March 03, 2006

Lord Hatters

Our Roy:

We must assume that Ms Jowell, being an honourable woman, finds no conflict of interest in her husband working to frustrate the wishes of the Chancellor with whom she shares the Cabinet table.

She should be a bit more forceful though and more like her other Cabinet colleagues and do down Gordon directly, not through her husband.

March 3, 2006 in Taxes | Permalink | Comments (0) | TrackBack

Polly Toynbee: Economic Illiterate

A stunning comment from La Polla today:

This is a low-tax country still.

Compared to where? The US? India? China? Australia?

March 3, 2006 in Taxes | Permalink | Comments (25) | TrackBack

Cutting VAT on Condoms

I’m really not sure what effect this will have:

Less VAT is to be levied on condoms and the morning after pill as the Government attempts to reduce the high level of teenage pregnancies and the epidemic of sexually transmitted diseases.

The plan, to be announced in the Budget on March 22, would cut about £4 from the cost of the pill bought off prescription and between 30p and 50p from a packet of three condoms.

Last week ministers were embarrassed when figures showed that attempts to reduce teenage pregnancies by half by 2010 were well behind target. A teenage pregnancy unit had been established and £150 million spent on the campaign.

OK, sure, standard economic stuff, lower the price, more should be sold. But I’m still not sure about it. Given the number of places one can get such things for free I’m not sure that the use or non use of condoms is actually driven by the price. I did like this comment though:

But Jan Barlow, the chief executive of Brook, which provides contraception and health advice to young people said condoms were a necessity not a luxury.

Really? Sex is now a necessity? So when do we get the campaign for it to be assigned on a fair and equitable basis? The re-allocation from those getting to much to those under-provided? Fairness in matters of sexual gratification? When do I get the timeshare with one of Sven’s mistresses?

March 3, 2006 in Taxes | Permalink | Comments (7) | TrackBack

Rationality at Work?

Who knows? Perhaps this is taxpayers simply being rational?

Four out of five families are paying too much tax, footing an extra bill of £7.6 billion, according to new research.

These households are overpaying an average of £155 each by failing to claim tax credits and to manage their finances properly.

The news will provoke criticism of Gordon Brown's tax system, which many analysts have derided as over-complicated and cumbersome. Britain's "tax bible", Tolley's, has doubled in size since 1997, a sign of the increased complexity of taxation structure.

155 quid a year? What’s the cost to you of actually reading through the reams of forms and claims and exemptions to get your tax bill right? What’s your hourly pay rate? A tenner? Think it will take 15 hours to wade through all the bumph and see if you are overpaying or underclaiming? 15 an hour or so (roughly men’s average wages)? Take 10 hours to try to understand El Gordo’s forms?

Leave aside the ulcers and migranes brought on by the actual prose, the mind numbing effect of reading hundreds of pages of civil service pamphleteering. Think just of the time spent, or the opportunity cost of having to do so.

I agree, everyone will have different utility functions here, some who will cackle with glee at being able to grab something back from the Treasury, others who would rather have those few precious hours to do something interesting, like grouting the bathroom.

March 3, 2006 in Taxes | Permalink | Comments (1) | TrackBack

February 14, 2006

Calculating Taxes and Deficits.

Via Craig Newmark an interesting little story:

VALPARAISO, Ind. - A house erroneously valued at $400 million is being blamed for budget shortfalls and possible layoffs in municipalities and school districts in northwest Indiana.
...

County Treasurer Jim Murphy said the home usually carried about $1,500 in property taxes; this year, it was billed $8 million.

The homeowner, Dennis Charnetzky, declined to comment about the situation to The Associated Press on Friday.

Lippens said her agency identified the mistake and told the county auditor's office how to correct it. But the $400 million value ended up on documents that were used to calculate tax rates.

Most local officials did not learn about the mistake until Tuesday, when 18 government taxing units were asked to return a total of $3.1 million of tax money. The city of Valparaiso and the Valparaiso Community School Corp. were asked to return $2.7 million. As a result, the school system has a $200,000 budget shortfall, and the city loses $900,000.

So, the moral is that if you miscalculate your tax base then you’ll have, once you set your tax rates, a different outcome from the one you thought. For example, you might project a balanced budget (or even a surplus!) for the future but in fact be running a deficit in the real world.

Hhhm. Isn’t that what happened with capital gains taxes in the US in 99-2001?

February 14, 2006 in Taxes | Permalink | Comments (1) | TrackBack

Oil and Gas Royalties.

Ooooh, tee hee hee. You know how disgustingly beholden to the oil and gas lobby the Bush Administration is? And how appalling it is that those companies are pulling up fuels at massive profits without paying the royalties? Got to be, just gotta be the influence of the Halliburtonchimpymcsmirkcheneyshootalaywer crew, doesn’t it?

Err, no. Clinton actually.

The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years.

New projections, buried in the Interior Department's just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government.
...
But what seemed like modest incentives 10 years ago have ballooned to levels that have alarmed even ardent supporters of the oil and gas industry, partly because of added sweeteners approved during the Clinton administration but also because of ambiguities in the law that energy companies have successfully exploited in court.
...

The original law, known as the Deep Water Royalty Relief Act, had bipartisan support and was intended to promote exploration and production in deep waters of the outer continental shelf.

At the time, oil and gas prices were comparatively low and few companies were interested in the high costs and high risks of drilling in water thousands of feet deep.

The law authorized the Interior Department, which leases out tens of millions of acres in the Gulf of Mexico, to forgo its normal 12 percent royalty for much of the oil and gas produced in very deep waters.

Because it take years to explore and then build the huge offshore platforms, most of the oil and gas from the new leases is just beginning to flow.
...
Administration officials say the issue is out of their hands, adding that they opposed provisions in last year's energy bill that added new royalty relief for deep drilling in shallow waters.
...

In general, the Interior Department has always insisted that companies would not be entitled to royalty relief if market prices for oil and gas climbed above certain trigger points.

Those trigger points — currently about $35 a barrel for oil and $4 per thousand cubic feet of natural gas — have been exceeded for the last several years and are likely to stay that way for the rest of the decade.

So why is the amount of royalty-free gas and oil expected to double over the next five years?

The biggest reason is that the Clinton administration, apparently worried about the continued lack of interest in new drilling, waived the price triggers for all leases awarded in 1998 and 1999.

Be interesting to see how this issue is spun in the near future.

February 14, 2006 in Taxes | Permalink | Comments (5) | TrackBack

January 23, 2006

Jackie Ashley

One does have to wonder really. Jackie Ashley on Richard Layard:

He advocates more investment in our social lives by the state, and says that we would be happier as a society if taxes were higher: social democracy makes you smile.

That isn’t what he argues at all. He argues that there is an optimal level of taxation which will make us as happy as we can be (through the use of such blunt tools, of course). The next question is whether that is higher or lower than the one we have now. He says that the current western european levels are about right. If you actually take his argument seriously and delve into the numbers, that is, take him at his word on the logic, we’re actually taxed about 100 billion quid too much to be at that optimal level.

You do have to wonder whether Mrs. Andrew Marr has actually read his work. I’d suggest starting with his Lionel Robbins lectures.

January 23, 2006 in Taxes | Permalink | Comments (2) | TrackBack

January 03, 2006

That Laffer Curve Stuff.

Via Brad Delong:

Ben Page estimates estimates how an across-the-board cut in income tax rates could generate higher levels of economic activity.... Even in his most generous scenario, only 28 percent of lost tax revenue is recouped over a 10-year period. The United States, it seems, is firmly planted on the left side of the Laffer Curve.

Perfectly willing to believe that. With the odd caveat, of course. This refers only to the Federal income tax.....all taxes will have their own curve.

Now, next question. Where does one pass to the right side of the curve?

January 3, 2006 in Taxes | Permalink | Comments (18) | TrackBack

December 30, 2005

Francis Maude

There’s no contradiction here:

The Conservatives will not raise taxes on the rich as part of their new-found commitment to the redistribution of wealth, Francis Maude, the chairman of the party, said yesterday.

He appeared to backtrack on the promise by Oliver Letwin, the party's policy supremo, to embrace the principle of redistribution in order to narrow the gap between rich and poor.

One can narrow the gap in post tax incomes by leaving taxation on "the rich" exactly where it is and lowering it on those who are poor. It is, to my mind, one of the despicable features of our current system that someone on minimum wage, working 29 hours a week, faces a marginal rate of over 30%. Whack the personal allowance way up (and yes, that includes moving the NI bands way up) to something near median incomes. Then only the rich pay income tax and NI.

There is the side effect that this will also mean less money for the bureaucracies to piss away on our behal but my response to that is simple. Diddums.

December 30, 2005 in Taxes | Permalink | Comments (1) | TrackBack

December 23, 2005

Letwin on Redistribution.

Oliver Letwin has announced that the Tories are in favour of income redistribution:

The Tories should support the redistribution of wealth and try to narrow the gap between rich and poor, Oliver Letwin, the party's new policy chief, says today.

In an interview with The Daily Telegraph, he says: "Of course, inequality matters. Of course, it should be an aim to narrow the gap between rich and poor. It is more than a matter of safety nets."

Perhaps we should adopt the US moniker of RINO (Republicans in Name Only) and call them TINOs. Surely there is room for a party that says such redistribution is bunkum?

Now there is one way that I can see (and support) of changing the income distribution. Yes, change, rather than redistribute. My suggestion is that instead of money being raised in taxes to then be spent as our Lords and Masters desire, rather, taxes not be collected on a specific segment of the population.

If the aim is to reduce (post tax) income inequality, which is what is in fact suggested by all of these various schemes, why are we in fact collecting taxes from those we wish to redistribute to?

Far better to not incur the overheads and bureaucratic costs of the collection and spending in the first place.

Looking at 2001 (just because that’s the first figures I found) median income was 310 a week or a shade over 16k a year. Or perhaps we should take the poverty level, which is 60% of that median (with adjustments for household size, to be sure, too complex for this post) or just under 10k. Or perhaps Richard Layard’s point that more money does make us happier until we get to a 10k to 12k income level.

Whichever level we use, we simply shouldn’t be taxing incomes below those levels. Neither income tax nor NI. Yet income tax starts at around 5k a year and NI at something incredibly low like 60 quid a week. We have the completely absurd position whereby someone part time on minimum wage pays both income tax and NI. And receives benefits.

Whack the personal allowance up to 10, 12, 16 k a year. NI levels as well. The result will be a vastly more progressive tax system than what we currently have and a large change in post tax income distribution. Plus a large saving on the administrative costs of the way we currently do it.

