Panama Papers

[LondonMix]

Loz, the reason why the standard way to examine if a tax is regressive or progressive relies on income is because its designed to assess how much of each group's income is being contributed to the running of the country.

Consumption taxes are almost always regressive. I'm not suggesting to change the way tax is applied-- the UK does a good job of exempting basic items to help reduce the impact on the poor. I'm saying that VAT should be lowered and income tax increased so a greater proportion of government revenue would be derived from progressive taxes.

Without tax transfers back to the poorest, the bottom 20% of earners would be contributing a greater share of their income to run the country than any other group.

[Loz]

LondonMix Wrote:

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> Loz, the reason why the standard way to examine if a tax is regressive or progressive relies on

> income is because its designed to assess how much of each group's income is being contributed to the

> running of the country.

I think you are missing my point. I don't think your definition of progressive is correct, and neither does the IFS. And Seabag seems to agree with me too, since applying your rule to that example given would deem it very, very regressive.

Some sites do seem to agree with you, but then always use income-aligned tax as an example. Some just define a progressive tax where higher earners 'pay more' or 'pay a higher rate'. I can't seem to find a good solid, universally accepted answer to this. I'm not sure there is a 'standard' answer, as you claim.

So, rather like 'progressive' in a political sense, then. :)

[Blah Blah]

"Blah, Americans are taxed on their world wide income .........the fact that I work and am resident in the UK."

And if you'd said that in the first place instead of telling me not to even go there I might not have replied to you with indignance.

On income tax vs vat etc. We had higher taxes in the past, much higher - 32p in the pound and lower VAT (with the top earners paying 60%), and there were just as many problems. See it doesn't really matter how you take the money from people, just how much you take. The top rate is 40%, but history shows that when you start to get over the 55% mark you actually collect less tax from those top earners. Add to that, that National Insurance has risen steadily over the decades and goes into the same pot as income tax. So overall, direct taxes haven't really fallen that much anyway.

[LondonMix]

Blah, blah, all I said was "As an American, I can tell you that the tax system is incredibly complex and influences how people invest and you shouldn't draw simplistic conclusions." For some reason I guess you thought I was trying to silence you rather than simply stating a fact.

Regarding taxes, all I am saying is that direct taxes should make up a greater share of government revenue that they currently do vis-a-vis indirect taxes because indirect taxes are regressive. I'm aware of the fact that tax collection falls once the marginal rate exceeds certain thresholds and I don't believe its positive to have an excessively high top rate of tax.

As I've said before, to maintain services (if that's the goal) everyone will need to pay more tax, not just high rate tax payers but again, that's a separate point.

[LondonMix]

Loz-- no one, not even the IFS is debating what progressive or regressive means. The debate is how to measure who is rich or poor.

The IFS's position is that how much someone earns isn't the best measure of how rich or poor they are, particularly how rich or poor they will be over their lifetime. That's the core of their argument for using expenditure rather than income, which is the normal way of looking at this. They use the examples of rich retirees and poor students who are smoothing their lifetime consumption.

I can completely understand how people on zero income for a while who are otherwise not poor and have savings may distort the analysis when solely looking at income. On this, I think the IFS have a valid point.

However, the conventional method for measuring how regressive or progressive a tax is is income based. Pick up an economics text book rather than Google and you'll see.

The IFS's approach is in fact so unconventional there isn't sufficient data to do full analysis as that is not how the ONS (or anyone) typically makes the assessment. And I quote from the report:

"In the following sections, whilst it would be preferable to use expenditure deciles (as we

believe these more accurately capture living standards), data limitations force us to use

income deciles."

When using the much more conventional income measure, no one can argue that VAT is not regressive.

Unlike the IFS and you, I believe that using the conventional income measurement method is the best. I can go into the reasons why I (and most economists) do but it might be simpler to agree to disagree at this point.

I'm not looking to argue just for the sake of it.

[Blah Blah]

Your exact words were 'Don't try to bring America into this' LM, a tad confrontational don't you think?

How about I say, that 'as a Brit', in order to emphasize my understanding of MY home tax system over yours, because foreigners can never posibbly understand anything better or equal to nationals?

That's hows your statement came accross.

[LondonMix]

Okay, my intention wasn't to get your back up. If you said that to me and I wasn't clearly living and paying taxes in the UK (for over 10 years), I'd personally find it a perfectly normal statement. An American in the US trying to comment on British tax could get a lot wrong.

