In the last 15 or 20 years most western governments have attempted to encourage private industry to streamline itself and improve efficiency. They have also made election promises to improve efficiency and cost effectiveness in the public sector. The private sector has put a great deal of effort into initiatives such as computerization of basic processes, BPR, TQM and has largely succeeded with the result that productivity is now as high as anywhere in the world. But the public sector has failed dramatically with the result that public sector spending has grown with every year that goes by. Despite this increase in spending, (and by implication, taxation) the quality of basic services continues to decline and in the UK at least, public sector infrastructure projects have been notable failures.
One result of this is that while reducing taxation is a common election promise, very few governments actually achieve it. Rather, they have used taxation as a form of keynesian fine tuning in order to adjust the burden selectively on various sectors for social goals. The net result is an overall tax system that is staggering in it's complexity. It is extraordinarily difficult to comply with and requires a degree in accountancy from each and every one of the populace to fill out the associated forms. The individual parts of the tax system have become completely divorced from the area they are supposed to benefit. Effectively they are just feeds into a single pot which is then distributed according to political goals.
What is fundamentally wrong with this process is it's incredible inefficiency. To take one, possibly apocryphal example, it is rumoured that the UK car tax disk system has never made a profit in it's 70 year history. That is, it costs more to collect than it generates in revenue. Now it can be argued that the system provides a useful measure of social control. By tying the process to the MOT safety check and requiring insurance it ensures that vehicles are legal. But as a means of raising revenue it doesn't work.
It may be politically naive, but it would be easy to draw the conclusion from all this that governments are not in the business of collecting and spending money for the common good. Or in the business of spending the money on capital intensive infrastructure. They are in fact in the business of employing people. They have become the employer of last resort that mops up the unemployment figures. This doesn't add any "value" and should not really be included in any measure of GNP. In fact it reduces the potential total amount of value created by taking employment out of the private sector. Now this may be appropriate in a 30s style depression. But it's hard to argue that it was appropriate in the last 20 years. When times are good, the bureaucracy should have been shrinking as it invested money on increased efficiency.
So here's a suggestion to streamline the whole business. First, register every person at 16 for tax and give them an account. Introduce a radically simplified tax code which sums everything that person earns in a year. Have three or at most 4 tax bands. Let's say a minimum wage of £10,000 If you earn less than this, the government pays you negative tax to top you up to this level. Then a first band at say 20%, a second at 30% and a 3rd at 40%. And that's it. No social security, no benefits, no tax credits, no differentiation of whether the tax was earned or unearned. The tax form could be reduced to a single sheet of A4. It could be completely computerized. The vast bureacracy associated with the tax collection system could be disbanded. And the money that went to support it is now available. Some of this can be fed back to reduce the tax levels or to increase the government supported minimum wage. The rest of it can be used to increase infrastructure spending.
Now sadly, no matter how much truth there is in this, or merit in the suggestion, I don't expect to see these sort of changes in my lifetime. The tax reform society in the UK has been working for a hundred years on ideas such as these, with no discernable effect.
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One result of this is that while reducing taxation is a common election promise, very few governments actually achieve it. Rather, they have used taxation as a form of keynesian fine tuning in order to adjust the burden selectively on various sectors for social goals. The net result is an overall tax system that is staggering in it's complexity. It is extraordinarily difficult to comply with and requires a degree in accountancy from each and every one of the populace to fill out the associated forms. The individual parts of the tax system have become completely divorced from the area they are supposed to benefit. Effectively they are just feeds into a single pot which is then distributed according to political goals.
What is fundamentally wrong with this process is it's incredible inefficiency. To take one, possibly apocryphal example, it is rumoured that the UK car tax disk system has never made a profit in it's 70 year history. That is, it costs more to collect than it generates in revenue. Now it can be argued that the system provides a useful measure of social control. By tying the process to the MOT safety check and requiring insurance it ensures that vehicles are legal. But as a means of raising revenue it doesn't work.
It may be politically naive, but it would be easy to draw the conclusion from all this that governments are not in the business of collecting and spending money for the common good. Or in the business of spending the money on capital intensive infrastructure. They are in fact in the business of employing people. They have become the employer of last resort that mops up the unemployment figures. This doesn't add any "value" and should not really be included in any measure of GNP. In fact it reduces the potential total amount of value created by taking employment out of the private sector. Now this may be appropriate in a 30s style depression. But it's hard to argue that it was appropriate in the last 20 years. When times are good, the bureaucracy should have been shrinking as it invested money on increased efficiency.
So here's a suggestion to streamline the whole business. First, register every person at 16 for tax and give them an account. Introduce a radically simplified tax code which sums everything that person earns in a year. Have three or at most 4 tax bands. Let's say a minimum wage of £10,000 If you earn less than this, the government pays you negative tax to top you up to this level. Then a first band at say 20%, a second at 30% and a 3rd at 40%. And that's it. No social security, no benefits, no tax credits, no differentiation of whether the tax was earned or unearned. The tax form could be reduced to a single sheet of A4. It could be completely computerized. The vast bureacracy associated with the tax collection system could be disbanded. And the money that went to support it is now available. Some of this can be fed back to reduce the tax levels or to increase the government supported minimum wage. The rest of it can be used to increase infrastructure spending.
Now sadly, no matter how much truth there is in this, or merit in the suggestion, I don't expect to see these sort of changes in my lifetime. The tax reform society in the UK has been working for a hundred years on ideas such as these, with no discernable effect.
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[ 0 comments ] [ G ] [ # ]