The Budget

[french frank]

here is a VERY interesting article about the pensions reforms, which suggest they may be the first stage in a complete overhaul of personal taxation.

some interesting ideas, which would have profound implications.

http://www.ft.com/cms/s/0/b199823a-b...44feab7de.html

Still trying to get my head round it :-)

He's saying this would be a direct, progressive tax so that the more you spend so the tax rate increases, is he? Small spenders pay little in tax?

[Serial_Apologist]

Still trying to get my head round it :-)

He's saying this would be a direct, progressive tax so that the more you spend so the tax rate increases, is he? Small spenders pay little in tax?

That link seems to expecting me to sign up for 8 FT articles a month!

[french frank]

That link seems to expecting me to sign up for 8 FT articles a month!

I think I might have registered at some point, but I don't pay anything.

[Eine Alpensinfonie]

I wonder what Messrs Clegg and Alexander and Dr Cable think of it all.

The former has meet, for the most part, a Tory stooge since the election. The latter, however, has often shown his integrity and I have much respect for him.

[teamsaint]

Still trying to get my head round it :-)

He's saying this would be a direct, progressive tax so that the more you spend so the tax rate increases, is he? Small spenders pay little in tax?

I'm not sure that there is what we would understand as a progressive element to it.
It seems to take a rather different view of personal finance that sees income taxed as it is "drawn down" and spent, rather than when it is earned.
He is suggesting that this might serve to rid the system of disincentives to earn, and increase the incentive to save.

If Osborne is in favour of this, I'm suspicious, although radical ideas on how we raise tax are well overdue.

[french frank]

I'm not sure that there is what we would understand as a progressive element to it.

Maybe I misunderstand the meaning of 'progressive'. I thought it would work as, e.g.:

First £10,000 of expenditure = tax free
£10,001 - £15,000 @ 10%
£15,001 - £20,000 @ 20% &c.

So someone on £10,000 who spent £10,000 would pay no tax, someone on £500,000 could end up paying whatever the top rate was, taxed on holidays in Bermuda, Porsches.

This would mean that those who only had the income to pay for bare essentials would not be taxed; and there could be a system whereby if they were obliged to pay more for their own necessities (if they were elderly, disabled, sick &c.) such expenditure could also be exempt.

I think the FT was probably speculative in suggesting that sort of shift in the system.

[teamsaint]

I confess I may have not understood every detail, and perhaps skimmed it it a bit.
Its an interesting article, and certainly the kind of radical thinking that could possibly lead to progressive change.

Or be a rich person's licence to make a lot more money !

[french frank]

Or be a rich person's licence to make a lot more money !

If the wealthy turned into reclusive misers who refused to spend any of their 'hard-earned' and therefore would pay NO TAX? But what would the point be of having large incomes?

And doesn't VAT also get removed, making all goods and services less expensive? Or am I beginning to make up my own version :-)

[teamsaint]

If the wealthy turned into reclusive misers who refused to spend any of their 'hard-earned' and therefore would pay NO TAX? But what would the point be of having large incomes?

And doesn't VAT also get removed, making all goods and services less expensive? Or am I beginning to make up my own version :-)

I assumed that VAT was part of the mix.

Re your rich misers thought, the wealthy would also of course have plenty of corporate vehicles to earn, move and use money. What this would certainly fail to address is the collapsing Corporation Tax take, which is hitting public finance hard . (down £10 Bn or 20% in 5 years).

http://www.taxresearch.org.uk/Blog/2013/02/27/corporate-tax-receipts-are-falling-but-were-not-getting-growth-as-a-result-so-why-keep-cutting-corporate-tax-rates/

It would also fail to address(this is a more personal view) ludicrously high marginal tax rates for some low and average earners.This a a key structural issue.


Edit : I think that making up your own version of budget and tax policy is a good idea, far better than believing or interpreting what the senior politicians tell us !