Friday, 4 November 2016

That Institute for Economic Affairs report seems to recommend a Citizen's Income

From page 172 of this

A flat rate tax plus a lump sum transfer could be optimal

The theoretical ideas behind this are complex. However, progressivity could be achieved by having a lump sum transfer to all people (which would be progressive because it would be a bigger proportion of income for the poor) and a flat tax rate (which would avoid the problem of rising marginal rates).

Correct, how come it's mainly right-wingers who get this?

From the point of view of low earners, it is the personal allowance/Citizen's Income which has the biggest impact on how much tax they pay in total; from the point of view of high earners it is the marginal/flat tax rate which has the biggest impact. For middle earners, it is a bit of both.

So you can keep everybody happy with a Citizen's Income/flat tax system. And the 'theoretical ideas' behind this are not 'complex', it is basic maths that a ten year old can understand.


Shiney said...

Because the 'top rate of tax' is the headline. Not the 'top marginal rate of tax'.

Most people have little comprehension of the concept of 'marginal' and think that higher earners are paying 45% on all their earnings. TPTB, especially those on the left, do not tell them otherwise as it suits their narrative of bashing 'The Rich'... who are usually defined as 'anybody who earns more than me'.

Plus PAYE insulates pretty much the whole working population from how much tax they are actually paying.

Mark Wadsworth said...

Sh, "'The Rich'... who are usually defined as 'anybody who earns more than me'."

Funny, I define "the rich" as anybody who earns more than half as much as I do.

As to PAYE, by and large, most people pay twice as much stealth taxes as they do in official PAYE (VAT, Employer's NIC, Council Tax etc etc). Hence and why the Tories get away with claiming "Council Tax is people's biggest tax bill".

Shiney said...


Re 'The Rich' - I'm talking about the dinner party champagne-lefties who keep bleating on about taxing 'The Rich'. When challenged (by me) they usually define 'The Rich' as anyone earning more than them - even though they are usually pulling down > £100k from some public sector non-job. I then make your point that they are precisely the people who should pay more and add that those actually creating wealth and jobs should probably pay less. Which, on the whole, doesn't go down well (I don't get invited out much anymore!!).

Re PAYE - I was answering your specific point about why lefties don't seem to 'get' why flat taxes are better. I should have said "how much INCOME tax/NI they are actually paying".

And agreed about stealth taxes.

Mark Wadsworth said...

Sh, as far as overpaid quangocrats are concerned, the tax is not really the issue, the issue is their net salary. The tax doesn't really exist as the government deducts it and pays it to itself.

And either way, the simplest thing to do is pay them less or sack them.

markc said...

Elon Musk has joined the Citizens' Income party, too............. :-)