Sunday, 31 May 2009

MP's and State Employees Shouldn't Pay Tax

This MP's expenses fiddle thing should make us think about the nature of income tax.
It is a fact that no MP or other state employee or Quangocrat pays any income tax at all. The income tax notionally deducted from their pay is in reality simply a rebate to the rest of us, the non-state employed wealth creation sector.
An excellent double bubble benefit could be achieved from the fall out of the MP's tax fiddles by recognising that they and there cohorts don't pay tax anyway and making paying all state employees on an income tax free basis. This would achieve two things. It would keep Joe public always and forever right on the case of public spending as it would reveal the true price, and two it would ensure that such public spending was reduced year on year as every party would only get elected on the promise to do that.
I appreciate that this ignores the ludicrously expensive pensions promise enjoyed by all state employees, but such state employees pay reform would go hand in hand with reform of state employees pensions. It is a given that the defined benefit schemes would all be replaced by defined contribution (money purchase) schemes and that pensions tax relief would be abolished.


Mark Wadsworth said...

Lola, good plan, but under my cunning 'flat tax system', all employees could/would be paid a gross-for-net figure (it's a maths thing - the corporation tax relief nets off exactly with the PAYE due, so provided the employer pays a flat tax on net profits plus wages) the correct amount of tax ends up being paid.

Lola said...

MW - How does your 'cunning plan' work for state employers then? It's still wealth creators money, not state money. I just cannot see why state employees and employers pay any tax including VAT at all. It's just a mad money go round.

Thinking about it they could pay LVT within in rents to landowners. I crrtainly don't think the 'state' should own any land at all.

Pogo said...

I'm not so sure... The one definite advantage of making them pay tax and NI is that they'll see the magnitude of their depredations reflected in the pre- and post-tax figures in their payslips.