Now, can anyone tell me why such a clearly sensible plan is not adopted? No, it’s not just because El Gordo likes fiddling with everyone’s pocketbook.

It’s because to do this we would have to shrink the State.

To balance this reduction in tax collected from the poor (I’m using lower than median income as shorthand for "poor") we would have to raise more in tax from those over median income. Much more. Tax rates would have to rise so much that there would be obvious disincentive effects, we’d almost certainly find ourselves going over to the wrong side of the Laffer Curve (yes kiddies, it really does exist. The argument is always about where we are on it, left or right of the peak, not whether the peak exists). Which means that we simply wouldn’t be able to squeeze more money out of those rich people.

Which would in turn mean that we’d actually have to start hacking away at some of the spending currently done by The State. This is a feature, not a bug, by the way.

Think of it this way. The analysis is that we have rich and poor and we should do something to close that gap. Currently we do it by taxing rich and poor and then spending the money, some going to the poor and much going to the rich (the middle classes get the biggest chunk of university spending, for example, the rich of arts subsidies).

Vastly better to not tax the poor, only tax the rich, and if there are limitations in how much we can squeeze out of the rich, so be it, we’ll simply have to spend less money.

Less post-tax income inequality, less bureaucracy, less intrusion into our lives and a smaller State. What’s wrong with that?

December 23, 2005 in Taxes | Permalink | Comments (10) | TrackBack

December 22, 2005

Abolish Inheritance Tax!

Tom Utley has it right I think:

Sexual intercourse has three functions: to make babies, to give physical pleasure and to give us a means of expressing our affection for each other. Only that first purpose should concern the state. The other two are no more the Government's business than Sir Elton's bedroom practices are any business of mine.

Every time I think of the Civil Partnership Act, I think of my two sisters - one of them a single mother - who have shared a house for most of their lives and bring up my niece together. They are expressly forbidden by the CPA from forming a civil partnership, for two reasons: (i) they are siblings; and (ii) they have not the slightest sexual interest in each other.

If Sir Elton dies before his partner, Mr Furnish may now inherit all his property, free of inheritance tax - and all because they fancy the pants off each other. When one of my sisters dies, the other will almost certainly have to sell their house to pay the tax bill. Where is the justice in that - and how does it serve the interests of the state?

Rather than the restrictions imposed by the Civil Partnerships Act, abolish the tax altogther. Of course, I want to see the tax abolished anyway for I’m rather with that idea of wealth cascading down the generations rather than it going off to pay for whatever El Gordo wants to piss it away on this week. And equality be damned.

December 22, 2005 in Taxes | Permalink | Comments (13) | TrackBack

December 18, 2005

Prescott and Council Tax.

I’m not sure that The Times has actually "got" Prescott on this.

A complicated tale of whether he actually pays Council Tax anywhere. But he doesn’t pay it on Doreneywood because the charitable trust does. Fine, same with Chequers, I’m sure. Not on his grace and favour apartment because it’s not his main residence. Also fine. But they then go on to aks whether he pays on his home in Hull.

Under the system for parliamentary allowances, Prescott is entitled to claim back expenses — including the council tax — on his home in Hull provided it is not his main residence.

Well, unless he’s claiming Dorneywood as his main residence then it must be so he can’t (and I assume doesn’t) claim it off his allowances.


December 18, 2005 in Taxes | Permalink | Comments (1) | TrackBack

December 07, 2005

Taxes Too High?

We can construct any number of measure to try and work out whether taxes are too high. Are they damaging incentives for example, distorting the economy too much and so on. One possible measure is to try and see how much is being avoided. Too much and we might think we’ve got the rates too high, if there is sufficient profit in such avoidance to risk jail time for doing so.

Ian Davidson, a Labour MP, said it was staggering that British firms and traders were dodging an estimated £11.9billion of VAT annually. "The business community must be full of thieves and villains if one in eight pounds of VAT is being lost," he said.

Data in the Chancellor's pre-Budget report indicates the tax-take from VAT and excise duty will fall sharply as a share of GDP before the end of the decade.

VAT revenue will drop from 6.2pc to 5.9pc by 2008, while excise duty falls from 3.3pc to 2.9pc by 2010 - together cutting revenue by £7billion a year, enough to seriously damage the public accounts.

The Treasury said yesterday that it had factored in "deterioration" as a prudent forecast, but denied the Government had thrown in the towel on tax collection.

Customs officials say a big chunk of revenue is being creamed off by organised crime in "missing trader" rings.

If even the Treasury thinks that current tax rates are causing increasing fraud might that not be a sign that the taxes are indeed too high?

December 7, 2005 in Taxes | Permalink | Comments (4) | TrackBack

December 06, 2005

Pre-Budget Report.

Can’t say I was all that surprised by El Gordo yesterday. Screw the oil companies in hte North Sea, oooooh, what a surprise. That it will have detrimental effects in the long term, well, who cares, eh? Get some money in now to pay the Real Nappy Officers I say, much more important than a stable investment regime.

The other non-surprise is the change to the SIPPs scheme.

Two years ago Mr Brown said that self-invested personal pensions (Sipps) would be able to gain tax relief on residential property bought after April 2006. Yesterday the Treasury said: "Sipps will be prohibited from obtaining tax advantages when investing in residential property and other assets, such as fine wines."

However sensible it might have been to provide a tax break for the provision of rented housing, however sensible encouraging people to save for their own retirements, this was never going to be allowed to stand.

Update. One other non-surprise. Leave your money in an account for 15 years and it’ll be spent on sending teenage scrotes on long holidays.

Hundreds of millions of pounds lying dormant in unused accounts will be used to fund "youth facilities and community services" such as gap years for deprived teenagers, the Chancellor said.

Might actually be worth it, getting the chavs to father their babbies on the youth of other nations.

December 6, 2005 in Taxes | Permalink | Comments (5) | TrackBack

December 05, 2005

International Tax Avoidance.

Duncan Campbell gets very het up about the way in which companies and individuals avoid tax internationally.

Six out of 10 US corporations pay no tax,

Leave aside the obvious truth that corporations shouldn’t pay tax at all. Even within his own belief bubble the only interesting number is how many corporations make a profit and don’t pay tax?


and the recent Enron scandal demonstrated how cynically major household names in the US exploit the system. Enron used around 800 different "Caribbean financial dumps" to hide its debts.

Err, you mean Enron wasn’t making profits and thus should not have been paying tax? Which, I think, it actually did?


John Christensen of the Tax Justice Network, a former adviser to the Jersey government, says that more than 50% of the cash holdings of rich individuals in Latin America is now held offshore and that some 30% of the GDP of sub- Saharan African nations disappeared offshore in the second half of the 1990s. The situation in the Middle East and north Africa is even worse. Since the 1980s, banks have targeted the world's roughly 8 million "high net-worth individuals" and encouraged them to hide their funds offshore. As a result, around $11.5 trillion of their assets are now in tax-free or protected havens.

There’s actually something of a major problem here. The assumption seems to be that once in these tax havens the money just sits there, is not invested or anything. Which of course is nonsense. It goes back into the general capital markets and is used just like all other savings, to finance industry and so on. Sure, maybe they’re not paying tax on the profits but that doesn’t mean that the money isn’t being used.

Try this for a moment. If you were a reasonably well off Argentinian, you remembered what your own Government has done to you in recent years (hugely devalued the currency, confiscated your dollar savings in local banks and so on), what would be, from your point of view, a rational response? Getting your cash offshore and out of their reach of course.

That so much money is indeed held offshore is not anything other than an example of just how little trust there is in the rulers of these places. And as recent history shows, that lack of trust is not misplaced.

December 5, 2005 in Taxes | Permalink | Comments (9) | TrackBack

November 14, 2005

Globalization and Taxes.

The Guardian tries a nice bait and switch in an editorial today.

But what if the threats to decamp are real? If globalisation really has made it easier for companies and individuals to relocate abroad, then moves to recoup small amounts of money could lead to the loss of much greater sums and lots of jobs, if businesses and employees migrate to lower tax climates.
...

But the flip side of this freedom is that corporations and managers should act as good citizens: and that means paying their proper share of taxes. It is not as if they are an oppressed species. As Incomes Data Services reported last week, the pay of top company directors rose by 18% last year, over six times higher than the rise in average weekly earnings of 2.8%. And 18% of, say, £500,000 is a lot more than 18% of average earnings of £22,400 a year. If it turns out there is a real problem about corporate migration, then it will have to be faced. But there must be a suspicion that industry is simply trying it on this time.


Where’s the switch? Well, talking about corporate taxation is one thing, talking about the taxation of managers of corporations is another. Take my little business for example.

We purchase things in Kazakhstan, refine it in Russia, sell it in Taiwan, the US, Germany and so on. Why should we pay corporation the in the UK? If I live in the UK, sure, I should pay income tax there, but why should the corporation do so? Of course, we’ve organised things so it does not, but that shows up the two things about globalization and taxes that need to be addressed. Both the ease with which businesses can indeed escape (entirely legally I might add) national taxation on profits (but not on personal income, whether from labour or dividends which depend upon the residency of the indivdual, not the company) and secondly, the intellectual argument. Given the above, exactly where should, in moral terms, taxes on those profits be paid?

I realise that the Guardian is not going to accept my view that companies should not pay tax at all but given that disagreement, can anyone come up with an argument that shows that we should be paying corporation tax to El Gordo?

November 14, 2005 in Taxes | Permalink | Comments (2) | TrackBack

November 06, 2005

Taxing Your View

There’s a report that the Government is going to start taxing your view, raising your council tax band or two for an extra bedroom, a conservatory, lower it if you’re beside a power line and so on.

Taxpayers are set to be charged hundreds of pounds extra a year if they are in a conservation area, next to an open space, have a swimming pool or tennis court or enjoy full or partial views of the sea, hills, mountains, lakes or rivers.

Extra charges are also expected to be levied on homes with more bedrooms than average, conservatories, large patios or gardens, roof terraces or balconies. Homes in "gated communities" will also face higher bills.

Official documents show that ministers are going to extraordinary lengths to build a detailed database of properties across England, with the intention of placing them in a higher council tax band.

In one sense I can’t really see the problem with this. Council tax is levies on the value of a house. Getting a better valuation makes some sort of sense really, as the banding process itself is pretty "suck a thumb and see". It’s entirely normal, in the US for example, for property valuations to be made in such detail.

On the other hand it could turn out to be yet another bureaucratic nightmare. Why not, for example, just ask the estate agents in an area what a place is worth? They’ve usually got a pretty good idea.

