The UK Libertarian party is celebrating its first year of operations.
May 2009 see them grow and prosper and may they do much to undermine the foundations of the limited right-Statist and left-Statist UK political scene.
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Congratulations on a first anniversaryJanuary 2nd, 2009 |
 19 comments to Congratulations on a first anniversary |
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Well, here we have a political party ‘celebrating’ its first year. Yet during that year, UK Libertarian Party calls for the abolition of personal income tax.
Much as I wish tax and total government spending to be markedly reduced, I see income tax (flat with a decent-size personal allowance covering the essentials including food, shelter and warmth), as one of the more sensible forms of taxation.
A flat income tax falls, as fairly as any tax, according to ability to pay. [And do note, in the UK and taking into account National Insurance Contributions, the combined PAYE and NIC is flattish, though excessively complicated.]
Income tax is taken when one has the money, and so before one has the possibility of getting into difficulty by financial mismanagement.
Income tax is a tax that is relatively easy and cost-effective for a government to collect. This is itself beneficial to taxpayers.
With a dominant sales tax and no income tax, such fairness can only be tackled with extra complexity, by having government decide on a single set of essentials and have them rated tax-free. Unfortunately, such arrangements become even more complicated than do tax allowances, to avoid exploitations at the margin. This is not least because it requires effectively all retailers to become part of the enforcement chain.
Would it just not have been simpler and more attractive to most voters to have a taxation policy substantially based on a mixture of income tax and sales tax, as we currently do? Then, perhaps, a new political party could look to simplification of the tax system, including phasing out (or reducing to proper Pigovian taxes) many of those other taxes that are representative of prejudices present or (worse) prejudices past.
So, Libertarian Party UK, why should I want to support a political party that has as one of its main policies, that which I view as bad. This is all the worse when many of its other policies are ones that I would support over the equivalent policies of other parties.
Best regards
Perhaps you are looking at things the wrong way. I see government as a deadly beast that is on occasion useful for keeping the other deadly beasts at bay. But it is nonetheless and dangerous and untameble monster. There is only one way to keep it under control, and that is to starve it into submission.
If you want smaller government, you will have to stop feeding it.
Yeras ago I went to a couple of meetings of the Libertarian Party of Canada. They had equally daft ideas about taxation and had NO chance of being considered seriously by thinking people.
A simple flat tax on income would work and no other party in UK or Canada is advocating that.
Nigel, while I agree somewhat with much of what you say, I have to disagree with
There’s no such thing as a pigovian tax. It’s impossible to objectively define externalities or their costs. Whenever one starts specifically taxing a particular thing for that purpose it inevitably reduces to “taxing people I don’t like to provide rent to my friends”. An atheist might well believe that religion has demonstrable externalities and tax churches; a christian would argue that atheism is the one with the externalities. No government can, or should, decide between the two positions.
Tax should be as simply as possible, nothing more than a subscription paid to fund the government for whatever purposes the people require of that government. If government spending were low enough, a flat subscription might be practical. In reality for the foreseeable future there will be need to be some basis of “ability to pay” involved. But that is where the discussion should end.
I may be misremembering this, but to be fair to the LPUK, wasn’t their advocacy of the abolition of Income Tax more about that fact that it could be done by winding back state spending by only five years, rather than any desire to see it go more than any other form of tax?
Nigel, you ask “why should I want to support a political party that has as as one of its main policies, that which I view as bad?” Obviously, you shouldn’t; the rhetorical question answers itself. However, I suggest that you examine your premises.
Your starting point is the assertion that “ability to pay” is the prime determinant of a “fair” taxation scheme. In reality, “ability to pay” is nothing more than the implicit acceptance of the state’s right to take anyone’s property. Whether I have more “ability to pay” for the costs of government than you do does not confer upon you any right to take it from me by force; the fact that you are starving does not give you the right to steal my food. “Ability to pay” is at its heart a Marxist concept, having nothing to do with equity and everything to do with raw power. The concept is morally bankrupt. If you truly believe it, the LP is no place for you.
Happy Birthday, UKLP, and best of luck to you in 2009.
