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Monday 7 May 2012

Taxes (Part 1)

How to Start a Fight

If you know anyone who only works for a government agency or perhaps the NHS and has no other source of income, and you want to see them get really angry, very casually tell them this:

You do not pay income tax. 

Now sit there quietly and let them rant at you for a time, let them show you their payroll stub and prove to you they they have indeed paid their taxes, because it says so right here on this sheet of paper.  Do not interrupt them. Let them finish.  You will hear about how the government is screwing them, how their pensions are being taken away, how underpaid and undervalued they are as workers, as human beings.  And when the inevitable lull in their tirade occurs, hit them with:

And the money that you were paid with, where did that come from?

And then wait for it.  It might take a few minutes; it usually does.  "From the government," is a classic response. Eventually, when you ask the question again, they will have no choice but to answer that they money they receive is funded by taxpayers. Yet in the same breath they will still insist that they pay income tax.  Their rightfully-earned money has been deducted from their pay, therefore they have paid tax, they claim.

That's one way of looking at it.  Here's another.  The government is merely taking away some of the taxpayer money that they promised to their workers and redistributing that money to other workers in the process.  It's quite clever when you think about it.  By all appearances, you seem to be paying tax, as is legally required, but really you are just getting less taxpayer money than what they said you'd get.  "We'll pay you £65,000 per annum, entirely funded by taxpayers, but we're only going to give you £48,000 'after tax.'"  So, with the money that they do eventually receive, they are in a sense still paying their other taxes with your money.  Council tax, VAT, national insurance. You, the private sector working woman and man, are paying the public sector's salaries and their taxes. 

Of course, this argument is moot if your government-worker friend has another source of income from the private industry. So it only works for those who are solely employed by the government.

Your Duty as a Citizen is to Pay Tax

As you can imagine, the above viewpoint does not sit well with a lot of people, both public and private sector workers.  It challenges some fundamental beliefs about taxes.  For the moment let us set it aside and focus on another aspect of tax.  The amount of tax each of us must pay.  For the sake of this argument, assume that everyone pays a flat tax of a certain percentage regardless of income.  If all of us were to pay flat tax on our income, what would be a fair percentage?  10%? 25, 33, 50%?  More?  Seriously, assuming you are not Stephen King, what do you think?

The current system is set up so that the wealthy should pay a higher percentage of tax than the rest of us who are living off the scraps that society deigns to feed us.  We know that many wealthy people have numerous tax shelters and the resources to exploit the loopholes in tax law so that they end up paying a lesser percentage than the middle class, for instance.

Inevitably, there is outrage all across the board about tax evaders. It's immoral! It's your duty as a citizen to pay tax. Jail them! Take their property and give it to us!  IT'S IMMORAL!

Is it?  Is it really immoral?  Think about it for a few minutes. I can wait...


Finished?  Good. What were your conclusions?  Do you feel that you have a moral obligation to pay tax?  If so, why?  I am genuinely curious about your opinions either way. Pro or Anti.  Before I go further and give you my opinion, I want to know yours.  I don't get very many comments on this site, so I don't know if I'll receive any responses to my query.  But please have at it. You can do so anonymously. Disqus does not require a real e-mail address. If you already have a Disqus account, log out and then comment if you want to be anonymous.

I'll give it a few days, and if no one responds, I'll post up my opinions.