Monday, 9 January 2012

Citizens Income and Flat Rate Tax


On the face of it 'citizens income' seems rather socialist and collective imposition on the public (who after all will ultimately be paying for it), but if we are to accept that, regardless of anything, people aren't going to be left to starve on the streets, it does seem the most efficient way of providing basic sustenance for all citizens.

This is just a high level summary of how a 'citizens income' would work, I was tweeting about it so thought I'd write it up a bit...

Citizens Income

Every UK citizen would receive a regular payment from the government - no means testing, just a fixed sum with no strings. This would be simple to process.

The sum would be sufficient to cover basic 'living' expenses.

So for the unemployed, no additional benefit would be payable - the 'citizens income' would replace job seekers allowance and housing benefit.

For the employed, there would be no 'tax bands' and no 'tax free allowances' - instead they would receive the citizens income to replace their tax free allowance.

This would be on the region of £10,000

Flat Tax

All income would be taxed with one tax at a fixed rate - this would replace the existing National Insurance contributions and income tax. This rate is likely to be around 35%.

Because the tax rate is flat, and because everyone receives citizens income regardless of other earnings - there is no 'benefits trap' everyone would 'take home' 65% of every pound they earned/were paid, in addition to their full 'citizens income'.

Who pays the 'Flat Tax'?

Once in place, every company would be paying 35% of everyones pay to the government as tax - so why bother to track individuals tax payments at all? If a company had a total payroll bill of (say) £1,000,000 per month - it could simply pay 35% to the taxman (£350,000) and then distribute the remainder (£650,000) to its employees 'tax paid'.


And Corporation Tax?

How about setting the salary 'flat tax' and 'corporation tax' the same rate?

If this were done, then a companies profits (income, less costs except payroll) could be taxed at that rate (say 35%) and the remainder would be 'tax paid' and could be distributed to workers as pay and share holders as dividends with no further tax to worry about.

A huge part of the UK tax system would simply disappear. The citizens income would only be paid to UK Citizens, so there is no room for 'benefits fraud' there and a company would be paying a flat tax on all its profits, so there is little scope for evasion there, finally as all payroll is taxed at the same rate and paid by the company, there is little scope for companies to commit fraud/evasion, and no scope for individuals/employees to do so at all.

Finally

During the switch from our current taxation system to the new one, peoples 'take home pay' would have to be protected - it is a 'simplification' not a tax raising exercise, so people currently paying higher tax rates would actually have their 'gross' salary figure cut, while people on low pay may have their 'gross' salary increased - however every one would continue to 'take home' the same immediately after the switch over as they did before, so there would be no hardship and no windfalls!

There would be massive savings to be made in the existing civil service that handle taxation and there would still need to be some level of 'benefits' or 'social security' for those with various special needs.

Some people may choose to do nothing and scrape by on their 'citizens income' as their only means, but many would also be in a position to try to start new businesses, or do voluntary or care work for others, while yet others will be content to just carry on working at a job and receiving their pay to live a bit better - getting 65% of every single penny they earn from the first to the last.

A Philosophical Note

On the face of it 'citizens income' seems rather socialist and collective imposition on the public (who after all will ultimately be paying for it), but if we are to accept that, regardless of anything, people aren't going to be left to starve on the streets, it does seem the most efficient way of providing basic sustenance for all citizens.

On a philosophical note, I would suggest that a country belongs to all of its citizens as a birthright and to provide a basic living in return for them sharing their part of this commonwealth with everyone else is a fair trade - in theory each citizen of the UK is currently entitled to 1 about one acre - the citizens income could be though of as the income they earn from their one acre...

4 comments:

  1. This all sounds very sensible - and quite Green too!

    http://policy.greenparty.org.uk/ec#EC730

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  2. Its a UKIP policy http://www.ukip.org/content/ukip-policies/1408-welfare-and-social-security-ukip-policy.

    Whatever the Greens say on a basic income, I don't believe for a second they see any savings to be had from removing the civil servants who currently administer our over complex tax system.

    And while the Greens were also supposedly supporting a Yes to AV, and seem to have large numbers in Brighton - They never actually showed themselves when the local 'Yes2AV' group were out campaigning...

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  3. Obviously a citizen's income would save money on administration, right? (Would UKIP have adopted the policy if it didn't?)

    And maybe the Greens in Brighton were busy in the run-up to the AV vote - which I think coincided with another vote?

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  4. There is only a 'saving' to the taxpayer if they get their money back. But the Greens in Brighton have made clear that money only matters if it is under their control - they would rather take local 3.5% council taxpayers money than 2.5% from central taxation. 'All your money are belong to us'.

    As a Candidate with out a big team behind me I was pretty busy in the run up to the election too - but found the time to turn our on street stalls and the such for Yes2AV.

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