Well, Laird- yes and no. All tax is “the implicit acceptance of the state’s right to take anyone’s property”. It’s a given. A flat subscription paid by every citizen whether they individually want to or not is the state taking their property. A government funded by tarrifs is taking the property of importers, and thus of their customers (i.e. everybody). A sales tax is the theft of property from customers, or businesses, or both. Take your pick. By accepting any tax regime at all you are accepting that the state will use force to extract its running costs. If taxes are based more or less on “ability to pay” does not alter that one whit.
People have been taxed proportionally since long, long before Marx. A farmer required to hand over grain as tax would be taxed on the size of his farm- the ability to pay, basically. That’s not a morally bankrupt principle, since it recognises that some people have small farms and some people have big farms. I daresay one can argue that it’s the small farmer’s fault for not being a big farmer, but in the real world there are bound to be such differences between farmers, and in the real modern world different people have vastly different incomes. A flat rate tax would be negligible to some citizens, impossible to pay for others. No political party is going to get very far declaring it’ll throw the poor en masse into a debtor’s prison.
Laird writes:
I’m not sure about the classification as ‘Marxist’. More importantly, I see the converse as unacceptable: taxing people at any old time and at any old rate, including as and when they do not have the money to hand, taxing them so much they never could pay, and taxing each person an arbitrary amount rather than (apart for the lower paid) pretty much the same proportion of their income!
Now, if Laird wants to tax the rich at a much higher rate than the poor, I would view that as communism (or approaching it). Alternatively, if he wants to tax everyone, irrespective of income, the same amount, I would view that as both unfair and politically impractical.
And Laird writes:
Really? In my ignorance, I feel the need for a somewhat fuller explanation as to why.
Best regards
Dale writes:
I agree entirely. In fact I have previously suggested (God knows where, but it probably does includes Samizdata) that the gross levels of taxation and/or government expenditure should be taken out the hand of parliament, and set annually by referendum.
However, that does not stop income tax (flat-rate with a sensible, life-subsistence, level of personal allowance) being one of the better and fairer ways of raising at least a major part of such limited revenues as are necessary for government.
Best regards
I don’t see anything “wrong” (in a Libertarian sense) with so-called progressive tax rates. After all, even proponents of a flat tax are in effect proposing a two-rate progressive system (0% tax on the first tranche of income, x% on everything above that tranche).
What is bad about modern tax regimes is complexity. Different tax rates for different kinds of income; tax-free income from certain sources; ultra-complex deductions and offsets. All of that complexity leads to genuine economic inefficiency & diversion of efforts from creating value into sheltering it from rapacious taxation. And the point of the complexity is to give politicians the means to control other people’s lives.
But because taxation is as much about control as about raising revenue, there is simply no chance that the political class will ever willingly go along with simplification. Note the disappointing failure of US Republicans even to address tax simplification when they held Congress & the Presidency.
For Sam, the LPUK press release that I referenced states:
Thus this is not an irrelevant side-effect, as Sam suggests, of just a tax-cutting policy.
Actually, I fail to see how a sales tax benefits the poorest in society over the rest. It taxes all income levels in proportion to their expenditure: and presumably the poor (on average) save a lower proportion of their income than everyone else. However, an income tax with subsistence-level untaxed allowance favours the poor to a greater proportion of their income, even 100% for the very poorest, than it does the rest. [That is unless some contorted (and costly) sales tax system is introduced, in which the government decides how the poor should spend their money, and hopes the rich don’t want more of the same things.]
Best regards
Alice: I entirely agree.
Nigel: There seems to be a certain amount of– trying to think of a polite term here– less than joined up thinking going on at the LPUK from what emanates therefrom at the moment. The policy list last time I looked had a Georgist LVT slant (cue Mark Wadsworth!) and I’ve also seen stuff about taxing “luxuries”, which if I recall correctly I discussed over at DK recently. Such a concept is something of which I personally strongly disapprove as it asks some bunch of crats to decide what is a “luxury” and everyone else to start bunfighting about what is included, and you end up with purchasers of beer, ciggies and Ferraris funding everybody else.
I agree with Alice that a primary goal of a tax system should be simplicity. I don’t think any system is particularly “fair” but taxing sales seems to me to be entirely arbitrary. Ultimately, I guess I fall on the simple argument that if tax is required in a libertarianish soceity, we should see it as a kind of subscription to pay for the government, it then seems most reasonable to levy it on every individual, and to incorporate some degree of ability to pay. Taxing things (land, cakes, ferraris) seems to have little going for it, IMHO. We should IMV certainly avoid social engineering thinking- “if we tax this it’ll encourage that and discourage the other”. That’s what got us into this complex mess of a system in the first place.
