[Metrobeans]

B484 - Welfare and Tax (Amendment) Bill 2012, TSR Libertarian

Welfare and Tax (Amendment) Act 2012

An Act to update the rates of Resident's Income, double the personal allowance, reduce the number of income tax tiers to 2, scrap VAT and take 5p off the basic rate of tax.

BE IT ENACTED by The Queen's most Excellent Majesty, by and with the advice and consent of the Commons in this present Parliament assembled, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:

Part I: Spending
1 Resident's Income
(1) For Schedule 1 in Welfare Act 2012, substitute:

Schedule 1: Rates Of Citizen's Income
1st adult (16-64 years): £164.00 per week
Subsequent adults (16-64 years): £94.00 per week
1st pensioner (65+ years): £132.00 per week
Subsequent pensioners (65+ years): £60.50 per week
Child aged 12-15 years: £89.00 per week
Child aged 5-11 years: £68.50 per week
Child aged 3-4: £62.00 per week
Child aged 0-2: £55.00 per week

Part II: Tax
2 VAT
(1) The Value Added Tax Act 1994 is hereby repealed.

3 Ground Rent Tax
(1) In section 6(1) of Tax Act 2011 (Ground Rent Tax), for "54 per cent" substitute "65 per cent".

4 Central Income Tax
(1) In section 1(2) of Tax Act 2011 (Income Tax) for "5 per cent" substitute "0 per cent".
(2) In section 1(3) of Tax Act 2011 (Income Tax) for "15 per cent" substitute "10 per cent".

Part III: Miscellaneous
5 Short Title
(1) This Act may be cited as the Welfare (Amendment) Act 2012.

Notes

Changes in RI Rates

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1st adult (16-64 years): £162 --> £164
Subsequent adults (16-64 years): £92 --> £94
1st pensioner (65+ years): £132 --> £132
Subsequent pensioners (65+ years): £69 --> £60.50
Child aged 12-15 years: £72 --> £89
Child aged 5-11 years: £60 --> £68.50
Child aged 3-4: £48 --> £62
Child aged 0-2: £40 --> £55

Note that although there has been a decrease in the rate for subsequent pensioners this is largely due to the falling prices from the cut in VAT to 0% - it's just that the cost of living has risen for everyone else by a larger amount to outstrip this effect. The new figures are based on the 2012 Joseph Rowntree Foundation minimum income research - minus rent (since it's covered by housing benefit) and council tax (since it's abolished) and reducing prices by 8% (based on the pass-through from the RL cut in VAT to 15%).

The Costs of the RI Scheme

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From Table 22 and population estimates from ONS we can see that the country is made of:

Non-Retired Households
3.88m households with 1 adult @ £164 p/w, annual cost: £33.1bn
10.8m households with 2 adults @ £258 p/w, annual cost: £144.9bn
3.15m households with 3 adults @ £352 p/w, annual cost: £57.7bn
2.82m Children 12-15 @ £89 p/w, annual cost: £13.1bn
4.98m Children 5-11 @ £68.50 p/w, annual cost: £17.7bn
4.01m Children 0-4 @ £58.50 p/w, annual cost: £12.2bn.
Total annual cost for non-retired households: £278.7bn

Retired Households
3.75m households with 1 pensioner @ £132 p/w, annual cost: £25.7bn
3.22m households with 2 pensioners @ £192.50 p/w, annual cost: £32.2bn
Total annual cost for retired households: £57.9bn

Notes: I've taken the average cost for 0-2 and 3-4 payments since there's only data on 0-4.

It might seem odd that retired households have no children, but I've just taken the total figures for children and put them in the non-retired bit for costing. If a retired person/persons have children in the household, they will be eligible to claim for them.

The total outpayments from the scheme will be £336.6bn, rising from a previous total of £326.7bn (see Welfare Act 2012).

Government Finances

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Previous Surplus from Welfare Act 2012: £15.4bn

Extra Welfare Spending: £9.9bn
Total Extra Spending: £9.9bn

VAT to 0%: -£20bn
Income Tax Changes: -£30.5bn
GRT to 65%: £61.5bn
Total Extra Revenue: £11bn

Surplus from this Act: £1.1bn

Total surplus: £16.5bn

Income Tax Revenue Calculations - See table 2.5, 2012/13.

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£0-20K: 0% (£0)

• 0% tax rate yields no revenue.