However, it’s the other bit that shows what a mess such taxation is in:

The charges will come in after a long-awaited revaluation of each property in England and will take into account the huge rises in property values since the last valuation in 1991.

Earlier this year, ministers postponed the revaluation, which was originally set for 2007, fearing a backlash from middle-income voters in the South, who are expected to face the highest rises.

If local taxation actually paid for local services (as it should, arguably,) then the revaluation shouldn’t actually be such a political hot potato. It might be that four bedroomed houses had changed value relative to two bedroom flats inside an authority, say (with the change in demographics this doesn’t seem unlikely) and so the tax load would be rebalanced. But the amount raised in taxes in any specific authority would remain the same. For local services do not cost more or less (well, only to the extent that councils use rented rather than owned property to provide them from, a marginal difference at best,) depending upon the underlying property values.

What causes the political problem is that local taxation does not pay for local services.  There is huge cross-subsidy between local authority areas so the change in relative values between the North and South (say) leads to a huge group of losers and another of winners. Unfortunately, from the Tory heartlands to the Labour heartlands.

One way out of the mess would be as follows. Tax the undeveloped value of the land, not the developed (nice bit  of Georgism there, taxing the Ricardian Rent at 100% for example), as that is the value being provided to the property owner by the surrounding society. Abolish the system of cross subsidies which would also mean abolishing the central subsidies to the councils. This would be achieved by taking huge chunks of spending out of Local Authority control (like an education voucher system for example) and funding them direct from the centre rather than the current system of grants from the centre going to the Local Authority to pay for them.

This would also lead to greater local democracy....you vote for people and they have to raise the taxes from you to pay for what you want. Democratic accountability even.

It won’t happen, of course, far too sensible an idea.

 

November 6, 2005 in Taxes | Permalink | Comments (2) | TrackBack

November 05, 2005

Rewriting History.

From the Groan:

Mr Bush inherited a healthy budget surplus from the outgoing Clinton administration and squandered it partly on tax cuts at a time when Mr Bush was infused with Reaganite notions that deficits don't really matter.


Might be worth noting that some of that surplus wasn’t really there. Based upon tax collection projections that the unsustainable boom would in fact be sustainable. You know, that bubble we had in 98/99 or so.

Minor point but one worth remembering.

November 5, 2005 in Taxes | Permalink | Comments (2) | TrackBack

November 02, 2005

Stamp Duty.

El Gordo’s increases in stamp duty seem to be pulling in the money:

Over the past year the amount of stamp duty pouring into the coffers of Gordon Brown, the Chancellor, rose by almost 50 per cent, new figures showed.

Revenue from the tax has increased eightfold since Labour came to power in 1997. Stamp duty on house sales now generates more money for the Chancellor than spirits and beer duty combined and is fast approaching the level raised by tobacco tax.

Unfortunately it’s a particularly stupid tax. In effect, it’s one on labour mobility. That isn’t something we want to tax, rather the opposite, we both want and need to maintain as much labour mobility as we can.

November 2, 2005 in Taxes | Permalink | Comments (3) | TrackBack

October 24, 2005

Raise the Gas Tax.

Rare for me to agree with the NY Times, I know, but on this issue I do. Raise the Federal gas tax....keep the price up at the $3.00 level or so.

They even recognise that such a thing would be regressive and should thus be recycled back into either lower taxes or earned income tax credits for the poor. I’d prefer cutting FICA, the most regressive of US taxes but that’s a quibble.

I’ve been saying this should be done for years and now finally some people are agreeing. I guess it’s the old stopped watch thing, or perhaps random chance. I’m bound to be right about something sometime, even if purely by mistake.

October 24, 2005 in Taxes | Permalink | Comments (1) | TrackBack

Neil Clark

Neil Clark writes in the Groan today.

What exactly is moderate about David Cameron? On taxation, the Tory leadership favourite has signalled his attraction to the flat-rate tax, a far-right wheeze that would leave, according to a Treasury report, up to 30 million Britons worse off and the super-rich even richer. Declaring his support for "flatter taxes", Cameron has enthusiastically backed the decision of his lieutenant, George Osborne, to set up a commission to investigate the idea and has signed up to a classic Thatcherite economic agenda of tax cuts and deregulation.

Oh dear. He hasn’t been reading the blogs has he? Both Owen and Chris have pointed out, from the left, that a flat tax can be progressive, neutral or regressive, it just depends on the rate and the size of the personal allowance. Certainly, it would be trivially easy to design one that is both more progressive than our current system (what is it with this insistence that part timers on minimum wage should pay income tax?) and revenue neutral.

And our Mr Clark has missed out the interesting bit about that Treasury report as well. The way in which it was censored before being released so as to exclude all the good things it said about it.

Still, at least Clarkie has a blog with an open comments section where you can go and point out to him the error of his ways.

Trying these Technorati things again:

<p>Technorati tag: <a href="http://technorati.com/tag/flat+tax"
rel="tag" target="blank">Flat Tax</a></p> Flat Tax.

<p>Technorati tag: <a href="http://technorati.com/tag/flat+tax" rel="tag" target="blank">Flat Tax</a></p>

October 24, 2005 in Taxes | Permalink | Comments (5) | TrackBack

October 20, 2005

The Groan on Pensions.

Here’s The Guardian’s considered thoughts on how to deal with the pensions crisis:

what is needed is a combination of three options: working longer, saving more and paying more tax.

Hunh? How do we reconcile saving more and paying more tax?

October 20, 2005 in Taxes | Permalink | Comments (9) | TrackBack

October 08, 2005

SIPPs

I have to admit that I’m surprised at this new pension plan scheme called a SIPP. The Guardian explains how it works. It seems to drive a coach and horses through the thickets of restrictions in what you can or cannot invest a pension in, and how much you can actually contribute to a pension pot.

Whether this is all a good thing or not I don’t know but from the limited information I have at present it looks like a cock-up. And as such I expect a lot of changes to the rules soon. I mean, I can’t reallysee a Labour Chancellor encouraging 40% off the price of a buy to let property for the wealthy. Just doesn’t seem to make sense. Thus I don’t think it will last.

October 8, 2005 in Taxes | Permalink | Comments (1) | TrackBack

September 11, 2005

Well Done Will!

Well done Willy Hutton! I hadn’t seen this argument before. The flat tax will make the levees fail! And cause hurricanes!

Jeez.

September 11, 2005 in Taxes | Permalink | Comments (2) | TrackBack

September 09, 2005

Interesting Number

Ross CLark gives us an interesting little number:

The average immigrant now earns more — and pays more tax — than the average Brit.

September 9, 2005 in Taxes | Permalink | Comments (1) | TrackBack

September 05, 2005

Academia is Screwed.

Here is a column by a Professor of Accounting.

The top fifth of earners pay a smaller proportion of their income in tax than the bottom fifth. Corporate tax payments now account for just 2.5% of national income, the smallest share ever.

One good point, that our current tax system is not actually progressive at all. One bad one, about taxes on companies. The thing is, as he should know and be teaching his students, that corporations don’t pay taxes in any meaningful sense. They hand the cheque over, sure, but they’re merely collecting the cash. The money actually comes from the customers, the workers, or the investors (which depends on some complex calculations of elasticities etc and is different in each case). So complaining about how much tax is paid "by companies" is silly, as it is always none.

His figures also show us that we could abolish the corporate taxation at a very low cost. Anyone think that there isn’t 2.5% of Govt spending we couldn’t do without?

And here is a terrible point:


The tax avoidance industry is on a collision course with civil society. Elected governments take months and years to develop tax laws, but in pursuit of private profits accountancy firms can undermine them within hours of a chancellor's budget speech.

Every example he gives is one that has been ruled illegal. That is, he is not talking about tax avoidance at all, but tax evasion. When a Professor, of Accounting no less, fails to make that distinction then I think we can safely say that the education system in the UK is screwed, completely cocked. Who would want to be "educated" by someone ignorant of that most basic distinction?

September 5, 2005 in Taxes | Permalink | Comments (7) | TrackBack

September 04, 2005

The Flat Tax.

Nice article on the flat tax. It might be worth noting, now that such an idea is being seriously considered here, that it isn’t, unfortunately, the only thing that needs to be done. The National Insurance system needs fixing too. Combine the two systems and abolish the eligibility rules for unemployment pay and pensions.

One other point:

Now aged 46 and out of office, the one-time young firebrand is a grand old man of Baltic politics after serving two stints as premier. The flat tax is now cross-party orthodoxy in Estonia, and Mr Laar is tipped as a European commissioner when his country joins the EU in 2007.

Don’t these people have editors? Estonia’s already in.

September 4, 2005 in Taxes | Permalink | Comments (1) | TrackBack

August 29, 2005

Aye

Aye

August 29, 2005 in Taxes | Permalink | Comments (0) | TrackBack

August 26, 2005

Insane Tax System.

The taxation system in the UK is truly insane. A gargantuan screw up.

August 26, 2005 in Taxes | Permalink | Comments (2) | TrackBack

August 08, 2005

The Estate Tax.

The New York Times editorialises about the Estate Tax in the US.

Under Mr. Kyl's approach, the estate tax would not kick in until the value of one's assets at death exceeded at least $3.5 million. That's overly generous; a $2 million exemption would be ample to protect the hard-working families, entrepreneurs and farmers that estate tax foes claim to care about most. Still, it's in the ballpark. With an exemption of $3.5 million, only the top 0.3 percent of estates would be subject to the tax. Huge estates are precisely those that should be taxed most heavily, because the larger the estate, the more likely it is to be made up of investment gains that were never taxed during the owner's lifetime.

Where Mr. Kyl's plan really implodes is in its drive to cut the tax rate on big estates by some two-thirds, to 15 percent. A $3.5 million exemption, together with a top rate of 15 percent, would cut the taxes of America's wealthiest families by some $550 billion during its first 10 years. That would be nearly as bad as repeal itself.

They have, as usual, managed to completely miss the point about the Estate Tax. The very richest families do not pay it. Joe Kennedy’s estate didn’t pay it, Warren Buffett’s won’t and nor will that of Bill Gates (or the Hewletts, Packards, Heinzs, ad infinitum). Stick the money in a trust fund and descendents get to enjoy the interest, dividends and capital gains for evermore without paying tax at all. But you need more than $100 million to make this work.

Exactly why the Times never cares to note this point is unknown. I’m sure that it has nothing at all to do with the fact that the family that owns the paper, the Sulzbergers, employ a similar strategy.

Update: for an explanation of how to avoid the estate tax have a look at these two old pieces from sci.econ. One and Two.