Alice writes:
That is a very interesting aspect, and one well-worthy of discussion. I’ll try and give a couple of reasons, as I see the issue.
(i) First consider a family unit, differently supported though to the same total amount with either 1 or 2 income earners. Now, a simple approach is to allow, in the one-income case, for the personal allowance of the non-earner to be transferred and added to that of the earner. This makes the total tax paid the same as would apply to the two-income case (except where one income is below the personal allowance level, which I reckon should be catered for by partial transfer of the allowance).
If one introduces progressive tax rates, it becomes much more difficult to have a system where the one- and two-income cases can be taxed to the same total amount.
Now, if Alice or anyone else can give me a good reason why taxation should favour the two-income family over the one-income family (with the same gross income), I’ll reconsider.
(ii) Now consider 2 totally independent employees with the same company. The company decides that one employee is worth exactly twice as much to the company as the other, and pays them accordingly. Both live in sufficiently similar circumstances that they have the same subsistence-level requirements for their lives – at close to the level of the government-determined personal allowance.
Now, the government provides benefits to these two persons partly in some combination of equivalence – perhaps health care and the education of children, plus use of local amenities: museums, parks. There are some other aspects of government provision that are somewhat more in proportion to expenditure, say use of swimming pools, sports and recreational facilities, subsidised theatre and concerts, use of free carparks, etc. One can argue interestingly whether government provision of defence of the realm and provision of law and order should be viewed as equal between the two cases, or in proportion to their income/expenditure: I’d hazard somewhere in between.
On balance, however, the lower earner gets somewhat more out of the government compared to what he put in than does the higher earner. On what basis is it then reasonable to tax the higher earner more than around twice the amount than the lower earner, and more importantly to leave him with less than twice the income after tax? This is when the employer, the most informed source on the question, has already decided the relative values of the two contributions through work. On this aspect, can the government know better than the employer?
And on those aspects of societal contribution beyond work, how can any of us know, let alone the government, who contributes most. Maybe it is the higher earner, through his greater (management) ability; maybe it is the lower earner because he works less hours and finds his interests elsewhere than work.
And Alice writes:
I am entirely agreed.
It seems to me that it is a sad fact of politics that politicians wish to forever meddle. From time to time one gets the impression that one government or other has actually introduced some reasonably simple and (as far as it can be with tax) fair part of the system. Whew, we go! What a surprise. Then the next lot get in, and the first thing they undo is the new good bit.
Best regards
When looking at the taxation system overall, is is clear that from many of the comments we receive there is a mistaken view that all government services are derived and paid for by income tax. This is far from the truth. Income tax contributes only about 30pct of overall government taxation income. The remainder of Treasury income is made up from NI contributions, VAT, Corporation Taxes, and duties on motor fuel, alcohol, tobacco, betting and vehicles in that order.
By stepping back the level of government spending, primarily in the arena of quangos, the army of politically correct regulatory bodies, directly funded charities, non humanitarian overseas aid, the removal of many of the unworkable IT programmes and the sheer cost of the very complicated taxation system itself, the savings would fund the ability to cancel income tax and IHT completely.
But merely scrapping income tax is not the primary motivation in this. It is also fed from the sheer lunacy of taking tax from wage earners, having a massive cost in processing that, and then giving a proportion of it back in subsidies, tax credits and allowances. It is clear that it is more cost effective not to take it from you in the first place, and it would remove the advantage at the cost of others given to those who choose to purchase a house or have more children than the average.
Secondly, by removing income tax the need for the intrusion by government into your lives also diminishes. There is no need overall for Government to know how much you earn as there will be no mandatory penalty placed upon those earnings (and I do consider it to be a penalty, effectively working at a rate of two thirds to half pay for most). There will be no need for the huge and costly databases operated by HMRC that collect not only details of your earnings, but also your spending details by way of credit, debit, store and loyalty cards for cross referencing against earnings. This alone will result in a substantial reduction in government spending.