£20K-100K: 10% (£29.98bn)

• From those earning £20-100K, total income £550bn.
• Subtract personal allowance of those 15.35mn taxpayers.
• Tax base of £243bn from these taxpayers.
• 710,000 taxpayers earning over £100K.
• Each paying £8,000 in tax at this rate.
• Total revenue = 10% * £243bn + (10% * £80,000 * 0.71m).
• Total revenue = £29.98bn

£100K+: 25% (£18.9bn)

• From those earning £100K+, total income £146.6bn
• Subtract all income liable for tax at lower incomes of those 710,000 taxpayers.
• Tax base of £75.6bn at this rate.
• Total revenue = 25% * £75.6bn
• Total Revenue = £18.9bn

Total: £48.88bn
Previous Income Tax Revenue: £79.37bn (see Welfare Act 2012)
Shortfall: £30.49bn

[jesusandtequila]

(Original post by Metrobeans)
x

Apologies if I wasn't clear, could the title be Welfare and Tax (Amendment) Bill 2012, rather than Welfare Bill 2012, please?

[Metrobeans]

(Original post by jesusandtequila)
Apologies if I wasn't clear, could the title be Welfare and Tax (Amendment) Bill 2012, rather than Welfare Bill 2012, please?

Amended.

[jesusandtequila]

Seriously, I know this is a bit dry - but no replies?

[toronto353]

(Original post by jesusandtequila)
Seriously, I know this is a bit dry - but no replies?

How much of the budget of the MHoC, if any, does this Bill achieve then? For example, there's the repeal of VAT, but what else have you taken up? What, if anything, have you changed and why?

(I'm not accusing you of plagiarism, but I'm interested and it kicks off this debate).

[jesusandtequila]

(Original post by toronto353)
How much of the budget of the MHoC, if any, does this Bill achieve then? For example, there's the repeal of VAT, but what else have you taken up? What, if anything, have you changed and why?

(I'm not accusing you of plagiarism, but I'm interested and it kicks off this debate).

So we've updated the RI rates in line with the updated research. Tax, we've scrapped VAT, moved GRT from 51% to 65% and removed the bottom rate (5%) of income tax, making it part of the personal allowance, and reduced the 15% rate to 10%. This Act has a ~£1bn surplus (although we may figure out it's a bit more when we look at effects on growth for the future).

So income tax would now look like this (and remember, no NICs either employee or employer!):

£0-20K: Personal allowance
£20K-100K: 10%
£100K+: 25%

[toronto353]

(Original post by jesusandtequila)
So we've updated the RI rates in line with the updated research. Tax, we've scrapped VAT, moved GRT from 51% to 65% and removed the bottom rate (5%) of income tax, making it part of the personal allowance, and reduced the 15% rate to 10%. This Act has a ~£1bn surplus (although we may figure out it's a bit more when we look at effects on growth for the future).

So income tax would now look like this (and remember, no NICs either employee or employer!):

£0-20K: Personal allowance
£20K-100K: 10%
£100K+: 25%

You've made it even harder for me to pick fault with this you know.

Anyway, why have you chosen the figures that you have done for the boundaries for income tax? What was the reasoning behind those boundaries? What was the reasoning behind the percentages chosen?

(Sorry for the dull questions, but I'm honestly failing to see how to fault this so I want to find the reasoning now to see if I can pick fault with that. )

[jesusandtequila]

(Original post by toronto353)
You've made it even harder for me to pick fault with this you know.

Anyway, why have you chosen the figures that you have done for the boundaries for income tax? What was the reasoning behind those boundaries? What was the reasoning behind the percentages chosen?

(Sorry for the dull questions, but I'm honestly failing to see how to fault this so I want to find the reasoning now to see if I can pick fault with that. )

Hahaha.

Well the 4 income bands which had different rates before were £0-10K (0%), £10-20K (5%), £20-100K (15%), £100K+ (25%) - these 4 distinct bands haven't really changed, just that we've managed to reduce one of them to no tax. We've done the revenue calculations on the new data for the tax base, which actually means a reduced tax base versus the previous figures - especially at the top end. As such, we didn't think it feasible to bring down the top end as a priority, but we've shaved 5% off all tax under £100K - which is the rationale. It also means that someone on the median income pays virtually no tax now, on income or consumption.

[toronto353]

(Original post by jesusandtequila)
Hahaha.

Well the 4 income bands which had different rates before were £0-10K (0%), £10-20K (5%), £20-100K (15%), £100K+ (25%) - these 4 distinct bands haven't really changed, just that we've managed to reduce one of them to no tax. We've done the revenue calculations on the new data for the tax base, which actually means a reduced tax base versus the previous figures - especially at the top end. As such, we didn't think it feasible to bring down the top end as a priority, but we've shaved 5% off all tax under £100K - which is the rationale. It also means that someone on the median income pays virtually no tax now, on income or consumption.

Do you think then that there is any need to bring down the tax rate for 100k+ any further and, if so, why?

