What might this mean in practice? Scotland should start with a sensible, but higher rare of income tax. Then it would be necessary to close down most tax reliefs given to boost savings. After that it would be appropriate to tax capital gains as income whilst reform of inheritance tax and its replacement by a wealth tax is long overdue and now possible given the cooperation on tax data that’s now beginning with tax havens. VAT would need to stay, but no one can deny that it is regressive and hits those on low pay hard. In that case a new progressive consumption tax that would be charged on flows through bank accounts, and so charge the wealthiest at the highest rates, would be needed to redress the balance
We actually have a tax system being discussed called a “progressive consumption tax.” The basics of which are a 100% tax relief upon savings.
Effectively, all additions to savings, and earnings from savings reinvested, are tax free. All withdrawals from savings and all earnings from savings which are not reinvested pay whatever the normal income tax is at progressive rates.
I think that a pretty good system as does Bill Gates and so do a very large number of economists. It’s also fine if the Senior Lecturer doesn’t.
But what should leave us gape-jawed in amazement is that the Senior Lecturer doesn’t know of this proposal, is so ignorant of what all those other people who ponder such matters are talking about. What a recommendation for a university teacher, for a reformer of tax systems, eh?
If it moves, tax it. If it doesn’t move, tax it harder
I hope Scotland does exactly what Ritchie writes. A country-wide economic experiment that Ritchie has his name tied to that will let him go down in history.
@Noel, and this time it would happen locally in plain sight, so it won’t be so easy to blame the CIA or “dark capitalist forces” or whatever the excuse-du-jour is when it’s Cuba, Venezuela etc.
We actually have a tax system being discussed called a “progressive consumption tax.” The basics of which are a 100% tax relief upon savings.
Effectively, all additions to savings, and earnings from savings reinvested, are tax free. All withdrawals from savings and all earnings from savings which are not reinvested pay whatever the normal income tax is at progressive rates.
Does it matter that the current consumption tax is regressive, when income tax is progressive? What would be the second-order effects of removing even more ‘poor’ people from the group of taxpayers? And wouldn’t left-liberals see a progressive consumption tax as an additional revenue stream for funding their dingbat policies – not as a replacement for other taxes?
Essentially, we don’t need new taxes: we need fewer and lower taxes – and a state that is at least 30% smaller.
The problem I foresee with a progressive consumption tax is the endless list of goods and services that the public will clamour to have added to the tax-exempt pool. Health insurance, for starters. Then education (analogous to a company investing in employee training); then childcare; then gym memberships (part of healthcare, innit?); then tampons; and so on until the next time the system changes.
Not that the current system is any better.
In that case a new progressive consumption tax that would be charged on flows through bank accounts, and so charge the wealthiest at the highest rates, would be needed to redress the balance
He has dug this festering corpse up from the back yard again. Note however that now he is claiming it will only hit “the wealthiest”, whereas his original had people over £20k a year being whacked.
“Charging the wealthiest at the highest rates”. No, you will be charging those who happen to have more in a savings or current account the most. Someone who owns five houses worth £5m in total but has only £5k in a savings account will be hit far less than a younger person who has £50k saved up as a house deposit and yet will be classified as ‘wealthy’.
He admits that VAT, a consumption tax, is regressive and then proposes another consumption tax, but he gets around the problem of consumption taxes being regressive by declaring it will be progressive. Voila!
VAT, which has zero-rate for essentials and a lower rate for household gas & electricity that are near-essentials, is a progressive tax when measured against spending.
The claim that VAT is regressive is based on some nonsense statistics produced by New Labour (designed to conceal the extent of inequality after its decade in power) that showed the bottom decile spent over 110% of its income on VATtable goods (implying less than nothing on food, rent, books, public transport … although they did spend some money on stamp duty on expensive houses). Anyone who bothers or chooses to look at the data properly can see that it is nonsense.
There is also a twist in that the VAT paid indirectly for “VAT-exempt” services is excluded from the analysis – any input VAT cannot be reclaimed so the price of a “VAT-exempt” service includes a large amount of hidden VAT passed on to the customer.
Honesty is honesty and MMT economists are MMT economists and never the twain shall meet…
So, when I get paid, tax get taken off me, when I move some money from my personal account to my joint account, tax gets taken off me, and when I then move some money from my joint account to the mortgage, more tax gets taken off me.
Even worse, I tode myself over low points in the month my borrowing a couple of hundred quid from the joint account and put it back after payday. So I’ll get taxed twice more.
And I pay car maintance stuff from my personal account (‘cos it has a debit card) then refund it from the joint account (‘cos the car is a joint asset), so so I get taxed even more.
May as well just invest in a mattress.
Yea gods. I tide myself over low points in the month by borrowing
@ jgh
That’s why cash payments >£200 and notes >£10 are to be banned in the Curajus State.