It has often been said that one of the more important functions of blogs like this is to get ‘memes’ (or ideas, as I prefer to call them) started and then spread around virally. In the spirit, I think it behoves us to begin spreading this idea: that people who work in the public sector should be exempt from having to pay tax. All tax.
And, no, I am not proposing to do them a big favour, though expect that many in the public sector will see it as a favour and that is all for the good. No, what I am proposing is the stripping away of a fig-leaf that disguises the very important distinction between tax-payers and tax-consumers.
Currently, only those who earn their living in the private or voluntary sector are tax-payers and while public sector employees do file tax returns and, on the face of it, pay their taxes too, this is a mere bookkeeping fiction. They are the recipients of tax, adding nothing to the public purse. The number of people who fail to understand this distinction, holding instead that “we are all taxpayers” is alarmingly high. By forcing the public sector to lead tax-free lives, we make their true status not just clearer but undeniable.
It is high time that we made it crystal clear as to who bears the burden of taxation and who enjoys the benefit; who produces the wealth and who gets the wealth handed to them. It is a cheap and easy means of dramatically changing the dynamic of all economic and political debate.
If you like this idea, then tell someone else. Let’s start spreading it.
Hmm?
And what about all those who, at various periods and like me, have worked a goodish proportion of their time directly as contractors to the UK government or as employees of said contractors?
Are they too, to be untaxed as they are paid from the public purse?
Yippee!
I’m fine with the idea provided it is coupled with the loss of the franchise. People who don’t pay taxes shouldn’t vote.
Perfectly reasonable. But of course they then get paid less because they keep it all.
Does that mean a de-facto pay rise for those in public service? Or a large pay cut to accompany it (with corresponding loss of pension)- I can see a large breach of contract action succeeding in the latter case.
What about local government employees- do they get tax exemption, or just freedom from council tax- and how will this work if they live outside the authority for whom they work.
How on earth do you make them exempt from fuel duty, vat, etc- and if you do how do you stop the black market (I believe there may be unscrupulous civil servants who would sell their tax free petrol,booze and fags at a tidy profit- and a loss to the exchequer)
What about national insurance- its theoretically separate from taxation but in reality not so much- are they exempt from that too- and if so what about their unemployment benefits, NHS treatment etc?
As someone above said , what about someone who is contracted to work for government? And if someone works part time for the government do their earnings from government count as taxable income- i.e does their first tranche of private income remain tax free.
As far as I can see the idea is an invitation to fraud, and would cost a lot of money to police. Simpler to leave things as they are.
The inefficiency of government employees is caused by the fact that their incentive is to keep their boss-ultimately a politician-happy, and help him get elected, whilst the politician is paying them with our money. The answer is to have an elected body of politicians who are not part of the government but have the power to restrict and controll government actions. The house of commons was formed for this purpose- but since MPs are bribed with office, and remain MPs-they are now a rubber stamp for the executive. We simply need a law to the effect that any MP accepting a post in government must apply for the Chiltern hundreds before taking it- after all (as for example Lord Young and Lord Mandleson have shown) there is no difficulty in ministers being seated in the Lords, and its not so very long ago that prime ministers were seated in the Lords.
Frankly, whether or not this idea ever was implemented, those people who are net receivers of income from the government should not have the right to vote. It is, plainly stated, a conflict of interest.
Conflict of interest ethics and law hold everywhere but the vote… because, until recently, only a small percentage of voters where in this position. With the amount above 50% in many countries (at least in terms of federal taxes in the US), the situation has now changed to the point that it must be recognized.
Removing the vote from public employees is the best way to go. A unscrupulous government can easily buy the votes of its millions of employees with cash belonging to the public as a whole.
Public employees are very useful and many of them are hard working, so they should pay taxes and be able to claim they pay for essential public services as much as the rest of us working in the private sector.
Yes of course. If all you are doing is outsourced government work which is paid for with tax money, you are a de facto public sector worker. If you follow the money trail back and it is ultimately tax money, that should be tax free.
I think you are missing the point. If you are paid with tax money, the fact you are hard working or useful is irrelevant. You are not a tax contributor, you are a tax consumer of other people’s money.
By the time this proposal worked its way through the Parliamentary alimentary tract, the only output would be that people who work for the BBC would be exempt from paying taxes.
Well, you could implement this gradually without breaching contract – each year give public sector workers no pay raise, and reduce their taxes by an amount equal to what a raise would have given them.
Or we could just abolish income tax altogether. But of course the first option is electoral suicide, and the second is governmental anathema.
The money I pay in tax on my income selling parking tickets at a private amusment park is real.
The money that appeared to be deducted from my (much higher) income as a Civil Servant in the Home Office was a book keeping fiction.
So the article is correct.
“But sometimes someone can be employed to do a job for the government but still be independent”.
True – and the money supposedly deducted in tax from the money paid to a private contractor is a book keeping thing also (it was never really money belonging to the contractor).
Just as money supposedly deducted from my “allowance” as an elected Kettering Council member was never really my money.
The thrust of the author’s point is well-made. even if difficult to implement in practice as has been outlined above. Removing the right to vote would remove the ability of this by now majority group to vote themselves ever-higher wages and benefits.
Presently in the US not only are public sector wages on a par or higher than in the pvt. sector for functionally equivalent positions, but avg. pension benefits so exceed the national avg. in the private sector as to be not only scandalous, but ultimately unsustainable. No small part of the State of California’s $26 billion (yes that’s Billion with a “B”) budgetary shortfall is due to the liabilities for outrageously generous pensions for public sector workers and civil servants which these self-same people have voted in for themselves–and this despite being one of the highest tax-rate regimes–state and local plus sales tax and “fees” for everything else imaginable–in not only the US, but on the planet.
