Fairly taxing thoughts…
In this article, I hope to think through a fair taxation system. What to tax and why. I am starting from the ground up and paying no attention to the fact that we are running a massive deficit that needs funding with any monies that can be grabbed.
Each tax will have a reason behind it and the money will in all cases be directed specifically. But the tax code could hopefully be written on a few pages of A4.
It isn’t a budget, and there will be a lot overlooked, but it’s a start. This is an idealised set of articles and a little poetic licence is used to stretch the limits of what could be possible.
Tax on wealth or wealth creation?
I will be arguing for a land tax to pay for defence spending & maybe for the civil service. One of the first retorts is that it is a wealth tax and thus suppresses investment. I think this is wrong headed. Wealth taxes concentrate the mind and have to be paid regardless, in fact there is a need to create wealth to stand still, hence the need to work to replace it. Most complaints are levelled at capital gains etc. These are not so much wealth taxes, but wealth creation taxes: Why create wealth if it will get confiscated. Also capital gains may be purely due to currency inflation and therefore the government takes a percentage of wealth regardless of any real benefit to the asset owner. Income tax is another wealth creation tax. I remember with higher rates, employees refusing overtime because over half of it would be taken off them so what was the point?
Sequestration of wealth taxes
The main focus of this is Stamp Duty. A tax on buying a house which serves no purpose other than to take money for no reason whatsoever.
The other biggie is Inheritance Tax. Only paid by the less than superwealthy unless very unlucky. They take away a portion of a person’s estate again for no reason whatsoever other than they can. Any idea it is handed out to the poor is for the birds, it goes into general spending.
Duties
These were a tax on enjoyment and are now used to enforce austere living by making them expensive. Again the government taking over the church in removing money in the name of being in your best interests – because they can.
Fuel Duty in particular exists to make all products more expensive – takes a special kind of stupid to see this as good in any way.
VAT
A tax on selling to non-commercial end users. A tax on wealth creation similar to Income Tax, only taxed out of already taxed income.
Usage (Roads, Airports, Insurance)
Road tax is paid to cover the cost of maintaining our road system – yeah, right. If it did, we’d have the best roads in the world. Now a social engineering tax because government experts know best.
Insurance tax is a tax on protecting yourself – a disgraceful tax – nothing more to say
Wealth Creation (income and profit)
As already stated, if you (or your company) works hard, the government feels it deserves a share. Why – there is no good answer. With Income Tax, the Napoleonic Wars are over, so they must be about to be scrapped???
Welfare
NI was set up to pay for the welfare state – NHS/health; Unemployment Benefit & pensions. Any link to this is long gone and it is now something for chancellors to play with for headlines.
Other funding
Income from commercial activity
Sales of stuff they claim rights to, such as car number plates, wavebands, at local levels fishing etc. They take away the freedom of the unencumbered market and charge a few lucky ones the right to use or make money off the back of exclusive rights.
Borrowing
Borrowing with a fixed income should be unnecessary and is just an excuse for politicians to put off taking hard unpopular decisions. It puts the cost into a future where they will not get criticised for it, much less thrown out of office. If set up correctly, other than small temporary overdrafts (a few weeks at absolute most), there shouldn’t be any borrowing and preferably something of a reserve, just in case of an emergency while a new budget can be organised for going forwards.
Policy Ideas
Ok, really putting my head on the block now and proposing what to tax and why, and how we move to this new nirvana!
All taxes outlined below are to be simple with no allowances under the theory that every allowance will create loopholes with an industry to fully exploit them – we want our best brains better utilised. In fact, hard luck cases, and there will be those, make for bad law – our complex tax system is already the perfect case in point.
Clear borrowing
Our currency isn’t backed by anything. We can make a law allowing the government to create money and then just pay off all government debts of our fraudulent fiat currency. Maybe this is a fantasy – maybe not? In the end, the currency isn’t backed by anything, if it was this would be clearly impossible, therefore we’d be giving back a few IOUs for their IOUs.
Targeted taxation
Obvious one here. All taxes have to be justified as to funding something directly. It is not a means of control for social reasons.
So scrap most, move all welfare spending into NI. This would massively increase NI, but it would be fully reclaimable against private payments.