August 8, 2005 in Taxes | Permalink | Comments (3) | TrackBack

July 14, 2005

Land Development Tax.

Prescott is looking at imposing a land development tax. No, this isn’t unfortunately, the single land tax of Henry George, more’s the pity.

On the face of it I don’t see why it shouldn’t be a good idea. There is a huge difference in the value of agricultural land (4k and acre?) and land with planning permission (500k an acre?). The only thing that gives that difference is the action of the local council in granting the planning permission. As it is, solely, a gain given by the allocation of a government licence I don’t see why it shouldn’t be taxed.

On the larger picture that very price difference shows that there is something grievously wrong with our planning system but that’s another matter.

As the Telegraph notes it may not be all this simple.

There have been four attempts since the war to introduce such a tax, three by Labour governments, and all failed or were not given time to work.

Even if it is a good idea in theory don’t doubt the ability of Government to cock it up.

July 14, 2005 in Taxes | Permalink | Comments (2) | TrackBack

July 13, 2005

Trivial Point.

I’m aware of the various talking points from both sides about the shrinking US deficit as a result of rising tax collections. I’d side with Ben Bernanke when he says that it’s way too early to tell whether this is a "supply side " effect  (itself a misnomer). But there is one line that jars:

Mr. Bush's intention to extend his tax cuts indefinitely, and to add new ones, would drain more than $1.4 trillion from government coffers over the next 10 years.

It’s indicative of a mindset, one that I thoroughly disagree with. Money somehow belongs to the Government, and reducing taxes is giving it away. No. This is nothing to do with whether the tax cuts are a good idea or not, but about the basic relationship between the govt and the citizenry. It isn’t money being drained from the government coffers. It is money that is not being drained from the citizen’s coffers. Reducing taxes is not giving something away it is not taking it in the first place. 

To think the other way is to be on the road to madness, that it all really belongs to Govt and we are allowed to keep what they let us. Rather, the correct position is it all belongs to us and we give the Govt what they need or what we collectively allow them to have.

July 13, 2005 in Taxes | Permalink | Comments (2) | TrackBack

July 05, 2005

Total Tax Takes.

EU Rota has another one of his informative little charts up. Total tax takes in the EU 25. Now, if we cross match that with growth rates I wonder what we’ll see.....

Update.
John B provides a graph of that and EU Rota a table. Slightly different conclusions:

John B:

Not terribly conclusive, although going for a tax rate much above 45% seems like a marginally worse strategy than going for one much below it.

Rota:

The average rate of government consumption of GDP (ie. taxation) for the EU-25 is 44.37%. Those countries below this average had average GDP growth of 3.79% per year. Above this rate nations turned in an average GDP growth of 1.87% per year. On the spending side, the average rate of government expenditure as a percent of GDP for the EU-25, 46.16%. Those countries below this averaged 4.19% GDP growth per year. Those above this expenditure level averaged 2.13% GDP growth per year.

July 5, 2005 in Taxes | Permalink | Comments (4) | TrackBack

June 20, 2005

Income Tax Rip-Off.

Let’s start from the beginning, eh? There’s two ways that we can look at taxation on incomes.

1) Everyone has to pay something to buy the services we get from Government.

2) We want to make society more equal, so the rich should be paying and the poor receiving.

Let’s also assume that higher rate tax kicks in at about the right level, 1.6  times average wages...we’re assuming that that is the level of "rich" at which people should be paying for others.

If you were a letist, someone who believed in this idea of reallocation of incomes, thought number 2 was the right way to think about taxation, would you be happy with the current system?

Just 3.6m people are paying £73.2billion in income tax, proving that the Government is forcing higher-rate taxpayers to shoulder more than half of the income tax burden.

This equates to only 6pc of the population paying 55pc of the Government's income tax revenue, despite basic rate taxpayers outnumbering those in the 40pc bracket six to one. This year, income tax receipts are expected to reach £134billion, nearly £10billion more than last year.

By contrast, there are expected to be 100,000 more basic-rate taxpayers, increasing the number to 22.6m, who will contribute £59.5billion this year, up from £57billion last year.

You might be happy with the first part of that, that the rich really are paying their share. But in reality you shouldn’t be, for the figures are showing that the poor (as we have defined them) are still paying 60 billion odd in income taxation. (The situation gets a lot worse when we add in National Insurance and VAT, both regressive taxes.)

Remember, we want to reallocate the incomes, raise the poors’, reduce those of the rich. So why in hell are the poor paying income tax? If redistribution is indeed the goal of the system then obviously the poor should not be paying into the pot at all. So no income tax on those who are not rich.

Which leads us to the conclusion that we have a government which is too large to allow such redistribution. They simply do too many things, spend too much money, for it to be possible to run the system off the taxes of only the rich.

So, if you were truly of the left, really did believe is this redistribution shtick, you would be campaigning for a smaller state, for less government spending, so that the poor could stop paying taxes on their incomes.

Just as an example, an individual working 29 hours a week at minimum wage faces a 30% marginal tax rate on every extra pound they earn. (Actually, it’s 40% if you include both NI payments.) How does this contribute to a more egalitarian society? How can it be defended at all?

Yes, I know, I nicked the basic logic here from Mr S&M but then we’d have a much better run country if more did nick his ideas.

June 20, 2005 in Taxes | Permalink | Comments (7) | TrackBack

June 17, 2005

Customs Duties on Aid.

Another story out of Sri Lanka about import duties being charged on aid after the tsunami.

The sum was levied by customs in Colombo which have refused to grant tax exemptions to non-governmental organisations working to repair damage caused by the giant Boxing Day wave.

The Indian-made Mahindra vehicles, essential to negotiate damaged roads and rough tracks, remained stuck in port at Colombo for almost a month as officials completed the small mountain of paperwork required to release them. Customs charged £2,750 "demurrage" for every day they stood idle.

Oxfam said it had "no choice" but to pay the exorbitant 300 per cent import tax or face further delays to its relief operation.

Sources said that when Oxfam officials tried to reason with the government, the ministry of finance offered three options: pay the duty, re-export the vehicles or hand them over to a ministry of their choice.

As the report goes on to say:

An aid worker who asked to remain anonymous said yesterday: "When people watched those scenes of destruction and suffering on television they were moved to help the victims - not fill the government's coffers."

Obviously this worker did not want to be named as he is not a nong, has not quite imbibed the ambrosia that is the nongerist view of the world. As we are repeatedly told, governments having more money is a good thing, their having more money will cure what ails the poor parts of the world. So paying duty on emergency and development aid is a good thing, as it gives more money to such governments.

It’s all so simple if only you have the right attitude.

June 17, 2005 in Taxes | Permalink | Comments (0) | TrackBack

June 14, 2005

Tory Tax Policies.

We’ve still got a long way to go in educating the political classes about economics. The Shadow Chancellor comes out today with what will be seen as a radical move, a shock to the system....business taxation should fall. Yes! Lower corporation tax! There’ll be a fight about it, the Tories will be lambasted as favouring companies over people and rates will inch down if they ever do get back into power.

What a waste of bloody effort. Why not simply go out and tell the truth? Shock! Horror! I know, the truth from someone living off our taxes, but it would be a nice change, wouldn’t it?

Companies don’t actually pay taxes, the contention that they do being merely a polite fiction. Dependent  upon various technical matters like elasticities of demand and supply, those taxes which we think of as being paid by companies are actually paid by the workers, the consumers or the investors. None of it is actually paid by the company.

Given this undoubted fact, something available in every economics textbook, if someone is going to actually spend political capital to change people’s views, why not direct them towards reality? Abolish the Corporation Tax (but keep the Advanced CT, which is merely the company collecting taxes on dividends, an efficient way to do it) and abolish Employer’s National Insurance payments. Stick the taxes clearly and obviously on those who actually pay them, the workers, the customers or theinvestors, and get rid of this fantasy, lie even, that companies pay taxes at all.

Why not? Truth in Politics at Last!

June 14, 2005 in Taxes | Permalink | Comments (4) | TrackBack

June 05, 2005

National Road Pricing.

Here’s a real surprise. Nu Labout actually putting forward something economically rational...has someone been putting something in the water?

The Transport Secretary, Alistair Darling, will use his first address since the election to launch a 'national debate' on the importance of introducing a national road-pricing scheme to solve Britain's chronic congestion.

He told The Observer that it was critical to start 'building a political consensus' while winning the acceptance of the UK's 28 million motorists on the merits of a scheme. Satellite and global-positioning technology will be used to make drivers pay to use notorious 'traffic-jam' routes such as the M25 around London, the M1 in the Midlands and the M6 in the north-west of England. Motorists will be told that road tax and petrol duty will be reduced under a congestion-targeted scheme in which they would pay for each mile they drive. Motorways, A-roads and minor routes will all be affected.

'We need to decide in the course of this parliament whether this is going to be feasible,' Darling said ahead of his speech to the Social Market Foundation think-tank on Thursday.

This is so obviously sensible that of course there will be the most  almighty cat fight to get it through. There are, however, two provisos:

1) The scheme needs to be revenue neutral. Whatever is raised via this system needs to come off taxes somewhere else.

2) How, exactly, are the payments to be collected and the system monitored? I’ll guarantee you that there is, somewhere in the system, a Civil Servant pointing out that if only the National ID Card had to be inserted before the ignition worked then we would have a complete system. A fascist’s dream, knowing where every single driver was at any moment.

The system needs to be anonymous. Check that the car has paid the toll, yes, but only identifying the car or owner if it has not, perhaps GATSOs to take the licence plate of those whose transponders don’t ping....but the idea that the system will know who is driving what on every mile of road is horrifying.

June 5, 2005 in Taxes | Permalink | Comments (8) | TrackBack

June 01, 2005

How Much Tax Uncollected?

No doubt there wwill be squeals at the figure inadvertently revealed yesterday for the amount of tax uncollected each year, 50 billion quid or about 12% of the total. The important part of that number will not be remarked upon, except here, of course:

"My references to improved collection of unpaid tax have been presented as official estimates when they are nothing of the sort. In reality, it is notoriously difficult to estimate the amount of tax that goes uncollected because of evasion, avoidance and various forms of non-compliance."

This is not, even as a very rough estimate, the amount of tax that people should pay but do not. That part is the evasion and non-compliance part.  The great bulk of the number will be in the avoidance part, that is, the perfectly legal methods by which one can arrange one’s affairs to reduce one’s tax bill.  Given the complexity of the system there are always going to be ways to do that. What the number does not mean is that there is 50 billion a year that legally should be paid over but is not. Avoidance includes things like having a deposit account inside an ISA, buying farmland to avoid inheritance tax (or shares on AIM), deducting mortgage interest paid from rent collected.