Tax is complicated. Unless you are very familiar with the rules, trying to draw simple conclusions about a country's tax system is nearly impossible. For the US this is doubly true as it has one of the most complicated personal tax systems in the world.

[Loz]

LondonMix Wrote:

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> Loz-- no one, not even the IFS is debating what progressive or regressive means. The debate is

> how to measure who is rich or poor.

But the debate is whether VAT is regressive or mildly progressive (or even something else). Surely defining the terms is central.

> The IFS's position is that how much someone earns isn't the best measure of how rich or poor they

> are, particularly how rich or poor they will be over their lifetime. That's the core of their

> argument for using expenditure rather than income, which is the normal way of looking at this.

That contradicts your entire previous argument: that percentage of income is the *only* standard measure of progressive. It also contradicts that "no one, not even the IFS is debating what progressive or regressive means". I'm really not sure what you are trying to say, now.

> Unlike the IFS and you, I believe that using the conventional income measurement method is the best.

Hang on - you previously said this was the 'standard', now it's just your opinion of 'the best'? Your argument is entirely inconsistent. You keep defining what you say is the definition of 'progressive', then contradicting yourself, then saying there is no debate, all while pointing out the debate.

> I can go into the reasons why I (and most economists) do but it might be simpler to agree to disagree at this point.

Well, that was sort of the point I was making at the end of my last post. More so now as I have no idea of what you are actually trying to say.

[LondonMix]

Income is the standard measure Loz. Its not my opinion.

I was presenting what the IFS's reasoning is for using an unconventional metric and acknowledging the parts of their argument have some validity.

However, changing from the standard metric using income to what they are doing with expenditure is in my opinion (and many others) unjustified by their arguments.

However, I think you already know that's what I was saying...

I'm trying to be reasonable rather than simply trying to win the argument by actually talking about the ideas behind the paper.

I've not said one thing that actually contradicts myself on this topic.

[Loz]

LondonMix Wrote:

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> However, I think you already know that's what I was saying...

No, after your last post I have really no idea what you are saying. Your argument has been all over the shop.

Your starting argument has been that a progressive tax is defined as a function of "percentage of income". I merely pointed out that is not a hard and fast definition. You said it was 'standard', then moved around using lots of other definitions (e.g. rich/poor), and saying there was no debate on the definition, all while having a debate on the definition.

Lets remember how this started:

Me: "There is a LOT of debate on whether VAT is progressive, regressive or even proportional."

You: "I've never heard anyone before claim here or in the US that consumption taxes aren't regressive."

[LondonMix]

No, I have always said that determining whether a tax is flat, regressive or progressive is based on its relative impact on income as standard (the text book definition).

The paper you linked to suggested changing that by measuring it by expenditure for VAT. Their argument was that expenditure was a better measure than income of who is rich or poor. -- (Their argument not mine!)

Rich and poor matter because the point of assessing if a tax is progressive, flat or regressive is to determine its impact on different social groups.

I have said, that while the paper makes some valid points, I (and most economists) believe that the conventional income method remains the most appropriate and accurate measure.

I'm really not sure how else to say all of this. Loz have you read the IFS's position? Why do you agree with them?

[Loz]

More quotes:

You: "Economists never judge at tax that way. You have to look at the total tax as a percentage of income not as an absolute number to determine how heavy the burden is on each group. "

Me: "The IFS would disagree with you, and they're about as independent as you can find. And pretty competent economists."

My point was that there is a lot of debate as to whether VAT is progressive, regressive or even proportional. That point still stands.

[LondonMix]

Okay and my point is that there is not a lot of debate. Economists do not as standard look at this issue that way and that the IFS's position is not widely held.

The IFS make some good points but the problem with their argument is that it only makes sense over a lifetime not at a specific point in time because of the way debt and savings impact expenditure.

Perhaps we can now move on...

[*Bob*]

Would anyone like a cup of tea?

[LondonMix]

I would

[Jah Lush]

https://theothermrsbeaton.com/2016/04/11/why-im-sending-mr-cameron-34p/

[Jeremy]

LondonMix Wrote:

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> Who thinks that?

Well it is/was traditionally thought of as a tax on luxury goods... you'll just have to take my word for that.

I think I already explained that it isn't necessarily the case in reality.

[LondonMix]

Yes, I get that Jeremy. Its structured well to exclude basic items and that's a good thing.

My question was who was questioning the calculations showing its impact rather than how people hoped it would work.

[Blah Blah]

The IFS probably do the analysis I would think?

[LondonMix]

The ONS has done official analysis and in the standard way. Th IFS obviously have done separate work in an unconventional way.