To continue my series on how to address inequality by changing the UK tax system, this suggestion is, I think one that glaringly obviously needs to happen:
Introduce an investment income surcharge
A perversity of the UK tax system is that those who work for a living tend to have much higher tax rates than those who live off unearned income. This is largely because those who work for a living have to pay national insurance contributions in addition to income tax and those who have unearned income do not do so. Despite this, those with unearned income do have access to the full range of state services and might even qualify for some benefits if, for example, their income fell in old age. This system is, then, another contribution to the creation of income and wealth inequality in the UK.
It can easily be addressed. Until well into the 1980s the UK had what was called an ‘investment income surcharge' rate of income tax. This charged an additional 15% income tax on investment income and rents over a specified annual allowance, which could be significantly increased for those of pensionable age, but might otherwise apply to investment income in excess of, I suggest, £7,000 per annum, which limit would imply that the taxpayer to whom it would apply had significant wealth holdings, and which happens to broadly align with the income level at which national insurance is first charged at present.
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Maybe National Insurance should just be scrapped in all its forms and income be taxed properly whether that income is earned, rental income, capital income, dividends etc. All these sources are income after all. Governments of all stripes are always banging on about simplifying the tax system.
The other important consideration is collection. Paye is simple to collect at source and corporation tax is relatively simple admittedly with some time lag. Perhaps all companies should pay a form of advanced corporation tax based on previous year earnings similar to self assessment advance payments charged on the self employed?
Eminently fair and sensible .
it’s just another tax increase..you need to accept that the vast majority of the population from all walks of life don’t like tax and want to pay less not more…call it selfish or whatever you like but that’s the truth..so accept you are an outlier and incessant tax increases is not what the electorate want
A more equal system might well reduce tax overall
The required tax yield is not an issue Ivan addressing here
How to tackle inequality in the tax system is
You either deliberately miss the point or are making an inappropriate political comment without disclosing your bias to the wealthy
The Treasury should be “Charged” like a spending government department for the tax breaks they give. That would make the Treasury the highest spending department.
I suggest making the bases 40% income tax and 20% spending tax (VAT) and 100% inheritance tax, 2% capital transaction tax (Stamp duty)
All tax breaks that reduce the tax take e.g. low income thresholds, investment incentives etc (including those that are a result of international tax treaties) are charged to the Treasury.
Always been surprised that “spending departments” have never attacked the Treasury for their profligate and regressive spending!
The logic is sound
My thought (not that I know enough to really understand the detail) is that perhaps there should be an increased standard rate of income tax (perhaps 35-40%), with, for payers of NI, a tax credit equivalent to, or exceeding, the amount of NI paid, bringing net tax + NI down to the standard rate, or below.
So far achieving this goal of integration has proved to be the unachievable Holy Grail of PAYE
Why do you prefer this to just abolishing NI etc and just having one income tax rate that you pay on income of all forms?
I’ll try to find the time to explain
But not tonight…
[…] continue my series on reforms a progressive government should introduce in the UK, this one should make complete sense. And for those who wonder why I do not say get rid of national […]
[…] continue my series on reforms a progressive government should introduce in the UK, this one should make complete sense. And for those who wonder why I do not say get rid of national […]