June 1, 2005 in Taxes | Permalink | Comments (1) | TrackBack

May 26, 2005

Inflation Running Out of Control

We hear a lot about the low inflation environment in which we live, yet there are certain sectors where it seems quite high:

The estimated cost of buying a new national ID card has risen to £93 - up more than £20 since the scheme was first proposed three years ago, it was disclosed yesterday. The figure is £5 more than forecast just a few months ago.
Official total running costs over 10 years are put at more than £5 billion - a £2 billion rise on original estimates. Trials of the biometric technology that will underpin the scheme have indicated unacceptably high failure rates.

One commenter here a few months back (Mr. Gillies?) suggested that the abomination would cost some 20 billion in all, leading me to think they might end up trying to charge us 400 quid a time.

There is also this piece of mendaciousness:

The Government said 70 per cent of the cost was for biometrics in passports, which would proceed whatever the fate of the ID Card Bill because they will be needed for US and EU travel.

I’ll admit I might have the wrong end of the stick here, but I thought the US just wanted a digital photo?

Update: Tim Hicks with the details. All the Yanks want is a machine readable photo.

May 26, 2005 in Taxes | Permalink | Comments (6) | TrackBack

May 07, 2005

John Tierney.

John Tierney is interesting today. He’s about the only person I’ve seen who is actually giving a decent argument on the Social Security reform question. I don’t mean that there are no good arguments from the policy wonks, I mean a good one from the point of view of political persuasion, rhetoric if you wish, simple tales well told to bring out the underlying points.

But there's also another kind of risk to consider, one that Chilean workers kept mentioning to me. The best part of their private accounts, they said, was that they'd put "la plata donde mis ojos la vean" - the money where my eyes can see it. They knew they might lose some of it in the stock market, but they preferred that to watching it all disappear into politicians' hands.
....

It's not a problem now, because for the next few years the baby boomers' taxes will provide an annual surplus for Social Security of about $100 billion, allowing Congress to dole out the extra money for its favorite causes, like farm subsidies and weapon systems and West Virginia buildings named after Robert Byrd. But in four years the surpluses start declining, and they turn into deficits around 2017, when Congress must begin repaying those i.o.u.'s.

By the time I'm in my 70's, the Social Security shortfall will force Congress to find new taxes or make spending cuts that are more than half the size of the Pentagon's budget. If I make it to age 88, there will no more i.o.u.'s left in the trust fund, so everyone's benefits would have to be cut by 27 percent.
....

I can't protect my pension against political risk, but Pablo can help protect his against the risks of the stock market. As he approaches retirement, he can gradually shift his money out of stocks and into bonds, like the ones that financed the private road between Santiago and the port city of Valparaiso, which will be paid off by tolls. The Chilean pension system has billboards along the road proclaiming, "Your savings are financing this highway, and this highway is financing your retirement."

Those billboards have been on my mind. My pension depends on 535 politicians who will be asked to vote for steep tax increases or budget cuts that they fear could cost them their jobs. Pablo's pension depends on people driving between Chile's two largest cities.

Put this way the question becomes a little clearer and your answer probably depends upon your own prejudices Bayesian priors. Which do you trust more? Markets or politicians?  The UK experience, where there have been at least two changes to the indexation by prices/wage growth, where even private pensions have been gutted by tax rises, well, it doesn’t make the politicians look all that good.

May 7, 2005 in Taxes | Permalink | Comments (2) | TrackBack

April 16, 2005

Why We Need to Lock People Up Without Trial.

We all know of course that the Government is wonderful, only has our best interests at heart, can do no wrong and is there to protect us from the vicissitudes of the angry world ranged against us. This is why, of course, it is absolutely right and correct that we should overturn the wisdom of the ages and allow them to lock up anyone they think they want to, without benefit of a trial, for of course, they are wonderful, have our best interests at heart and can do no wrong:

The Home Office has been forced to apologise to 10 men placed under controversial anti-terrorist control orders after it linked them to the ricin plot in London, the Guardian has discovered.

In an embarrassing letter to the men, the government claims that it made a "clerical error" when it said the grounds for emergency restriction imposed on each of the alleged international terrorists was that they "belonged to and have provided support for a network of north African extremists directly involved in terrorist planning in the UK, including the use of toxic chemicals".

Last Wednesday, Kamel Bourgass, an Algerian who stabbed a policeman to death and planned poison attacks across Britain, was jailed for 17 years. But in a blow to the police and security services, four co-defendants were acquitted and a second trial was abandoned. Defence lawyers said the case was a massive conspiracy tapestry woven by the prosecution and that it had been used by the government to justify the war in Iraq and detention without trial in the UK.

The fact that the control orders attempted to connect the 10 men - who were detained without charge and trial for more than two years before being released under stringent conditions - to the ricin plot, will cast further doubt on the validity of the secret evidence the government claims it has on them.

Last night a Home Office spokesman said: "Basically there was a clerical error in the initial order in that the same basis for issue was given in all of the orders. This was noticed shortly afterwards and acted on immediately. It did not affect the validity of the order.

"The home secretary made the decision to issue the control orders on the basis of information given to him by the security services. The clerical error did not change the validity of the order in any way."

Certainly, I shall sleep safer in my bed tonight, knowing that I too could be locked up on the basis of a clerical error. Won’t you? So much easier than having to, oooh, I don’t know, persuade a judge, have evidence, anything concrete like that. I mean really, it’s obvious isn’t it, fascism is so much safer than freedom.

April 16, 2005 in Taxes | Permalink | Comments (1) | TrackBack

April 15, 2005

The NYT on Estate Tax.

The New York Times takes the usual position (and the wrong one) on the US Estate Tax:

Repeal would shield the estates of the very wealthiest Americans from the tax.

That is, to use a Britishism, complete bollocks. The very wealthiest Americans do not pay the estate tax. They set up foundations where the money is protected, can grow tax free and pay for the lifestyles of the myriad offspring down the generations. Fords, Kennedys, Sultzbergers, Rockefellers, the whole damn list of them. Buffett has stated he will leave his entire fortune to a foundation, Bill Gates likewise, and the tax revenue from their estates (when it comes at some indeterminate future date) will be zero.

The thing is, to make this work, one needs over about $100 million. The people who do pay the estate tax are those in the $1.5 to $100 million spread. Adding housing and pension savings and the like, in expensive areas of the country, that’s from a decent middle class lifestyle up to being very rich, but not plutocratically so.

The problem with the US estate tax is not that the very wealthiest would not pay it if it were abolished but that they do not pay it now while it exists.

April 15, 2005 in Taxes | Permalink | Comments (2) | TrackBack

February 08, 2005

A Rise in Tax Rates?

Tony Blair’s ex-speechwriter (OK, OK, I know we’re not talking the top of the political tree here) :

The top rate of tax should be raised to increase the money available for public services, according to a former member of Tony Blair's inner circle.

The problem with this is that the Laffer Curve is actually true. Zero percent and 100% tax rates raise no revenue. Somewhere in between those two is the rate which maximises the amount collected. No one is exactly certain where it is (and of course it is different for taxation on different activities) but the assumption that a rise in tax rates will lead to a rise in tax raised is dodgy, to say the least. This is leaving aside all the other effects of such a tax rise, the effects on incentives etc.

Still, at least this trial balloon takes away one of the Lib Dem promises, that one where they’ve spent the extra money raised from a 50% higher tax rate several times over.

February 8, 2005 in Taxes | Permalink | Comments (2) | TrackBack

January 31, 2005

Polly’s New Book.

All you need to know about Polly’s new book:

For some, the fact that a reasonably well-paid person was still paying less than third of their income in all taxes after seven years of a Labour government was itself the scandal.

Update. You could also read this:

Our verdict? There are signs of a country in gradual recovery. In school attainment, university entrance, classroom IT, teachers' pay, minimum pensioner income, child poverty, waiting lists, speed of diagnosis, buses, children's centres, childcare: the figures in our extracts to be published in the Guardian this week mainly tell a story of advance. And yet, and yet, was this really enough after eight years? With a mighty majority and full coffers, were Labour's ambitions too low, its progress too slow?

No one tried to jolt the country out of its contradictory wish for Scandinavian services paid for on American tax rates. New Labour seemed complacently settled into a belief that Britain is so innately tax-phobic that this is about as good as British social democracy can ever get. Labour ministers never dared, never tried political persuasion, and that throttled many of the ambitions that had taken them into politics in the first place. So we conclude: good, but not good enough.



January 31, 2005 in Taxes | Permalink | Comments (0) | TrackBack

Are We Still a Free People II?

Anyone remember Hampden? Ship Money? The Civil War?  A great deal of blood and treasure was spent confirming the basic point that Parliament is supreme and as is so often the case in such matters, it was all about tax. Can the State levy arbitrary taxes? Or is taxation whatever Parliament says it is? The constitutional settlement reached, after we’d chopped the head off a King, was that taxes are what Parliament says they are, at the time it says it.
According to the 2005 Finance Act, this will no longer be the case:

The Inland Revenue's new powers to tax workers retrospectively, without recourse to Parliament or the courts, could leave thousands of taxpayers facing bills they did not know about.
The move, which would sweep away centuries of legal precedent going back to the Magna Carta, would enable the Revenue to act unilaterally in deciding whether someone has paid the "proper" amount of tax.

John Whiting of PricewaterhouseCoopers said: "The statement fundamentally talks about a 'proper' amount of tax, but who's definition of 'proper'? We understand the frustration the Revenue has over avoidance schemes, but this is your classic slippery slope. We don't do retrospective taxation here. You are taxed on what it says in the law when you do the thing, not what someone decides later."

Anne Redston of accountants Ernst & Young said that if such a move were allowed it would "be the most fundamental shift in our tax system and liberty since the 1600s". She added: "Throughout our history, we have fought for the right for Parliament to decide on tax.

Yes, really, they’ve done it again, eviscerated one of the basic parts of our constitution. Parliament makes the laws, laws are what Parliament says they are. Not any more in our Nu Labour wonderland. Our Tone gets driven, every day, past the place where we executed the last person to be on the wrong side of this issue. Wonder if he ever thinks about that?

January 31, 2005 in Taxes | Permalink | Comments (4) | TrackBack

January 27, 2005

Insane Tax Laws.

Jim Glass over at  The Scrivener has a tale of an insane, simply outrageously barmy, situation in taxes in the US. You need to go read it to get the full picture (and the delightful flavour of his writing) but in essence, the IRS taxes court awards and does so in a manner where the winning plaintiff can owe more in taxes than they receive in damages.
Just absurd.
Then again, in the US you also have to pay tax on gambling winnings and game show prizes. Over here all three are tax free, so however bad our system is at least it’s not that lunatic.

