Comments on: Income shifting - the Treasury misses the point, again http://www.taxresearch.org.uk/Blog/2007/12/07/income-shifting-the-treasury-misses-the-point-again/ Richard Murphy on tax and corporate accountability Wed, 03 Dec 2008 20:10:39 +0000 http://wordpress.org/?v=2.6 By: Neil Wilson http://www.taxresearch.org.uk/Blog/2007/12/07/income-shifting-the-treasury-misses-the-point-again/#comment-312659 Neil Wilson Tue, 11 Dec 2007 12:57:20 +0000 http://www.taxresearch.org.uk/Blog/2007/12/07/income-shofting-the-treasury-misses-the-point-again/#comment-312659 Richard, Isn't it simply a matter of getting the principles of the tax system straight and then setting the rates to make them work? I have similar idea with pensions, where NI is folded into income tax, the extended personal allowance scrapped and the reduction on savings income eliminated. The state pension is then increased to compensate at the average point. If you do that then rich pensioners start contributing more (no bad thing because they are living longer), poor pensioners are mildly better off and those in the middle are fine. Again if we take the policy decision to tax couples with children jointly, then you can scrap the tax credit system to pay for it. You may need to boost personal allowance to achieve equity. Thoughts? NeilW Richard,

Isn’t it simply a matter of getting the principles of the tax system straight and then setting the rates to make them work?

I have similar idea with pensions, where NI is folded into income tax, the extended personal allowance scrapped and the reduction on savings income eliminated. The state pension is then increased to compensate at the average point.

If you do that then rich pensioners start contributing more (no bad thing because they are living longer), poor pensioners are mildly better off and those in the middle are fine.

Again if we take the policy decision to tax couples with children jointly, then you can scrap the tax credit system to pay for it. You may need to boost personal allowance to achieve equity.

Thoughts?

NeilW

]]> By: Tax Research LLP http://www.taxresearch.org.uk/Blog/2007/12/07/income-shifting-the-treasury-misses-the-point-again/#comment-309409 Tax Research LLP Sun, 09 Dec 2007 17:28:16 +0000 http://www.taxresearch.org.uk/Blog/2007/12/07/income-shofting-the-treasury-misses-the-point-again/#comment-309409 Graeme Interesting idea Who will pay the extra tax to make it work? Sorry, but that's a necessary question I'm the first to agree that tax is not a zero sum game, but nor is change without consequence either So what would you suggest? Richard Graeme

Interesting idea

Who will pay the extra tax to make it work?

Sorry, but that’s a necessary question

I’m the first to agree that tax is not a zero sum game, but nor is change without consequence either

So what would you suggest?

Richard

]]> By: Graeme Pietersz http://www.taxresearch.org.uk/Blog/2007/12/07/income-shifting-the-treasury-misses-the-point-again/#comment-307321 Graeme Pietersz Sat, 08 Dec 2007 06:08:23 +0000 http://www.taxresearch.org.uk/Blog/2007/12/07/income-shofting-the-treasury-misses-the-point-again/#comment-307321 I would prefer the opposite solution: allow everyone to shift income equally: i.e. allow couples (or even families) to pool their allowances and tax bands. There are several reasons why I think this is fair. 1) Couples are treated as a single unit for social security purposes. If the government pools your income when calculating how much to give you, surely it is only fair to do the same when calculating how much to take? 2) Couples and families are in fact single economic units. This is recognised by divorce law (maintenance, share of assets), by some parts of tax law (I believe income from assets gifted to dependent children is treated as the parents') and by economists (consumption is regarded as being done by households). 3. Separate taxation favours some choices over others. Consider a situation like this: a couple has a choice between 1) each taking a job that makes £30,000 or 2) one taking a job that pays £60,000 requires long hours (leaving no time for domestic duties), while the other stays at home (to, for example, look after children). It seems wrong to me to tax one choice more heavily than the other. I would prefer the opposite solution: allow everyone to shift income equally: i.e. allow couples (or even families) to pool their allowances and tax bands. There are several reasons why I think this is fair.

1) Couples are treated as a single unit for social security purposes. If the government pools your income when calculating how much to give you, surely it is only fair to do the same when calculating how much to take?

2) Couples and families are in fact single economic units. This is recognised by divorce law (maintenance, share of assets), by some parts of tax law (I believe income from assets gifted to dependent children is treated as the parents’) and by economists (consumption is regarded as being done by households).

3. Separate taxation favours some choices over others.

Consider a situation like this: a couple has a choice between 1) each taking a job that makes £30,000 or 2) one taking a job that pays £60,000 requires long hours (leaving no time for domestic duties), while the other stays at home (to, for example, look after children). It seems wrong to me to tax one choice more heavily than the other.

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