February 17, 2011

Time To Rethink Government?

Our good friend and stalwart, William, posted a link earlier today that I found fascinating.

You will need to leave your comfort zone for a few minutes, but I assure you, it will be well worth it.

Here's a snippet:

"When we in New Zealand looked at our revenue gathering process, we found the system extremely complicated in a way that distorted business as well as private decisions. So we asked ourselves some questions: Was our tax system concerned with collecting revenue? Was it concerned with collecting revenue and also delivering social services? Or was it concerned with collecting revenue, delivering social services and changing behavior, all three? We decided that the social services and behavioral components didn’t have any place in a rational system of taxation. So we resolved that we would have only two mechanisms for gathering revenue—a tax on income and a tax on consumption—and that we would simplify those mechanisms and lower the rates as much as we possibly could. We lowered the high income tax rate from 66 to 33 percent, and set that flat rate for high-income earners. In addition, we brought the low end down from 38 to 19 percent, which became the flat rate for low-income earners. We then set a consumption tax rate of 10 percent and eliminated all other taxes—capital gains taxes, property taxes, etc. We carefully designed this system to produce exactly the same revenue as we were getting before and presented it to the public as a zero sum game. But what actually happened was that we received 20 percent more revenue than before. Why? We hadn’t allowed for the increase in voluntary compliance. If tax rates are low, taxpayers won’t employ high priced lawyers and accountants to find loopholes. Indeed, every country that I’ve looked at in the world that has dramatically simplified and lowered its tax rates has ended up with more revenue, not less."

The whole essay can be found here.

If things don't change, they'll stay the same. If politicians would allow themselves to think about what is really best for the nation, and for you and me, they would investigate and implement some (or all) of the ideas in the essay. The New Zealanders did, and were happily surprised by the outcome.

I appreciate that government agencies and government employees have a vested interest in the status quo. It doesn't matter to them that they are running a hugely inefficient system, they just want what's due to them. Change frightens people. But change is not always a bad thing.

I know that I am tilting at windmills, pretty much in everything I am attempting to do, but I will carry on regardless. It is costing me pennies, I am in no danger, and I believe I am on the right path. Negative comments abound on the interwebs about me, the Freeman philosophy, Lawful Rebellion, but I am not dissuaded.

If people will just stop to consider the alternatives available, then that is okay. That is about as much as I can reasonably ask for. New thinking is needed.

The linked essay is evidence of that.

The blogpost is, as always, only half of the story. Your comments, good, bad or indifferent, make up the other half.

Let me know what you think.

CR.

16 comments:

Andy Baxter said...

CR it's nothing new mate and its called....

The Laffer Curve.....

best explanation I've ever come across is here

http://www.heritage.org/research/reports/2004/06/the-laffer-curve-past-present-and-future

William said...

I like it but then I would!
My accountant rails against the fact he is essentially an unpaid tax collector and the tax system in this country is broken beyond repair but crucially that is all he does.

He doesn't try to change things and takes the view that you cannot beat the system. I argue till I am blue in the face that ANY system created by humans can be changed if the humans are willing.

His is the attitude that is proving to be difficult to shift.
This educated man can see that the system in play is FUBAR and has to change but he is not willing to get involved in change lest his current level of income falls.

I would love to see the current Parliament displaying a massive closed for essential maintenance sign whilst the country is essentially frozen for a week or two whilst the old form of government is discarded and a new leaner, more flexible, simpler, clearer and accountable replacement takes its place.

William said...

AB your link is FUBAR!

Captain Ranty said...

Thanks Andy.

I has heard the phrase but I never looked it up.

That is a great explanation.

CR.

Captain Ranty said...

William,

That is the problem, or part of it.

If people work unpaid and with threats of menace, it is called slavery.

I thought we had abolished it?

CR.

Mongo said...

When I was drug dealing I made a good living, going straight sucks, maybe I`ll join a political party and milk the system proper.

Anonymous said...