January 27, 2005 in Taxes | Permalink | Comments (2) | TrackBack

January 24, 2005

Customs Powers of Search and Seizure.

I’d forgotten this. Customs and Excise has always had the powers of search, entry and confiscation of potential evidence without the need to get a court order or warrant. The only part of Government, traditionally, that had that set of powers. Merging C&E with the Inland Revenue, which set of powers will that one body have? The lesser powers of the IR, meaning that everything must now go before a magistrate or judge before action?  Or will Hector get the greater powers?

Your answer to the hypothetical will tell us much about your attitude to government and bureaucracies in general. If you believe that their actions are always for the best, then you won’t mind if they all get the stronger powers. If you believe that we are well governed you will assume that this will be clarified in the law, perhaps allowing the greater powers in their traditional areas and no extension. If you are like me, near paranoid about any extention of the powers of the State, you will see the spreading of these greater powers to the IR as exactly the reason for the merger itself.

No one would ever be able to get through Parliament laws that allow, even in theory, the Inland Revenue to conduct midnight raids without a warrant in order to see whether you are cohabiting, for example, or paying the NI for your nanny. But merging two structures and spreading the powers, being able to reject calls for their diminution by waving the drugs and smuggling card, well, that’s a different matter.

Gordon must be pretty desperate for tax money if he’s going to allow Hector unrestrained access to our houses, our person and our property. What a free and happy land we’re building.

January 24, 2005 in Taxes | Permalink | Comments (1) | TrackBack

January 23, 2005

No, No, You Should Pay More Taxes, Not Me!

The Observer, sister paper to the Guardian, runs an interesting column today:

Sally McCrone looks at ways of keeping the Revenue out of your piggy bank

But, but, aren’t we all supposed to be paying more taxes to pay for the benevolent state, the coming paradise of social justice? I think we can deconstruct this quite simply. "No, No, you should pay more tax, not me!"

January 23, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 22, 2005

Your Round Mate.

Bunny points out a little known benefit of making friends with a bureaucrat:

If you're a smoker and a civil servant complains about your smoke, go over to him, poke him in the chest, and say "I paid for your suit, you Whitehall Whelk". Then make him get you a beer with the taxes knocked off - civil servants are entitled to this, you know, and that's why they should always be made to get the round in.

Important advice this, make sure they get the round in before you install them in your garden’s gibbett feature.

January 22, 2005 in Taxes | Permalink | Comments (1) | TrackBack

The Guardian Explains.

The Guardian explains today that it is not your money, oooh no, it’s the taxpayers. Well of course you say, we are the taxpayers, but sadly, that’s not what they mean. What they mean is that it’s the government’s money:

The government currently spends in excess of £10bn a year on tax relief to support pensions saving.

Get that? Tax relief is government spending.

For every 78p individuals contribute to their pensions, the government adds 22p. Higher rate taxpayers get an additional 18p, and although they make up only 10% of workers, receive 50% of all tax relief. The national audit office estimates that a quarter of the £10bn goes to the top 2.5% of earners.

So what is actually happening is that if people save for their pensions they get back the tax they have already paid on that money. High income earners get most back because they pay most in the first place. So, allowing us all to keep more of our own money is government spending. Quite obviously we can therefore never have a tax cut as this will raise spending won’t it? Sheesh.

January 22, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 21, 2005

When Resigning Doesn’t Mean Giving up the Perks.

David Blunkett resigned as Home Secretary. OK, we can all have our views on that. Yet he still lives on at the Home Secretary’s official residence:

Tony Blair has decided that David Blunkett can carry on living in the Home Secretary's official residence until the general election, Peter Hain, the Leader of the Commons, said yesterday.

There’s an interesting tax implication to this, as there was with Robin Cook not moving out of the Foreign Secretary’s place when he resigned. These magnificent mansions are provided as a perk but are not taxed as such, given various security and requirements of the job reasons. But when one is no longer a senior Minister, obviously these fall by the wayside, and living rent free in millions of quid’s worth of housing is a taxable benefit.
So, the question. Do these people pay tax on such benefits? Is there a brave enough tax collector who will call them on it?  What was the outcome of the Cook case? Interesting, for the tax on that benefit would be more than the total income of a back bench MP, so we would expect them to go bankrupt if the benefit was received for any length of time.

January 21, 2005 in Taxes | Permalink | Comments (1) | TrackBack

January 19, 2005

Children are not Property.

Interesting little line in a Grauniad editorial. Talking about custody of children when a couple splits, and the way in which the system, to their mind rightly, concetrates on what is best for the child, not the parents, is this:

Children are not property.

Which raises the interesting thought well, yes, but what about what is property? Presumably, those things which are property really do belong to their owners, to be disposed of and utilised as they wish. Well, of course, I agree, just a little surprised to see it in the Guardian. For isn’t property something that belongs to the society in general, to be taxed, regulated and legislated over for the good of all?

January 19, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 17, 2005

Gatsos

So, in order to reduce speeding, they introduce speed cameras, or Gatsos. This works, in that it reduces speeding. It also proves to be a very nice little earner for the powers that be. Then, people start to use gidgets that warn them of the presence of such cameras, so that they may slow down without having to pay a fine. Wonderful one might think. People are slowing down which is what we wanted all along, even better, people are happily paying 200 quid of their own money to help them do so.
Ah, no, you haven’t quite got the picture yet. These handy devices, which contribute to people driving at safe speeds, are to be banned:

More than half a million drivers will have to throw away speed camera warning devices or face a fine if a Government ban goes ahead.

So, which of the following two things do you think is true? Your choice, no pressure to make a quick decision.
1) Speed reduction is the most important aspect of the Gatso system.
2) Raising revenue is the most important part of the Gatso system.

Not all such systems are to be banned:

although equipment using global positioning technology will still be allowed.

Why is that you ask? Well, as is well known, there is a long term plan to move us to road pricing, being charged for the miles one travels on particular roads at particular times. This would of course depends upon GPS systems being in every car. Can’t ban that now can we, whatever the revenue we’ll lose from the Gatsos in the meantime?

Cynic? Moi?

January 17, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 14, 2005

Management of Offenders and Sentencing Bill

Referring to the new Management of Offenders and Sentencing Bill the Telegraph notes something that I had not.

The maximum fine that magistrates can impose will triple to £15,000, but those with little or no visible earnings (most professional criminals, for example) will pay a fraction of this.

Of course, slaps forehead. The current fine for manufacturing and selling, just as a trivial example, apricot jam laced with essential oils of citrus, is 5,000 quid. This can now be tripled for someone with a high declared and legally recorded income. Like, for example, the sort of middling wealthy entrepreneur who might think about launching a new comestible or compote.

Our neighbourhood plasma TV recycler (also known as burglar) has no recorded income other than the dole and so wil not have his fine tripled. Quite marvellous don’t you think, a massive step forward in social justice.

January 14, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 08, 2005

First Income Tax

A slightly unfortunate anniversary for January 9, the 206 th anniversary of the first income tax. As we all know, brought in as a temporary measure by Pitt to pay the costs of the Napoleonic Wars. I vaguely recall that it was dropped after 1815 for a time but then re-instituted sometime later. Such a boon to us all eh? Thanks Billy.

January 8, 2005 in Taxes | Permalink | Comments (0) | TrackBack

January 04, 2005

Waiters, Wages, Tips and National Insurance.

This is a slightly geeky tax question...what taxes should be paid on tips in the UK? Geeky, yes, but important for the Inland Revenue is now fining those restaurants that have got it wrong in the past.

Michelin two-starred restaurant Pied à Terre in London is one of many top spots to be fined. The taxman fined it £187,000 for wrongly administering tips.
This includes Conran, according to Steve Wright, a tax expert at law firm Vantis, who says Conran's bill is "in the low millions."

Just in case there are any waitron units who read this blog (produced by an ex-waitron unit) here’s the rules as they were before the introduction of the minimum wage.
There are two major classes of "tips". One is the service charge. This is put on all and every bills and customers must pay it. This money belongs to the restaurant and pays VAT, NI and income tax in the normal manner.

Then there are tips, which are voluntary payments (this includes places where a voluntary service charge is added to the bill. If a customer can state that they don’t want to pay it, and then not do so, then it is voluntary), cash, credit cards whatever. Firstly, as a voluntary payment, these do not pay VAT. If the management is telling you that they ust then they are lying and taking the 17.5% themselves. Second, as the article suggests:

As long as the system has been administered by someone other than management or owners, all these payments are exempt from National Insurance. The Revenue claims many restaurants have been abusing the system and, as a result, owe up to six years' of unpaid National Insurance.

It is vitally important who administers the scheme to dish out the tips. If it is done by hte restaurant management and the money turns up in your regular paycheque, then it must pay National Insurance. Both sides of it, around 20%. If, however, it is administered by the staff, then it does not pay NI. Whoever administers it, the tronc pays income tax at the basic rate.

So, if you happen to be a waiter, check out how you are paid your tips. If the staff run the tronc system and it is taking NI out, then something is wrong.....and nip round to your local tax man with a few payslips. You’ve been ripped off by the management and I’m sure that Hector would love to hear from you.

If it’s a tip (not a service charge ) system and the tronc is being charged VAT then show the same slips to the VATMan. You’re being ripped off again.
Given the way that the two systems are taxed it’s amazing how many restaurants still let management run the tipping system. You would think that they would want their staff to get the 20 odd % that goes in NI, not the taxman....but if they let the staff run the system then they can’t dip into it themselves.

January 4, 2005 in Taxes | Permalink | Comments (1) | TrackBack

December 30, 2004

Great Job Offer!!

Hurry hurry hurry! There’s a great job offer out there but you need to get your application in by the 31 st to stand a chance of landing it. It’s a great way to claw back some of the tax you hand over every year as well as offering 15-20 trips to London each year, expenses paid. That alone means that it would appeal to someone in New Zealand for example. Who is this, what is this wonderful job? It’s to be a Commissioner on the Equal Opportunities Commission. 160 squid a day plus expenses (and we all know how to pad those don’t we?....lunch at the Ivy, first class flight from our home in the Seychelles, simply cannot visit London without staying at the Connaught....) and they welcome applications from anyone!

Go to here to download your application form. Get them in smartish for we wouldn’t want to miss out on  being able to contribute to such a worthy cause now would we? I’ll post up my application form when I’ve finished it in an hour or so. Link to here with yours as well.