As we will also be looking to massively decrease direct funding within the NHS, moving instead to an insurance based scheme that benefits the clinicians by making payments for treatments and operations direct to hospitals, GP surgeries, clinics and specialist units rather than layer upon layer of NHS paper pushers and quangos, the relevance of the NI scheme as an income base also diminishes without loosing any of the front line services available to the public. It can then return to its original schema as designed by Bevan, that of an National Insurance scheme free from the constraints of a complete Government administered delivery industry.
Lastly in moving to a system of taxation through purchase rather than income, the VAT system would largely remain in place. However this is currently an EU tax, where the Treasury benefits very little from the huge amounts raised through VAT. As the majority of LPUK policies would not be compatible with the EU, as part of our withdrawal the Treasury would gain by keeping ALL the VAT receipts, thereby relieving any short term pressures due to the abolishion of income tax.
With regard to the comment by IanB who said :”Taxing things (land, cakes, ferraris) seems to have little going for it”, if it is already covered by VAT, so it will remain. Perhaps VAT is now so integral to our buying of goods that we take it for granted and no longer consider it a tax. We are not talking of lots of new purchasing taxes here, just keeping the VAT receipts in the Treasury instead of sending them to Brussels.
To the average man/woman on the street he/she would see little difference in the price structure of goods that he/she purchased, but would see a huge increase in the income that they had to spend in the first place.
The benefits overall of smaller government, coupled to increased spending power by consumers would probably see an increase in government revenues as a higher level of disposable income would result in increase in purchases of VAT liable goods. This over time would also give scope to reduce the VAT rate as more of Government was scaled down, as well as stimulating economic growth.
You make a powerful point. What is bad about an income based tax is not so much the tax itself as all that goes with it. Eliminate income tax and you can eliminate the reason for the government knowing anything at all about your finances. You have to prove nothing; you have to supply nothing to nosy bureaucrats; no records of your personal activities may be subpoened for the purpose of deciding if you paid what you ‘owe’.
In one fell swoop you take down a very large part of the intrusive powers of the State.
Some of the other arguments had me wavering one way or the other, but there is no doubt in my mind now that you are right. Kill the income tax and you kill a vast portion of the State’s intrusiveness into your life.
I don’t disagree with the sentiments behind Ian Parker-Joseph’s comments — but think about who would lose out in that smaller-government world. Yes, the politicians, the middle-class bureaucrats, the animal-rights activists, the global warming devotees, and all the rest of the “It’s for you own good” crowd. Those meddlers have been winning since the end of WWII, and they are not suddenly going to see the error of their ways and give it all up.
What Libertarians would need to do if they wanted to change things is to empower (or enrage) a large enough constituency to defeat the entrenched Left-wing establishment. As discussed on other threads, I think the chances of that happening are very low. But since Ian B has repeatedly requested a plan, here is a suggestion (since we are talking about tax).
Suppose we could find a rationale for getting rid of PAYE (Brit-talk) aka withholding (US). Get employers out of the business of collecting income taxes. Treat everyone like the self-employed, who once a quarter have to write their largest check to pay their taxes direct to the government. People who have to take large sums of money out of their own accounts to pay their tax bills tend to be a lot more critical of government spending.
Of course, the Powers That Be are not stupid — and they will defend withholding to the bitter end. Which, as I have noted elsewhere, is coming.
Exactly Alice.
NI means nothing – it all goes into the same pot – but they haven’t removed this added complication and bureacratic cost because of that because the obvious solution would have been to scrap NI and raise IT to compensate for the lost revenues… but that would mean an increase in the headline-rate of IT which as Ian Parker-Joseph corretly points out is dramatically over-rated in importance by the populous (to the extent that people refer to it simply as “tax” as though it was the only one!).
A similarly modest proposal would be to enforce that all shops show prices inc & ex of VAT &/or duty. Imagine filling up the tank of your car and seeing how little it would have cost without the Government? Then people would begin to realise just how much the bastards take all the time on everything every single day.
But the take is just the half of it. It’s what it’s spent on that is the other half. We could start by forcing all charities in receipt of government funding to say how much they get very publically.
Another good thing might be to let as many small businesses/sole-traders in receipt of all the little dole-outs* from HMG’s assorted Quangos amount to compared to what
Either that or we could just hang the bastards and burn their houses down.
Compared to what?
…compared to what they paid to get ’em and will continue to pay for them.
*And come with all those soul-destroying rules and regs.