I read with interest an article online at: http://www.theguardian.com/business/2014/aug/10/tax-benefits-citizens-income-self-employment
in which it suggested a Citizen’s Income.
This is nothing new. John Pardoe suggested this alongside the removal of Income Tax.
His argument was that Income Tax removed the incentive to earn more and therefore act as a restriction on creating wealth for the country and he felt that if Income Tax was replaced with a form of Purchase Tax so that whatever a person earned they kept and they decided how much tax they paid according to what they bought. The Purchase Tax would have levels set according to how luxurious the item was. The sliding scale can be adjusted so that the those who could afford to do so paid the most tax. For example the tax on a small car would the 100% whereas the tax on a luxury car would be 400%. His argument was that if a person had enough money to buy the luxury car, they would not be put off by the fact that the tax on it was higher than that on a smaller car. Human nature being what it is, the status acquired with a luxury item would override the desire to pay less tax, however, if a person preferred not to pay so much tax they can choose to buy a smaller car.
His idea was to set the tax at the point of entry to the market and for it to be transferred up the chain of transfer from one market to another as a set amount, saving huge amounts for companies who currently pay an extra cost because they have to employ accountants to be unpaid tax collectors for the government.
The exact system for this would have to be carefully worked so that it is fair to all and catches all products and services that are consumed in the UK. It would not matter if people made money on what is currently the black economy as they still need to spend their money, thus paying tax. Even if some of the goods they bought had been smuggled into the country, thus evading tax at the point of entry to the market, they will still spend a large part of their income on taxed items. It would also remove the need for huge numbers of tax collectors, thus saving the government, and the taxpayers, a huge amount of money while converting cost centres to production and wealth creating centres instead.
If we had an income that we could live on every week/ month, paid into our bank accounts, regardless of whether we were working or not and then kept all the income we made on top of this, we would not mind paying the extra tax on purchases. It would take time to adjust to this way of paying tax, like it took time to adjust to the change from Pounds, Shillings and pennies to the decimal currency system that we have now. Some might say that this could encourage fecklessness but I would argue that this is not the case. Humans are greedy animals and the ability to earn more and spend it on luxuries would far outweigh any lack of motivation to work.
Conclusions
The main benefits to this system would be the following:
1) the removal of the stigma attached to the current benefits system and the reduction the cost of administering such a system to almost nothing;
2) a reduction in the cost of collecting tax on the tax payer and on the wealth creating organisations in the country;
3) the removal of child poverty and possibly a huge reduction in rough sleepers;
4) people who work because they have a good reason to do so rather than being forced to work just to exist;
5) a fairer system of taxation that will mean that those that can afford to do so, pay more tax;
6) a much simpler system for adjusting the taxation levels so that the government gets enough income to pay for the services that we take for granted and those services that we an not do without; and
7) a significant reduction in crime.
I wish that John Pardoe was still around to see that his ideas have gained some credibility. Hew was about 50 years ahead of his time but I hope that a government in the not too distant future will have the political will and the balls to change the taxation and benefit system to a fairer one that is easier to administrate.
Alien born Brit 