(God I sound so tedious. )

[ByronicHero]

On the basis that I think the first adult should receive £165 I will of course be voting no, should I be able.

[jesusandtequila]

(Original post by toronto353)
Do you think then that there is any need to bring down the tax rate for 100k+ any further and, if so, why?

(God I sound so tedious. )

Heh. Might at least show the page up here for some others.

I do, I think we should be aiming to get rid of income tax across the board. However, I'd like to see the 10% rate go, or at least be reduced first as the priority.

[JPKC]

The response is probably more muted because this is just an extension of the Welfare Act, nothing actually new.

As I think I said last time, I disagree with having a flat rate of GRT, especially when that rate is so high. The wealth you are taxing, unlike income, is not necessarily liquid - the tax would really make it difficult for certain groups of people, even if it is the most theoretically legitimate (directly quid pro quo etc.). There's also the issue of ghettoisation; although I was sort-of on your side about this with the Welfare Act, I've changed my mind and now reckon that it would make it practically impossible for families that live in newly gentrified areas to remain in them. The area you live in will be completely determined by your social class, far more than in RL. All the bad consequences will just be accentuated by the rate increases.

Regarding the RI, the only improvement to it I can think of would be to specify that the child's amounts get paid directly to the mother, as with the (now defunct) Child Benefit.

Edit: Hmm. There's no links in the Notes explaining the RI rates. Looking at the Joseph Rowntree Foundation's recent report, they say that the average single adult requires £192.59 per week. How are you getting this down to £165? I don't imagine the VAT difference can account for that much...

[jesusandtequila]

(Original post by paddy__power)
On the basis that I think the first adult should receive £165 I will of course be voting no, should I be able.

[toronto353]

(Original post by jesusandtequila)
Heh. Might at least show the page up here for some others.

I do, I think we should be aiming to get rid of income tax across the board. However, I'd like to see the 10% rate go, or at least be reduced first as the priority.

What would you replace income tax with then in that case?

[jesusandtequila]

(Original post by toronto353)
What would you replace income tax with then in that case?

Either spending cuts or GRT, or a mixture of both.

[toronto353]

(Original post by jesusandtequila)
Either spending cuts or GRT, or a mixture of both.

In the case of GRT, don't you think that increasing it even more might be too much? In the case of cuts, what cuts would you make?

[Mechie]

How do you get paid the RI if it's dished out per the number of people in a household? I've already asked this in the Ask a Liber thread, and it would've been good to get a reply from the person who actually wrote the bill.

[ByronicHero]

(Original post by davidmarsh01)
How do you get paid the RI if it's dished out per the number of people in a household? I've already asked this in the Ask a Liber thread, and it would've been good to get a reply from the person who actually wrote the bill.

You would almost certainly nominate a bank account on the form as you do now and it would be paid into that. I really hope it isn't paid based on the "household" but rather by "residence" or something similar because people who rent space in shared houses certainly should not be subject to any "subsequent" restrictions. I would imagine if I were paying attention I would have pointed that out in the reading(s) though as I did with the 18 to 16 issue

[barnetlad]

Regardless of the rest, I think that ending VAT should not take place until there has been a referendum on EU membership. Setting up a confrontation with the EU with such defiance is un-British.

[Mechie]

(Original post by paddy__power)
You would almost certainly nominate a bank account on the form as you do now and it would be paid into that. I really hope it isn't paid based on the "household" but rather by "residence" or something similar because people who rent space in shared houses certainly should not be subject to any "subsequent" restrictions. I would imagine if I were paying attention I would have pointed that out in the reading(s) though as I did with the 18 to 16 issue

As Part I 2(1) of the Welfare Bill 2012 says:

Part I 2(1)

The Resident's Income is paid to all eligible, claiming households on a monthly basis.

So that part of the bill asserts that the money from RI is paid to households. Looks fine on the face of it, but the practicalities of this really do need to be considered. I'd like to know how it's actually paid, as it can't be paid to individuals (unless only 1 person is in the household) because subsequent adults are paid less than the "first" adult (then the issue comes that who do you define as the "first" adult, but if it's paid into a household it doesn't really matter).

If it's paid to a household who nominate a bank account, there's issues of who's bank account it is paid into (or indeed a joint one). If it's one person's bank account, then that person has total control over the other's finances. If it's a joint account, what's stopping one person taking everyone else's RI out of the account? If that were to happen, and you were to think "**** this, I want it into my account" then you can't, seeing it's paid to households (especially with the fact the rate of RI for subsequent adults decreases, meaning that one person would arbitrarily be paid more into their individual account while the others get the "subsequent adult" rate).