The government are well aware of this (Laffer Curve) Their social policy from the powers that be determine taxes and they clearly do not want this.

Instead, people are being taxed leaving barely enough money for them to function on. More tax from less people distributed to benefits keeps us all on the breadline. (or the majority anyway)

will said...

the NZ tax plan is exactly what John James Cowperthwaite did to build hong kong into what it is today. taxes are so low that voluntary compliance goes beyond coercive taxation and wealthy individuals wear philanthropy as a badge of pride.
have a butchers here for an excellent explanation (if you havent already seen it) http://www.channel4.com/programmes/britains-trillion-pound-horror-story/episode-guide/series-1/episode-1/

that said taxation is still extortion. coercion can never be justified.

Anonymous said...

If you look at Devil's Kitchen there's another good idea from NZ about state v private employees.

Quite an eye opener.

James Higham said...

A radical view, Cap'n, always needs more promotion than an orthodox view. It does eventually break through though.

FireballXL5 said...

I urge everbody to get off PAYE and go under the radar. The current rates of taxation are unsustainable and are leading to penury for anyone stuck in the system.

If you're earning a half decent wedge you pay 40 - 50% headline rate + 11% NI, your employer then pays 12% NI, you fill your car up and pay around 83% in tax/VAT, if you have anything left after feeding yourself you'll pay another 20% in VAT on whatever you buy. That must add up to about three quarters (or more) of all your earnings going back to the wastrels in power to piss up the wall of foreign aid/welfare state etc. It's utter madness.

Any one with even half a brain can see the logic in the argument posted here and demonstrated by the Laffer curve, so if the government were really serious about the wellbeing of it's citizens they'd go down this route of less is more.

I'm amazed that people seem to have bought in to this "we're all in it together" bullshit and consigned themselves to everlasting debt slavery and diminishing quality of life.

You are tilting at windmills Capt. but you, have helped to steer me, along with others, on to a more enlightened road so your efforts have not been in vain. I think we have to accept that, as much as we might like to, we cannot move the mountain and so must arrange our lives such that we can at least disregard it.

Dark Lochnagar said...

Ranters, let me assure you there are no negative comments about you on my blog. If there ever is, I'll contact you so you can refute them!

Spycodog said...

I live in NZ and sadly that is no longer the case, we are now up to 15 percent consumption tax and the effective tax rates are/have recently been far higher and more complex again. We are also having lots of little thoughtful extras, eg carbon taxes, roading taxes, local council levied regional development taxes in addition to rates. Many "services" have been devolved to local authorities who then use this as an excuse to increase rates far beyond what is reasonable, ie another tax.

econyonium said...

Lower and simplified taxation was Thatcher's policy. Tax revenue went up under Thatcher despite lowering of taxes.

Lower taxes mean fewer allowances and exemptions. It also means people are prepared to work more and earn more because additional income does not push up their taxation to the point where it is not worthwhile.

But here is another aspect of income tax, its affect on employment. Payroll is the biggest cost to all employers. It is actually the employer who pays the employees tax and NIC.

Reduce income tax and payroll costs go down.

If an employee earns £20 000 of which £5 000 goes to tax and NI, if those taxes were reduced to say £2 500, then the employer could reduce gross salary to £17 500 without any effect on the employee's take-home pay.

In fact the employer could pay
£18 000, and save money and the employee would be better off.

Lower taxes particularly for SMEs mean they can afford to hire more people.

As business grows as a result and with more people in employment, the Government may get a thinner slice, but of a larger cake.

The current political claque do not understand this and are doing the complete opposite.

Sue said...

Spycodog.. and so it goes full circle.

There will always be people who want more power and wealth and they get away with it for a while. This particular cycle has gone way too far and for far too long.

As we are now witnessing, the bigger governments are, the less effective they become. Everyone wants a finger in the pie.

The EUSSR is virtually imploding in front of our eyes. It will all fall apart pretty soon and we'll back where started. Trouble is, the poor taxpayer will be left to pick the pieces, again.

Full Circle.

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