Originally Posted by MariconesUnited
I agree with the idea of simplifying the tax code Beingist. A flat tax on everyone's yearly incomes I think would be more fair in the grand scheme of things. It wouldn't be a demotivational thing like the tax brackets we have now. But there should be some compensating for the poorer individuals when the flat tax is implemented. Because obviously they'd be getting the short end of the stick in the transition if there's no balancing out the fact that these people woule now be paying more in taxes.
But we're talking about something different now. We were talking about sales taxes, not income taxes. Sales taxes are pretty straightforward and simple. You buy a product you pay x% in taxes on it. Simple
It gets complicated when you look at the different types of income and how they are taxed. This is what enables people to move their money around and draw income in different ways to control how much tax they do and don't pay.
For example I run my primary business (IT consultancy) through a UK LTD company. The money that comes into my company I can draw in 2 ways. I can pay myself in salary which is fully taxed, or as a company director I can take out dividends which attract much less tax. I have a choice over which method I use and how much tax I pay.
Same with trading, I can trade spot and CFDs which are liable to simple income tax and/or capital gains depending on whether I reinvest all my profits or take them as income. Or I can use spread betting which is 100% tax free providing it isn't my sole source of income.
It all boils down to how well I think the money will be spent by the government how I decide to draw money out of my contracting and my trading.
Simplifying the tax brackets at the end user income would probably be a good thing like a flat rate for all income for everyone whether it's salary, dividends, capital gains. It would have to still incentivise businesses and entrepreneurs to take on risk and the extra work involved in creating wealth and jobs for those who just want an easy life without having to worry about all that.
I'm in a situation where I can earn more and pay less tax because I chose to get myself into it. There's nothing stopping anyone from doing the same and the tax breaks are there to encourage just that. It's risk vs reward, take away the reward element and what's the point in taking the risk?