M542 – Flat Income Tax Motion 2019

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Saracen's Fez
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What is this thread about?
This is a motion in the Model House of Commons (MHoC). It's a proposed statement that MPs debate, and there's a good chance that the House will later vote on it, but it doesn't have any legal effect. All are welcome and encouraged to ask questions about the motion's content and join in the debate – you don't have to be in a party or be an MP to do so.

What is the MHoC?
It's a political role-playing game where we pretend to be the House of Commons, and it's been going since 2005. We have formed parties, we have elections twice a year, and we debate bills and motions just like the real-life parliament. If you want to know more about how the MHoC works, your first port of call is the user manual. If you'd like to get involved and possibly join a party, you want the welcome thread.


M542 – Flat Income Tax Motion 2019, TSR Libertarian Party
This House believes that all existing personal taxation should be abolished and replace with a single flat rate of tax on income.

Every year the ONS produces a report titled Effects of taxes and benefits on UK household income, a report which year in year out exposes the lies inherent in how we talk about taxation in the UK and how we are duped by successive governments to make us believe our taxes are low when on low income and high when on high income for this is only true when looking at direct taxation and direct taxation alone. What this report shows is that on a quintile level high earners pay only marginally higher than average levels of tax and in fact very marginally less than those in the fourth quintile and those with the highest proportional tax liabilities are in fact those in the bottom quintile, although I believe this to be a sligh quirk as a consequence of council tax and council tax relief and if both are stripped out the level of taxation in this band is also in the same region as those with higher incomes.

Due to how flat net taxation already is we therefore believe that a massive exercise in tax simplification should be carried out with savings from increased efficiency allowing reducing costs associated with tax collection and serving to significantly close the tax gap due to many of the loopholes or frauds used no longer existing, and there would be a far smaller incentive to either defer of bring forwards income for tax purposes, for instance as was seen in 2015-16 to avoid the increases in taxation on dividends brought in for FY2016-17.

Effects of taxes and benefits on UK household income:

https://www.ons.gov.uk/peoplepopulat...lity-of-income

Compiled Data:
https://docs.google.com/spreadsheets...it?usp=sharing
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barnetlad
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The tax issue is not solved by a flat tax. No indication of change to corporate tax proposed, or indirect taxes. There would also be a significant impact on low incomes as tax credits would be abolished by this proposal.
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Rakas21
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Abstain.

As it is a motion I shall sit back and look at the level of parliamentary support for this. It’s certainly an interesting idea and I support flatter income tax (though probably at a higher rate than the authors), I also support tax simplification.

With that being said I am wary of putting the burden on income tax and my own preference is probably towards wealth and assets.
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Connor27
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Flat tax is quite simply the fairest system there is.

Let’s stop punishing overachievers and those with aspiration.

Vote aye on this motion.
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Jammy Duel
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(Original post by barnetlad)
The tax issue is not solved by a flat tax. No indication of change to corporate tax proposed, or indirect taxes. There would also be a significant impact on low incomes as tax credits would be abolished by this proposal.
Erm, it does cover indirect taxation, in fact indirect taxation is essential to the justification given.

As for corporate taxation that is completely separate and any plans that may or may not exist to reform corporate taxation would be done broadly independently as a consequence
Last edited by Jammy Duel; 1 year ago
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Mr T 999
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I ask the prime minister Ns_2 and leader of the opposition Saunders16 their opinion on this motion?
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username4307230
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As said above, I'm pretty supportive of making income tax more flat, but I'm wary of removing other forms of taxation. How does this correlate with government spending increases or reductions?
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Connor27
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(Original post by SankaraInBloom)
As said above, I'm pretty supportive of making income tax more flat, but I'm wary of removing other forms of taxation. How does this correlate with government spending increases or reductions?
It’s a motion, it’s not our job to make those correlations, it’s the job of the chancellor to do when (hopefully) implementing this proposal into his budget/finance bill.
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(Original post by Mr T 999)
I ask the prime minister Ns_2 and leader of the opposition Saunders16 their opinion on this motion?
It is an interesting proposal...