Leaving out the personal details here’s the main thrust of my application:

Question 1 of 3

This role requires someone who can give purpose and direction. Use this section to describe your own skills and experience in this area and how you would bring these qualities to the work of the board. Please use examples to back up your description. 

There are two major areas where my extensive experience of the working world will be of advantage.
The first is in my experiences in business, specifically to do with websites and programming.
I would, for example, suggest to the staff of the Commission that if they release a major report,
perhaps on the subject of who runs Britain with the attendant press coverage,  then it would be
helpful if their own link, from their own website, to that report, actually worked. Unlike their
website today on the occasion of the release of the report “Who Runs Britain”.

Using similar experience of the big wide world out there I would further suggest that job application
forms, such as this one, use a slightly more simple format, rather than forcing people to write from
the middle of the page.

The second major area would be my knowledge of economics and how that impacts on the manner
in which firms are run. As an example, the Commission is quoted today in the Telegraph as believing:
“the majority of employers who offer flexible working find that it is cost effective”
which would indicate that any problems that remain in the private sector should be easily solvable.
(Assuming that the EOC is different from regular bureaucracies, in that it does exist to solve
problems rather than existing to exist.)
There is not a single businessman on the planet who would not welcome advice that will increase
his (I assume his as that is what the report complains about) profits. We can therefore ensure that
flexible working becomes the norm simply by writing to each and every chief executive in the land
and informing them of this fact, that we know that it is cost effective and will thus increase their
profits. This will have the added bonus of allowing us to reduce, even eliminate, that part of the
Commission that deals with the private sector for the problem will be solved, we will therefore have the added bonus of reducing the tax burden under which the citizenry already groan.

And:

Question 2 of 3

This role requires someone able to make a personal impact. Drawing on your experiences of every day life or your work experience, use this section to demonstrate your skills.  Please use examples to back up your description.

I have set up, owned and run companies in the UK, the US and Russia, in fields as diverse as
offshore programming, scrap and rare metals, newspaper distribution and catering. This varied
experience of dealing with different bureaucracies, different cultures and of course employees of
different nationalities will be invaluable in the oversight role of Commissioner.


Question 3 of 3

This role requires someone able to think strategically, to understand complex issues and make decisions.  Drawing on your experiences of every day life or your work experience, use this section to demonstrate your skills.  Please use examples to back up your description. 

As above, anyone who is able to make a living in business, starting from scratch, is capable of
strategic thinking, understanding complex issues and making decisions.
I doubt very much that my specific expertise (the uses, markets for and provision of, scandium) will
be of great use in my future work as a Commissioner. However, I would point out that in that limited
field I am the world expert. No, not an, but the. This would of course be a great embellishment to
the Commission, having, for the first time ever, the world expert in anything at all helping to direct
its affairs.

Just as icing on the cake I described myself as Anglo-Irish (which I am), used an MP as a personal reference and refused to take the title of Mr, Mrs, Miss of Ms, preferring other, for I do not identify myself by either my sex or my marital status.

Breathlessly waiting for that call to interview now.

First response already! Via email:

I am out of the office until 04/01/05. If urgent please contact Farah Turner on 0207 276 2039

Err, so why do applications have to be in by the 31 st?

 

 

December 30, 2004 in Taxes | Permalink | Comments (2) | TrackBack

December 21, 2004

Prisoner JW7874

Read and weep for a once free land.

December 21, 2004 in Taxes | Permalink | Comments (0) | TrackBack

December 04, 2004

A Larger Lesson to be Learned?

Earth to Planet Grauniad:

Yet Mrs Jones's seamanship is unpaid, as is that of her husband and daughter, also lifeboat volunteers. The entire operation of the RNLI's 327 lifeboats and 4,600 volunteer crew (300 of them women) around the British Isles is voluntary, as are many such services in Europe and the Commonwealth. In 2002 an average 21 launches a day around Britain's often-wild coastline saved an average two lives a day, 775 in all, part of the 4,897 people brought ashore.
The RNLI stresses that its 180-year independence from government helps explain its success and its ability to raise £100m a year. Politicians may disagree in varying degrees, but Tony Blair, Michael Howard and their allies are all now putting great store by the voluntary spirit. Lifeboat crews like the Joneses are always respected members of their own small communities. But landlubbers should salute them too.

You’re right, of course, my alien friends. Could you please now think on the wider logical implications of this matter? That, perhaps, just a teensie weensie bit, possibly, wouldn’t want to make too much of it, but, umm, could it be true that, given this example of voluntary cooperation being more effective and efficient than State action, this proof that public goods can and are provided without the intervention of the Government, y’know, this proof that Coase was and is right, that, ermm, it just might be possible for you in the future to ponder on, when you’ve identified a problem, the concept that the State may not be the answer? I’m really not trying to be too ideological about it but here on Planet Earth we’ve found over the centuries and millenia that quite often, more often than you may think, that leaving people alone to get on with it works best. Not always, of course, but in matters economic, business, working hours, buying and selling, having children, who people screw, hire, live with, what they say, where they live, what they pay people, what they teach their children, .....well, quite a lot of life actually. As I say, I wouldn’t want to be too rigid about this but it is an interesting thought eh?

December 4, 2004 in Taxes | Permalink | Comments (0) | TrackBack

December 01, 2004

Sense on Social Security.

In the NY Times someone talks some sense on the Social Security Mess:

To repair Social Security, we have to be clear about what's destroying it. We'll soon be taking more money out of the system than we're putting into it, which means that one day it will go broke. In 1945 there were about 42 workers paying into the system for each person receiving benefits. Today that ratio is 3.3 to 1, and by 2040, there will be just two workers for each beneficiary.
At the same time, Americans are living longer. That's good news, but it means retirees will receive benefits for longer, putting further pressure on the fund. Americans are also having fewer children, which means fewer workers will be paying the taxes that help finance benefits.
Furthermore, benefits are growing faster than inflation. First-time Social Security benefits are now tied to wage growth, and wages are rising faster than prices. The result: over the next 75 years, benefits are expected to increase nearly eighteenfold, while prices will go up less than half that rate. In order to keep pace, our children and their children will have to work longer hours and pay more taxes. Between now and 2080, benefits will most likely exceed payroll taxes by $120 trillion.
How do we get out of this mess? To preserve the system for the long term, we must change the way first-time benefits are calculated. Growth in initial benefits should be linked to the consumer price index - not to wage growth.

A simple and excellent idea, indexing benefits to prices not wages. We did the same here a number of years ago and while it’s led to moaning over the value of the pension, it has stopped us going broke.
The sad thing about this outbreak of good sense is the following:

John Kasich, a Republican representative from Ohio from 1983 to 2000, was chairman of the House Budget Committee.

Why is it always retired politicians who are capable of speaking the obvious truths?

 

December 1, 2004 in Taxes | Permalink | Comments (1) | TrackBack

November 29, 2004

Public Sector Pensions.

At last someone is waking up to the way in which public sector pensions are unfunded, are simply a debt that will have to be paid by future generations:

Government debt would soar from the official figure of 33pc of gross domestic product (GDP) to 85pc if promises to pay unfunded public sector pensions are taken into account, the Conservatives claim.

There is a simple solution to this which I will share with you. Calculate the accumulated pension rights of those 8 million public sector employees. Issue Treasury bonds to each individual to that value. Tell them to open a private pension plan with those bonds. There is absolutely no change to the Govt’s nett position, as we are simply making an implicit debt explicit. Problem solved.
We also, by the way, increase the mobility of the workforce, as people no longer have to hang on for their final salary pension to kick in, and (here’s something you probably did not know. A civil servant who really pisses off the bosses can have his pension taken away.) we’ve also increased the freedoms of those very public sector workers.

November 29, 2004 in Taxes | Permalink | Comments (0) | TrackBack

November 23, 2004

Get Your Money Back From the IRS.

A fascinating post for Americans from an old contact at The Scrivener. There's some $6 billion of tax money that the IRS has been collecting but should not have been. Looks like they're going to have to give it all back. The author's a lawyer and provides the advice you need about how to make you get your share. No good for us Europeans of course, but American readers should get right on to it. After all, it's your money, not theirs.

November 23, 2004 in Taxes | Permalink | Comments (0) | TrackBack

November 15, 2004

More on US Taxation.

Second piece in the NYT on ideas for changes in the US tax system, this time from the left:

The other option would be to hijack the Republicans' fervor for tax cuts, the military and the ownership of private property. Let's start with tax cuts. From an accounting standpoint, there is no difference between a direct transfer to the poor and a refundable tax credit. In political terms, one is called welfare (a sure loser) and the other tax relief (an almost certain winner).
For example, the Democrats should advocate making the child tax credit refundable. While it has been expanded under Mr. Bush to $1,000 a child from $600, the credit does not fully benefit poor families who owe fewer taxes than the full credit amount. Making it refundable changes it into a program that is no different than a negative income tax - what McGovernites were proposing back in 1972, while calling it tax relief. Or, if we do end up with a flat tax, why not play a game of political chicken with Republicans by pushing the "no-tax" income exemption as high as possible?

So at least two commentators, from different sides of the debate, are willing to countenance raising the exemption to take many (most?) of the population out of the income tax net altogehter. There's one little problem I fear. One that will be much less obvious in the US than it is in the UK. That is that while "welfare" and "refundable tax credits" are the same thing in accounting terms they are not in political terms. One engenders clientism and the other does not. Lavishing welfare upon people can, and often does, act as a means of buying their vote. Are those who depends upon the votes of such constituents really going to agree to stop buying their votes?

November 15, 2004 in Taxes | Permalink | Comments (1) | TrackBack

US Tax Reform.

As you might know tax reform is (claimed) to be one of GWB's desires for his second term. An interesting idea is floated in the NY Times today by Michael J. Graetz:

The president has said that "simplification would be the goal" of any changes to the tax code. But the specifics of his plan are unknown. Will it be a flat rate tax on what people consume or on wages only, exempting all savings or investment income? Or will Mr. Bush propose one of the favorite plans of Congressional Republicans- replacement of the income tax with a national sales tax?
Neither will work alone. The so-called flat tax will stay neither pure nor flat for very long. And a sales tax would require much higher rates than proponents would accept to avoid indefensible increases in federal deficits. Both proposals would also produce a significant tax reduction for the wealthiest Americans, those who need it least - and a tax increase for middle-income folks.
The tax system can and should be fixed without such a shift in the nation's tax burdens. America should return the income tax to its pre-World War II status {minus} a relatively low-rate simple tax on a thin slice of the wealthiest Americans. Rather than repealing the alternative minimum tax, as many have urged, Congress should repeal the regular income tax. Enacting a value-added tax - a tax on sales of goods and services collected at all stages of production - at a rate of 14 percent would finance an income-tax exemption of up to $100,000.