Defence
Land tax – if you own land/property in this country you have a stake in its defence. Your share of the land by wealth will be used as a calculation to fund defence spending. Payment is mandatory, no excuses. If payment isn’t made then land is sold at auction and money returned after tax (and some fees?) to the owner. Monies go directly to the MOD or equivalent.
The first thing thrown at us will be the fate of old people. An argument of the old rates system was that it encouraged those in larger properties to downsize. The same argument has to apply here. For all the freedoms granted, life will have its difficult decisions too.
Roads
Vehicle owners/keepers will pay for new roads and to replace the damage caused by their travelling. An annual mileage will be taken and charged to the owner to pay in arrears over the next twelve months. All motor vehicles must be read once a year – older cars when they have an MOT. Also, mileage taken when sold. Etc etc.
This will make electric cars a fairer proposition and their eco-minded owners will delight in the pleasure that they are pulling their weight in looking after our roads.
A mileage and weight calculator will be used. Monies go to county councils/central government who hand over to contractors that bid to maintain roads to a certain standard. The advantage is that if sued for failure, they lose out not us, and competition will reduce bureaucracy.
Bureaucracy
Land tax? No idea how to directly tax for bureaucracy. Land tax keeps everything simple.
If a land tax then, like defence, there would be a set percentage and expected to be stable – I would prefer a rate that is set in stone in law. If moveable (and in the end, we cannot tie future governments) a change in rate would be no doubt an election issue. Assuming a stable rate, candidates would campaign on how to use the money the best, rather than make gesture promises against borrowing.
Mineral extraction
If we consider all below our feet that one man cannot remove alone as a national resource, then it would require companies to bid on extraction. This would create wealth funds and would allow maybe some vanity projects, a fund for old age pensions (see part 7), and a fund for emergencies. After that it can be handed to every adult/person to use as they wish. Bidding would be based and paid for on estimates rather than real extraction which would create costly auditing. In the real world though, maybe the only way to ensure companies are prepared to bid will be if royalties are paid on actual figures?
Other rights where it isn’t possible to offload them from the government would also go into the funds.
It is important that these monies are not used for general bureaucracy as they do not form a year-in/year-out stable revenue stream and would be soon frittered away. Again – long term, stable, tightly targeted taxation is the aim.
Removal of arbitrary taxes
- Stamp Duty
- Inheritance
- Capital Gains
- Insurance & Travel
- VAT
- Duties
Removal of Income Tax & Corporation Tax
As it says. Corporation Tax removal may need to be phased.
Welfare Tax
Move all welfare spending onto NI tax and look to clear in twenty years by raising the lower starting band.
Anyone could then claim a rebate on any ‘welfare’ spending. i.e. under 16 education, health and a few others. This will allow more people to be tax-free and allow far more people to be able to fund their lives fully in the (superior) private sector. There may be a few price bubbles, particularly in health – something to be considered.
NI tax rebates on union membership and other organisations that provide welfare would also be included as the unions would have to live in the real world. On one hand, the unions will hate us but on the other they will like being able to further control their member’s lives.
‘La raison d’être’ of the OTF Party?
To gain power on the right, there has to be an aspirational reason for an electorate to vote for you. By making NI almost as punitive as current Income Tax and NI combined – possibly higher (prices are lower as less of other taxes etc etc), they then have a choice of using the money to buy government welfare services or they can use it in the private sector instead. Hopefully the middle classes will work out the cost of private schooling & health insurance and realise that voting OTF will make it affordable and will vote for it. Pensions & other welfare insurances could be covered by friendly societies too.
With luck hardly anyone would be a net payer of NI to the government other than those that can easily afford everything privately anyway and then as the threshold increases the markets would adjust and normalise to normal people’s earnings. Those at the bottom would still get welfare versions so no worse off – they wouldn’t vote OTF anyway, but long term most would feel the advantage when they have to take more and more responsibility for their lives.
The devils in the details will decide whether this is a runner or not. Also it is one area of temporary bureaucracy we might need to implement ourselves – and this after I accuse UKIP & Reform of being right wing meddlers!
Next up – Dealing with the biggest fraud on the people: Part 6 – Currency & Means of Exchange.
© Jerry Mandarin 2022
