UK Emergency Budget

[Asher]

Did you study liberal arts, by chance?

[C0ckney]

nah, i've got a law degree.

[Asher]

Surely that means you took a liberal arts undergrad?

[Hauldren Collider]

Unless you're like my dad or are a patent lawyer.

[Asher]

Yes. Are you like HC and Kuci's dad?

[Kuciwalker]

kuci, there are exemptions for food, books, medicines and children's clothes (IIRC and this isn't an exhaustive list). i think water and sewerage services are also exempt.

i prefer VAT to other forms of taxation, because it reduces consumption, and i think that we (as a society) ought to consume less. whether this is good for the economy on the other hand...

You may be disappointed with the results, then...

[Drake Tungsten]

Can someone explain this chart to me?

I'm glad I wasn't the only one having trouble with it.

[KrazyHorse]

Points:

1) While I think that "progressivity" is in general a good idea for a tax &benefit system, I don't understand why every single change needs to be "progressive". Particularly why every change needs to be progressive according to a specific definition (that is, on the basis of an individual year's income). I prefer to say that I am in favour of redistribution from the rich to the poor. My preferred method of accomplishing this is to have a broad tax base, free of the distortion between current and future consumption, with the lowest possible peak marginal rates and generous lump-sum per capita disbursements to both the poor and the rich alike. In my mind this maximizes the transfer from rich to poor while minimizing the deadweight loss of taxation. If somebody can demonstrate that there is reason to believe that marginal labour supply is far less elastic at some points along the earned income distribution curve than others or that there are some sorts of dips in the income distribution that we can take advantage of then we can apply excess inframarginal taxation at these points and gain in efficiency.

2) Laz's point is the only valid objection against a consumption tax, but it is an open question in my mind as to how much intergenerational wealth transfer is motivated by the volatility in consumption tax rate. To understand this we must know both the elasticity of labour supply relative to far forward tax rates as well as the forward volatility of tax rates. My feeling is that the former is relatively low, which is why I'm not as strongly against inheritance taxes as I might otherwise be.

3) In order of understanding: Kuci, Laz, HC, the rest of the sane poly community, Ben

[KrazyHorse]

Can someone explain this chart to me?

I'm glad I wasn't the only one having trouble with it.

Important part is the series of diamonds connected with lines. Shows the net effect of tax & benefit changes on different income deciles as a percentage of net income.

[KrazyHorse]

The payoff to the "tax option" is that of an amortizing American option discounted at the personal rate of the individual. Since the option is not a tradable security, the discount curve is not the standard zero curve.

[Asher]

I'm not necessarily in favour or against of the VAT. I just am taken off-guard by its very high percentage.

[Ben Kenobi]

In order of understanding: Kuci, Laz, HC, the rest of the sane poly community, Ben

That's a strange list.

I prefer to say that I am in favour of redistribution from the rich to the poor.

Why? Wouldn't the poor be better off having mobility, ie, the ability to become rich?

Redistribution through income taxation doesn't do a very good job of producing wealth. It's a great way to keep people from becoming wealthy as the more that they make, the fewer rewards they earn. It also does a poor job of hitting the truly wealthy, as those who have already earned their money won't be hitting high incomes.

Consumption taxes do a pretty good job of rewarding earned wealth because you aren't taxed on it until the money is spent. It's also far cheaper to administer. Every dollar you consume in administration is going to be a drag on any wealth redistribution scheme, as you will be lowering your efficiency ratio. I think government is around 30 percent on it's efficiency ratio, in terms of actually distributing a dollar to someone that they have taxed from someone else.

[KrazyHorse]

Asher

It is different, of course. One question to ask is what the income tax looks like in Britain.

1) the corp. income tax is substantially lower in the UK than the US, but is higher than in Canada
2) IIRC UK income taxes are only collected at a national level, not by region/province/state/whatever
3) capital gains taxes are, I believe, lower in the UK than the US (?)

[Asher]

It is different, of course. One question to ask is what the income tax looks like in Britain.

1) the corp. income tax is substantially lower in the UK than the US, but is higher than in Canada
2) IIRC UK income taxes are only collected at a national level, not by region/province/state/whatever
3) capital gains taxes are, I believe, lower in the UK than the US (?)

Well, that changes things, then.

[C0ckney]

Surely that means you took a liberal arts undergrad?

it's a different system over here. you can take law at undergrad (which is what i did), although it's also possible to do another degree followed by a conversion course.