The Mudcat Café TM
Thread #161908   Message #3851585
Posted By: Dave the Gnome
21-Apr-17 - 06:24 AM
Thread Name: BS: UK General Election
Subject: RE: BS: UK General Election
Nigel -

The percentage they spend on 'luxuries' (Beer, tobacco etc.) is their own choice. But the basics of life are VAT free.

Heating is not exempt. Fuel is not exempt. Sanitary towels are not exempt. Need I go on? And please don't tell me you are going to come out with the usual crap about the poor spending all their money on chips and beer!

Let's try a simple example to illustrate why they spend more of their disposable income on VAT and why taxing income at source would be fairer.

10 people

1 earns 1000
9 earn 100

9 pay income tax at 20% = 20 each = 180
1 pays 20% on 100 (20) and 40% on 900 (360) = 380

Total revenue to government = 560

All pay a 10 gas bill with 5% VAT = 50p each = 5

Total government revenue including VAT = 565

Disposable income of 1 = 620
Disposable income of other 9 = 80 each

% of disposable income paid on VAT

1= 0.08%
9= 0.625% - Nearly 8 times as much.

Now, let us remove VAT

Same people. Increase top income tax to 45%

9 people have same disposable income.
1 pays 20% on 100 (20) and 45% on 900 (405) = 425
His disposable income drops from 620 to 575.

Government income goes from 565 to 605
9 people are happy that their fuel bill has gone down by 50p
The government have more to spend on social care.
1 person pays 45 more tax but still has nearly 8 times more disposable income than the others.

Does this not seem fairer?

DtG