It really depends on the exact level of flat tax, and whether some sort of personal allowance remains - before someone becomes subject to the flat tax.
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username4244768
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I feel that bringing in a flat-rate income tax would consequently force governments to raise revenues in other streams to offset the financial losses. One could use the argument of the labour supply increasing with the introduction of a flat-rate, but I believe (well with the reading I have previously done before anyway) that in most examples, increased labour supplies have not offset the costs of the flat-rate.
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(Original post by Mr T 999)
I ask the prime minister Ns_2 and leader of the opposition Saunders16 their opinion on this motion?
Naturally, I oppose this. Progressive taxation is a superior form of income tax that helps governments challenge inequalities in society.
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username4307230
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(Original post by Connor27)
It’s a motion, it’s not our job to make those correlations, it’s the job of the chancellor to do when (hopefully) implementing this proposal into his budget/finance bill.
Just a bit of a question, from your perspective, what positives are provided from removing other forms of taxation?
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Jammy Duel
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(Original post by SankaraInBloom)
Just a bit of a question, from your perspective, what positives are provided from removing other forms of taxation?
As per the motion, simplification, smaller tax gap, and via the simplification lower administrative costs
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Jammy Duel
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(Original post by Laminae)
I feel that bringing in a flat-rate income tax would consequently force governments to raise revenues in other streams to offset the financial losses. One could use the argument of the labour supply increasing with the introduction of a flat-rate, but I believe (well with the reading I have previously done before anyway) that in most examples, increased labour supplies have not offset the costs of the flat-rate.
If set appropriately the changes proposed would be cost neutral, in essence the proposal is to shift the regressive indirect taxation over to income tax; we currently have a de facto near flat rate, this is merely a proposal to make it formally flat and with probable savings resulting in a lower net tax rate
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Jammy Duel
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(Original post by SankaraInBloom)
As said above, I'm pretty supportive of making income tax more flat, but I'm wary of removing other forms of taxation. How does this correlate with government spending increases or reductions?
In theory spending should be down slightly due to lower administrative cost and the rate can readily be moved with spending to create and surplus or deficit required (ignoring any effects from non personal taxation and obviously within the limits of the modeling)
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Connor27
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(Original post by SankaraInBloom)
Just a bit of a question, from your perspective, what positives are provided from removing other forms of taxation?
Less bureaucracy and complication which makes everything easier for when the common man has that dreaded experience of having to deal with HMRC.
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Jammy Duel
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(Original post by ns_2)
It is an interesting proposal...

It really depends on the exact level of flat tax, and whether some sort of personal allowance remains - before someone becomes subject to the flat tax.
The rate would depend on the government of the day, the data would suggest cost neutrality before efficiency savings and reduction of the tax gap at a 34% rate. As for allowance, to de facto maintain the status quo there would be no allowance, but this is because the indirect tax on those below the allowance would be made direct. If I were applying it myself it would come with radical welfare reforms to replace a number of benefits with a personal allowance with negative tax below it, i.e. UC taken to a whole new (and administratively more efficient) level
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(Original post by Jammy Duel)
The rate would depend on the government of the day, the data would suggest cost neutrality before efficiency savings and reduction of the tax gap at a 34% rate. As for allowance, to de facto maintain the status quo there would be no allowance, but this is because the indirect tax on those below the allowance would be made direct. If I were applying it myself it would come with radical welfare reforms to replace a number of benefits with a personal allowance with negative tax below it, i.e. UC taken to a whole new (and administratively more efficient) level
Then, this is something I can reasonably back.
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Jammy Duel
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(Original post by ns_2)
Then, this is something I can reasonably back.
I will make doubly clear that the benefit reform is separate and will be significantly more work to get right, but if done right this does quite nicely lead to that reform. Without having looked in detail at the benefits side there may be (and I expect likely will be) a need to have some amount of supplementary payment if the negative rate is the same as the positive, i.e. a truly flat rate all the way through
Last edited by Jammy Duel; 1 year ago
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Division! Clear the lobbies!
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