Tax in the first place.

I've also fixed the banner add for them:


mombers said...

Employer NI is such a dishonest scam, as all all employer payroll taxes. Just put the whole bill on the employee's payslip so they can see it. The papers all reported a 1.25% NI increase, 50% of the actual number

Mark Wadsworth said...

M, massive lies all round. What this country needs is a Flat Tax, merge income tax, NIC, VAT and corp tax into one rate.

Admittedly, to be fiscally neutral, the rate would have to be apparently very high - 45% or 50%, but at least it would be honest.

Lola said...

Just to confirm, no state employee ever 'pays' any tax at all. Be it IT or NI or VAT etc etc.

All this tax can only collected from the surpluses of production, the wealth created by private business. And if you tax 'capital' - as they do - you get less production surpluses, i.e less wealth created and hence less tax.

What defeats me is why 'the people' cannot see this.

mombers said...

@L there is a lot of waste in the public sector but it does produce significant value. A large amount of the value add that the private sector produces is on the base of the public sector, e.g. the road, the police, the army, university research, etc. If the public sector produced no value, you'd see government-lite countries like Afghanistan thriving.
The private sector does a lot of things better than the state could, but will never supply defence, policing, universal education, property rights etc

Mark Wadsworth said...

L, the UK (by and large) doesn't tax business 'capital', it taxes profits.

Company A has assets of £1 million, makes profits of £100,000, pays tax on £100,000.

Company B has assets of zero, makes profits of £100,000, pays tax on £100,000.

Private individuals pay tax on transfers of indirect capital (shares in businesses) i.e. CGT and IHT, but that does not affect the amount productive capital, or if it does, only very indirectly.

M, as I like to say, the government builds the roads, private businesses make the vehicles.

Lola said...

M. I think it is the other way about. We have those things because we have an economy. We don't have an economy because we have those things. That is production comes before consumption. As production has developed it became possible to do roads and stuff and we have agreed (mostly) that 'the state' is best placed to do them from general taxation. Mind you the railway network was largely developed by private speculative capital.

I did say that the core functions of the state - defence of the realm and a system of justice - will be best funded from (land) taxation.

MW Yes, of course. But the effect of high levels of taxation is to - at the very least - inhibit capital formation and saving. That old fraud Keynes and his paradox of thrift nonsense.

Mark Wadsworth said...

L, does it really matter? Private businesses invented motor vehicles and then the government provided the roads to drive them on.

And there is such a thing as kick starting. You discover a large island in the North Sea and declare yourself King. If you want people to go there, you start by building a port, an airport, some roads etc, a power station.

Sure, the private sector would do this sooner or later, but it's quicker if you just borrow the money, build the basics and get the ball rolling.

The private sector port operator would say "What's the point building it if there are no roads and no airport? And where do I get the electricity from?"

The power company says "What's the point in building a power station? There's nobody there I can sell my electricity to."

Lola said...

MW. Rather like Mustique then? What you describe is not doing Kings so much as doing entrepreneur. An entirely different thing.

What has actually happened is that a nation state like the UK has evolved out of increasing wealth creation occasioned by the agglomeration of smaller economic units - let's call them subsistence farms and small settlements (all of which is what makes LVT so 'moral') - into a greater whole and more centralised government. And in the intervening years lots of 'infrastructure was privately funded - the Causey Arch for example. Or commercial electricity and water supply. And drove roads ran over 'common land'. If you look at the lane I live on it was a footpath, then a track and latterly 'adopted' and metalled - that latter between the wars.

I concede absolutely I am for the very tiniest of governments, wit their primary role being to stop internal and external coercion.

Lola said...

This is interesting and maybe germane to our current exchanges - https://en.wikipedia.org/wiki/A5_road_(Great_Britain) "The first major civilian state funded road since Roman times" (There were lots of military roads, notably in Scotland)

Shiney said...


Isn't this about degree. Govt provides:

Tier 1 - A standing army, police and certainty of contract (rule of law, property rights, justice, whatever)... basically to stop the bad guys, whether domestic or forrin', taking yer stuff
Tier 2 - #1 plus basic infrastructure like roads, a power grid, sewerage, rubbish collection to 'grease the economic wheels'
Tier 3 - #1 #2 plus some 'services' as payer/insurer - such as basic education and basic health service, a fire brigade

Beyond #3 we get into increasing levels of nutty socialism via coercive taxation to the point where the government thinks it can tell me how much fruit to eat, whether I can have me mates around for a barbie, what pronoun I ought to use and how high up the privilege scale I am.... me I get about -500 points being white, male, straight, English, over 50 and from the West Country.

Trouble is... we are where we are... at about level #25 on 'Shiney's measure of nutty socialism' scale.

Back to the original point about NI.... MW is right - roll all the taxes into a flat tax and tell the proles how much all the stuff beyond #3 is actually costing them then see where we get to. And I'd wager that there'd be a lot less nutty stuff than there is now.


Mark Wadsworth said...

Shiny, thats a good list. I'll turn it into a post. I'd put fire brigade into #2.

The arguments for #3 are more subtle, it has to do with super profits and rent seeking. So private provision at strictly capped prices is also fine. Works in practice.

Shiney said...


Thanks. Yeah, FB in #2 possibly but it does comes into the realm of 'insurance' like healthcare which might be better organised locally... or not. The others are more 'national'. I mean, if I live in the middle of nowehere the house has burned down before the FB even arrive so why would I pay - just get my buddies to agree to help me out in the event of an emergency. But I guess LVT sorts that out if that is the basic way of paying as my location (and LVT) sort of determines the service I get.

And agreed on private/charitable provision of #3 should be price capped, where the government pays but doesn't provide, to prevent producer capture as well as price gouging.

Perhaps the YPP (or whatever we are now called) should publish a paper on this with costings and tax rates at each tier!

#1 = 8% LVT
#1+2 = 8% LVT plus 10% flat tax
#1+2+3 = 8% LVT plus 20% flat tax

#4 (whatever that is) = x % on the flat tax.... and so on. Right up to nutty socialism/green wibble/foreign wars/BBC etc, etc at 85% falt tax where the fruits of your labour are 'owned' by the government.

And while were at it - why not pay all government workers net? Would save on the payroll costs at least and get away from the fiction that they pay taxes 'like everyone else'.


Bayard said...

"And while were at it - why not pay all government workers net? Would save on the payroll costs at least and get away from the fiction that they pay taxes 'like everyone else'."

While I was a civil servant, I was paid net, of income tax, NI and pension (pension being "non-contributary"), so if VAT and other consumer taxes were done away with, then there is no reason why gov't employees' pay wouldn't be fully net.

However, being paid net doesn't mean that they don't pay taxes like everyone else. If that was true, and the tax rate changed, their pay would remain unchanged, even if the rate became zero, and it is quite obvious that the take home pay would change under those circumstances.

Bayard said...

Shiney, as someone else who grew up in the West Country on a farm, I would say that that would be the one thing that bumps us up the scale a bit.