Me? I like it. Taking low and middle income families completely out of the income tax net sounds good. VAts? Seem to work OK elsewhere in the world. I'm sure there are complications to it as well but to my mind the most serious one is this, the effect of introducing any new tax at all. The old ones tend not to die. Have a look at those countries that do have a VAT system. They all also have an income tax system with exemptions of a lot less than $100,000. That would be the political problem, bringing in the new tax without allowing the old one to linger on.

November 15, 2004 in Taxes | Permalink | Comments (1) | TrackBack

October 07, 2004

Guardian Correction.

The Guardian, once again, shows that it doesn't understand the tax rules:

Sir David Barclay wishes us to make clear that, despite living abroad for the past 15 years, he and Sir Frederick Barclay have continued to pay personal tax derived from income in the United Kingdom.

Well of course they bloody do. That's the law. "Tax exile" doesn't mean that you don't pay UK tax. Assuming that you are British, if you live in the UK then you pay tax on your global income. If you are British but do not live in the UK you pay British tax on your UK income, but not on your global income. You also pay tax on your global income where ever you do live (and of course there are many places where this rate is nothing) and you can net off the UK and other payments under various double taxation treaties.
But if you're British and get paid in Britain, then you pay UK tax on it or show that you're paying more elsewhere. "Tax exile" ain't all it's cracked up to be.
The Yanks have it worse of course. If you are a US citizen you pay US tax on your global income whether you live in the US or not.

October 7, 2004 in Taxes | Permalink | Comments (1) | TrackBack

October 01, 2004

I Finally Get Published in the Guardian.

Well, they finally gave in. I get published in the Guardian. Only a letter unfortunately, not something that adds to the freelance writing income. What they publish:

From the Inland Revenue website (www.inland rev enue.gov.uk/stats/income_tax/menu.htm) we see that since 1991 the top 1% of earners have raised the portion of all income tax that it pays from 15% to 22%. On the same basis, the portion paid by the bottom 50% has fallen from 15% to 11%. Over that same period of time income tax collected has more than doubled (not inflation adjusted). That would appear to indicate that the high earners are paying more income tax in actual pounds and a greater share of the costs of our system of governance than they used to. From the same site we can also see that the average tax rate on income at average wages is 15%, while that on an income of £100,000 pounds is 33%.
Tim Worstall
Cascais, Portugal

What I wrote to them:
Sir,
With reference to Georges Monbiot's column yesterday.
From the Inland Revenue website here : http://www.inlandrevenue.gov.uk/stats/income_tax/menu.htm we see a number of answers to his questions. Since 1991 the top 1% of earners has raised the portion of all income tax that it pays from 15% to 22%. On the same basis, the portion paid by the bottom 50% has fallen from 15% to 11%. Over that same period of time income tax collected has more than doubled (not inflation adjusted). That would appear to indicate that the high earners are paying more income tax in actual pounds and a greater share of the costs of our system of governance than they used to. The figures also seem to show that most of this transition took place in the Major years..
From the same site we can also see that the average tax rate on income at average wages is 15%, while that on an income of 100,000 pounds is 33%.
I'm not sure what I should be more worried about. That Mr Monbiot does not seem to know Mr Google (which provided the link to these figures in about 45 seconds)? Or that the Inland Revenue Press Officer did not know the statistics that his own organisation published?
I was, however, heartened to see that you do not, as an organisation, appear to support the moral case for paying ever more taxation as shown by this page (http://money.guardian.co.uk/tax/factsheet/0,1456,595746,00.html) from your site, entitled " How can I pay less income tax?"


October 1, 2004 in Taxes | Permalink | Comments (0) | TrackBack

June 30, 2004

Is the Estate Tax Voluntary?

Professor Bainbridge looks at the Estate Tax and whether it truly is a voluntary one, something that if one is rich enough one can sidestep. I wrote about it here when Matthew Yglesias seemed to get a little confused.
My read on why the truly rich seem to be in favour of the estate tax is that they don't actually pay it, yet supporting it bolsters their liberal political stance. A full discussion of this was on sci.econ a few months back and the full entries are worth reading, here and here

June 30, 2004 in Taxes | Permalink | Comments (0) | TrackBack

June 13, 2004

Matthew Yglesias on the Estate Tax

Matt manages to completely miss the point about the estate tax: the truly rich don't pay it and haven't in the past. Charitable trusts and family trusts mean that those with over $100 million of assets (like, for example, some leftist leaning people like Kennedys, a Heinz or two, Du Ponts, Rockefellers) don't face it. It is those who are not members of America's aristocracy of the truly rich who do actually pay it. A few months ago Grinch went through all of this on sci.econ (yes, there are some of us who still look at Usenet) and the links are here
and here
The basic point, and one which should be understood by anyone commenting upon the subject, is that the Hewletts, Packards, Fords, Gateses and Buffets of this world do not and never have paid the estate tax and nor have the Grahams, Sultzbergers and Kennedys. It's pretty easy to be in favour of a tax which people think will apply to you but which in fact, does not apply to you.
Now, I might even be in favour of a tax that forced the occasional Kennedy into getting a real job rather than making more laws for the rest of us but it is quite clear that the old estate tax did not do that. It only affected those in the $2 million to $ 100 million range, not the engorged plutocrats in whose name Matt is stating we should have it.

June 13, 2004 in Taxes | Permalink | Comments (2) | TrackBack

June 05, 2004

Consumption Taxes

Matt also seems to be a little confused about consumption taxes:

It's a bit late, but there seems to be a gaping hole at the center of the New America proposal to replace the payroll tax with a progressive consumption tax:
A better alternative would be a progressive consumption tax, levied not on individual purchases but rather on total spending. Each year, taxpayers would calculate their total income, subtract their total savings and pay taxes on the difference. The first, say, $25,000 of consumption would be tax-free, and from there the tax rates would be progressive rather than flat. The more you spent and the less you saved, the higher your tax rate would be.
Um...isn't this a little hard to evaluate without knowing (a) where the bracket divides would be, and (b) what the tax rates would be? Seems important to me. Now I've complained previously that the whole concept of brackets is, in the computer age, pretty irrational -- we ought to have infinitessimal brackets and you ought to calculate your total taxes owed by taking an integral -- so the idea of a whole new tax sort of appeals to me since my calculus tax would probably be easier to implement given a blank slate.
On a serious note, right now Americans have available to them a wide variety of tax-preferred savings options whereby a certain portion of income can be sheltered from income taxation. These things are used, obviously, but they're not used very much. In other words, very few people are maxing out the amount they're allowed to contribute, and those who do tend to be very wealthy. The moral of the story seems to be that a consumption tax wouldn't really raise middle class savings rates very much -- if taxes were the issue, the middle class would be maxing out the accounts already available to them. So I'm a bit skeptical. Of course, make the rates punitive enough and you'll get results.

The real point about a system of consumption taxes is not that it rewards saving. It is that they tax dissaving and thus hammer the wealthy (note, not the high income earners, a different group). Imagine your general leftist's nightmare of a dumb rich kid. He lives off the trust fund left by great grandaddy oppressing the Wobblies. Using income taxes to go after him depresses the incentives for all those high acheivers, using dividend and investment taxation to get him discourages the investment needed to make the economy grow. But taxing him when he takes $50k out to buy a brooch for his mistress, that's taxing the rich in the least economically distorting manner possible.
I have to admit this is one of the things that worries me so much about the left in general. They are so ignorant of basic economic principles that they cannot even recognise when a plan does exactly that they want. You get taxes out of trustafarians this way. All those people living off inherited money and family trusts (the names Heinz and Kennedy come to mind) would be paying squillions.
And just think, Ted Kennedy would be paying more for his whisky than everyone else. Blondes will be safer.

June 5, 2004 in Taxes | Permalink | Comments (6) | TrackBack

May 15, 2004

Gambling Debts

An interesting little piece in the Telegraph One of the companies that runs casinos in London is having a little trouble collecting from those who lose while gambling on credit. Throws up two oddities about English law on such things. First, you don't pay tax on your winnings ( if there are any of course ) and second, gambling debts cannot be litigated. Yup, as far as the law is concerned the casino can just whistle for its money.

May 15, 2004 in Taxes | Permalink | Comments (2) | TrackBack

April 13, 2004

Weird Taxes

Marginal Revolution

Tyler Cowan at Marginal Revolution points to a CNN story on odd taxes.

Two on the list that he doesn't directly comment on :
"'Jock' tax: Some cities and states levy taxes on the income earned by athletes, entertainers (OK, not just jocks) and their various entourages, including non-athletic or non-performer employees. Generally, that means any money earned by a player or performer while playing in that particular city or state gets taxed. For instance, Cincinnati levies a 2.1 percent jock tax.

California levied the first jock tax in 1991, on athletes from Chicago, right after the Chicago Bulls beat the L.A. Lakers. (Chicago quickly responded in kind.) And today, most states with a professional sports team impose a jock tax. "

This has also been standard in the UK for a number of years. Visiting entertainers ( most especially rock and pop stars on tour ) must pay UK income tax on their earnings in the UK. Famously this led to the Stones not playing a couple of gigs one year, as performing, and thus creating a UK tax liability, would have meant paying tax on the rest of the money they had received in the UK that year : the year they got a large advance on a recording contract. The advance in itself did not lead to a UK tax bill as they did not work or reside in the UK that year.

"Playing card tax: If you want a deck of cards in the state of Alabama, be prepared to shell out an extra dime. The state government has levied a 10-cent tax on the purchase of a playing deck that contains "no more than 54 cards". If you object to this, get your playing cards in a different state, or buy a deck with an extra joker."

Again, this is an old tax, certainly back to 1700 or so England. Have you noticed that the Ace of Spades is usually different in a pack ? Above and beyond it being black, an ace and spadelike ? Usually it is more ornate than the other aces. This is the " Stamp " of the Stamp Tax that was levied upon packs of playing cards : yes, that very same Stamp Tax that caused certain little problems amongst the N American Loyal Subjects of George III a few decades later. Alabama would appear to be doing something slightly unAmerican with this tax.
Still rather better than the situation in England then though. Under the Bloody Code there were more than 250 offences earning the death sentence, including " defacing Westminster Bridge" and avoiding the Stamp Tax by forging that very Ace of Spades.

April 13, 2004 in Taxes | Permalink | Comments (0) | TrackBack