I like this issue,and i’ll try to introduce it in my spanish blog.
Regards
Does it matter too much if contractors continue to enjoy a fiction that they are generating wealth? Surely a measure that clarifies the societal role of most of the parasites is still worth the trouble?
Likewise, measures like VAT refunds that increase the cost of running the tax system don’t seem sensible. Then again, if you want to remove the vote at the same time then it becomes an issue of fairness.
I think perhaps an untaxed civil servant armed with a vote is (already?) an excessively privileged person, but a lightly taxed civil servant with no vote could be seen as somewhat put upon. Tricky.
It is an important principal, but too hard to work in practice.
You can’t stop public sector workers from voting, because the government does more than simply spend our money, it also restricts our freedoms. A civil servant is just as subject to the laws as anyone else, and they should be able to vote on them. If we had a more direct form of democracy, it would be reasonable to prevent public sector workers voting on areas that directly affect them (such as issues relating to public sector pay). But we don’t.
It would be nice to somehow frame their remuneration differently. But then how would calculations of tax on secondary income work? It is also the case that if (for example) income tax is increased, Fred the public sector worker gets less money in their bank account each month, same as the rest of us. Now it might be that eventually that income tax ends up turning into a pay rise for Fred. But equally that income tax might end up turning into a payment to French shareholders of a rail company, or any number of things unrelated to public sector pay.
At the very least, no soldier should ever pay income tax. But should they have the franchise? Perhaps not, since they are technically government employees.
In general I like the idea, but the implementation of it is tricky.
I like the idea. Non tax paying civil servants (I’m one) should lose their vote and be readily identified ie, in uniform (already the case with a great percentage of them anyway.)
And as an incentive to become more productive, the real workers should get 1 1/2 or even 2 votes…
I taking this idea downunder. See mickysmuses.blogspot.com.
Wouldn’t it be more radical to give every voter the option to give up the vote in exchange for not having to pay taxes. I know I would give up the right to vote in an instance if it meant not having to pay tax.
The suggestion is not about voting, it is about ending the fiction public sector pay is an addition to the national wealth, rather than the state giving itself back what it has already taken from someone else.
I never dealt with the voting thing.
In the 19th century it was a mainstream opinion that those who worked for the government, or were given poor relief, should not have the vote (never, as far as I know, made law in any major country, at least as regards government employees) but a mainstream opinion). Although not people who sold goods to the government.
Today most people either work for the government or get benefits from it. And it is hard to see people voting to have their vote removed.
However, the situation will “solve” itself in time – as a system were most people either work for the government or live off benefits must end in bankruptcy.
Perhaps it could be easier to achieve this no-tax scenario by selling it as a money-saving move. As several have pointed out, the taxation of public servants is a bookkeeping fiction. But it’s still bookkeeping — i.e., it still involves time, resources and efforts by the millions of public workers, along with those of the tax agency itself.
“We’ll save $X gazillion annually by eliminating tax collections on public workers”: sounds like a potentially viable political argument.
Not going to happen: they are not stupid, and are more than happy with the way things are.
I rather like this one, and the obvious corollary raised of disenfranchising public sector workers.
To answer some of J’s counter-arguments, I agree that it wouldn’t be fair to disenfranchise the public sector entirely: civil servants have as much right as anyone else to representation in Parliament on most non-fiscal issues (from motoring laws to police powers). So, let’s replace the House of Lords with a House of Taxpayers, and reverse the current rules that prevent the Lords voting on Money Bills (so that members of the House of Taxpayers get to vote on Money Bills, and members of the Commons do not). Of course, the other restrictions on the powers of the House of Lords should not apply to the House of Taxpayers either.
Let’s also permit public sector workers to earn private second incomes tax free if they wish and are able. Many public sector workers would then moonlight tax free to supplement their incomes. Good. Competition would gradually enable public sector salaries to be substantially decreased, often to the point where a second income was essential. This would both reduce the burden on the taxpayer and – which in the long-run is more important – give those workers more insight into and empathy for the other, non-fiscal burdens placed upon the private sector.
Let’s also allow any of them who wish to repurchase their franchise by volunteering to sacrifice their tax-free status. This would substantially remove any sympathy for their disenfranchisement; tax-free earnings are simply too enviable a privilege. It would also simplify the task of identifying who really is a public sector worker – which is so difficult with so many contractors, quangos and “third sector” fake charities. By allowing people to opt out we could draw the definition pretty broadly without fear of unfairness to those caught.
There would of course need to be some safeguard at the margin to prevent the peddling of “fake” public sector jobs, with no time commitment, as a ticket to tax-free private earnings. Perhaps a minimum 30 hour week for eligibility?
At the point of introduction, let’s be quite generous to the public sector workers: this should be seen as a benefit to them by taxpayers, and we should purchase the consent of those directly affected (c.f. how the government gave BT shares to BT workers on privatisation to undermine union objections to privatisation). So cut their salaries on introduction, but leave them with a significant net gain – at least ten percent, perhaps more. We taxpayers can afford it, if it puts the ratcheting up of the burden of public sector pay into reverse. Fiscally, I predict this scheme wouldn’t take long before it actually became revenue positive.
Pretty fair, perfectly logical, absolutely never ever ever going to happen.