I will answer your questions but first I want to show you something. It’s the link at the bottom.
In the UK there’s something called IR35. Without getting into to much detail, the client will decide if you fall inside or outside. If you are inside or outside you will pay different amounts of tax.
Not that long ago I was offered £1000 per day inside. That seemed like a really good rate to me. Or so I thought. In a month, 21 working days, that’s £21k per month, how much can taxes be right? Let’s call it £17k - I mean c’mon, £4k per month in taxes is already ludicrous. I couldn’t possibly be more. Right?
Please go to the link and plug in £1000 per day. Look at what it says you get cash in hand at the end of the month and tell me, does that seem ok? Is that tax worth paying?
If I read the site correctly it’s the last bit that is of particular concern. Why on earth does one need to make 220,000 per year independently in order to clear the same amount as some making 180,000 as an employee?
Does that take into costs of employment of employee benefits (like providing healthcare, worker's comp, retirement income, various insurances, accounting, payroll, etc.?) Not sure how it all works in the UK.
In the US, at least, companies provide a lot of benefits that contractors don't get and have to buy out-of-pocket... but not sure if that's what the difference comes from in this case.
I am not sure how the UK tax code works, or what I'm looking at here (the "inside" vs "outside" part is confusing). At a glance, it looks like it wants to tax you 46% of revenue (52% of profit) at £220,000/year if you're a contractor, which (it says) is the same as earning £180,100 as a regular employee.
Those numbers don't seem particularly significant either way to me, coming from the US. Our tax brackets cap out at about 40% right now, but they used to be in the high 90%s decades prior -- and that's just the federal, and then some states have a bunch of other tax burdens on top of that. But personally, I'm economically pretty left-leaning and would prefer expanded social services rather than private wealth accumulation, so I doubt I'm representative of what the average person would consider reasonable vs excessive when it comes to taxes.
That's not really the question though. I get that a lot of people (probably most?) wouldn't pay more taxes than they have to, and frankly I can hardly fault them for that. Everything from our genes to our industrialized capitalist societies encourages in-group prioritization and selfish behaviors. That's just how this world that we've made works, and even the most fervent idealists dare not dream of making the entire world pool and share income. We just ain't built that way, and that's just opening the floodgates to insane corruption.
The more interesting question, IMO, is whether ANY of it is worth paying for collaboratively. If I could design my own tax system (and have a billion minions happily working in it...) the upper bracket would be insanely high, like 99% or some such, but there would also be a high degree of choice, per taxpayer, for some portion of their funds. Like there might be a mandatory % going to roads, defense, schools, health -- basic infrastructure, broadband -- but then each taxpayer would get to choose where the rest of it goes (say, space, basic research, the arts, land trusts, energy development, whatever). Two millionnaires would maybe each keep 50% of their income, spend 25% on basic infra, but be able to choose (within constraints) how the remaining 25% is spent. One than decide to split his 25% among various pet causes, the other might give all of hers to increase defense R&D. Basically a democratic Robin Hood, where an armed bandit takes your money and gives it to charity, but asks you, "Which charity?". Heh.
That's just me.
My question to you, as someone who goes out of their way to avoid paying taxes, is... how would you do it? Is some of it still worth it, after all the pork-barrel spending and corruption and inefficiency and bureaucracy? Should it all be private? Like take what you're doing, how would you ideally scale it up to country-level with a few million taxpayers?
So, the reason I sent you that link is if you look at the numbers, that 21k per month pre tax turns into 8k cash in hand per month after tax.
That is nothing short of insane to me. That is almost 3 quarters of your money taken by the government. Maybe you can live with that. I can’t. It’s insane to me. I simply refuse to participate in that.
As for taxes, I get your point. Sounds good in theory. Until you realise people like me are not that uncommon. That 25% I still have a say on is going to go to my charity. A social change sort of charity. A charity aimed at offering educational alternatives to promising young leaders. The sort that will grow up to question the justice of your tax regime and advocate for it’s dismantling. And with a bit of luck and push from other rich people, give it a few decades and it will go away.
But to answer you:
1. 1% flat tax, applied to income for people and profit for businesses.
€1000 goes into your business -> you’re left with €990 -> you take them all out as dividends, you’re left with €980.1
This will provide an annual bulk income.
2. Flat transaction fee. Every time money changes hands, the government skims 0.1€ from it.
This will provide a steady income stream.
You buy a laptop, you pay €1000 for it, the vendor only gets €999.9 - This is not something operators worry about, this is done automatically by the banks.
But this won’t be enough to <insert something here>. Well, tough luck. Better start prioritising. Start by cutting foreign aid. Start by cutting aid to ngos shipping migrants from africa, start by cutting welfare to illegals, get rid of the useless government bureaucracy like “period dignity officers”, plenty of stuff to cut.
Make do with less, that’s what I would tell the government.
It's not quite 3/4, is it? More like 1/2? And that's if you're earning 1000/day (sorry, can't type that currency symbol)... which is like 10x the UK median wage. At lower revenues you're paying much less. But still, your point stands -- it's taking money away from you that you want to keep and spend your own way. Whether that exact percentage is 46% or 66% or whatever doesn't seem quite relevant if you'd rather it be as close to 1% as possible :)
Are there any examples of a system like you're describing working out in reality? Doesn't have to be a country, but maybe a local government, a private community, a membership club, etc.?
Sounds like a libertarian fantasy out of Atlas Shrugged or Bioshock... but hey, we all have our dreams, and my utopia would be your dystopia, lol.
In the UK there’s something called IR35. Without getting into to much detail, the client will decide if you fall inside or outside. If you are inside or outside you will pay different amounts of tax.
Not that long ago I was offered £1000 per day inside. That seemed like a really good rate to me. Or so I thought. In a month, 21 working days, that’s £21k per month, how much can taxes be right? Let’s call it £17k - I mean c’mon, £4k per month in taxes is already ludicrous. I couldn’t possibly be more. Right?
Please go to the link and plug in £1000 per day. Look at what it says you get cash in hand at the end of the month and tell me, does that seem ok? Is that tax worth paying?
https://www.contractorcalculator.co.uk/insideir35contractorc...