Income taxes can and will drop to zero

Bruce on beach 650

Taxes on a company or and individual when they create wealth are pernicious and nowadays ultimately uncollectable. Tax on spending is far more equitable and far more efficient. The problem with many of our extortive nation states is that they try to do both in order to perpetuate their inefficient and excessive public sector.

Corporation tax, the State taking part of what a business has earned, is one of the very worst taxes. It removes from the economy the funds that are used for investment and job creation. The tax is basically national self harm. So when we hear that a company has minimised what they pay we should be celebrating.

These days multinational companies can choose where they are notionally domiciled and where they pay tax. Ireland has used this to transform itself from a third world country to a modern European state. Their corporation tax rate is just 12.5%. This has attracted large numbers of global companies, such as Pfizer and Apple, to set up major operations there.

UK Corporation Tax in 1980 was 52%. This has very sensibly been reduced till it is now 21%. In the USA they have stuck with a 40% corporate profit tax rate and very many of their companies have invested elsewhere or even changed their nation of domicile as a result. American companies have trillion in earnings parked around the world that they won’t bring back home because of the punitive tax rate. This hurts America very badly.

So now we have the situation where for a country to succeed it has to have a low and competitive corporate tax rate. More than that, countries are in competition with each other to attract business and inwards investment whilst not losing businesses to other countries. So the imperative is to reduce rates in order to be competitive. Which is a very good thing for the world. And which will, inevitably, drive rates to zero.

Next we come to personal income tax. These days, with powerful telecomms and computers, a person’s place of work is often where they happen to be located. In an office, on a train, on a beach. Blackberry enabled a whole culture of mobile graft. Now with smartphones, tablets, laptops etc the concept of an office is becoming very blurred and in many cases is disappearing. So a person can work just as effectively from a Caribbean beach as from a Newcastle office. This effect will increase enormously as technology leaps ahead and as companies and society adapt.

Already many hundreds of thousand of high earning ex British taxpayers have voted with their feet and left our tax jurisdiction. They are in Jersey, Dubai, Switzerland, Singapore, Hong Kong, Andorra, Monaco and many other low tax areas. Our national loss is gigantic. Not just the tax that these people could have paid, but also their spending, investment and all their other contributions to a broader society. Meanwhile they are benefiting from their move by keeping far more of what they earn.

The trend, globally, has to be that this will increase enormously. That people will migrate to follow personal tax rates. Countries with high tax rates will be in enormous trouble as the key people they want and need all bail out.

So once again countries are in competition with one another, this time to attract and keep high earning individuals. A London banker moving to Singapore will create wealth there instead of here. And he will be far better off from the very low tax there. Countries have no option but to lower personal taxes or lose out very heavily. As the UK is doing right now.

At the bottom of the pay scale income tax is pernicious as it acts as a disincentive to work. When benefits are so generous and earnings just get taken from you by the state why bother working? Hundreds of thousands of people in Britain have come to this conclusion. Benefits as a lifestyle. George Osborne has done a lot to address this by rapidly increasing personal allowances. But still, to remove the work disincentive, they need to be doubled. Just for starters.

So whichever way you look at it, rich or poor, income tax will be reduced, till it disappears. Which will be utterly brilliant as everyone will be motivated to create wealth and our overall quality of life will increase rapidly.

But where does that leave government, with one of its major income streams removed? Much smaller is the inevitable answer. States have no option but to rapidly reduce government spend because they will find it impossible to do otherwise. If their businesses and earners jump ship they will be finished.

This is bad news for the evil cult that is socialism, there will be no money to pay for it. And any government stupid enough to try it will rapidly find themselves in command of a sinking ship as wealth creating businesses and individuals bail out.

 

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2 Comments


  1. All taxes on income/capital are paid out from land rent. It is fair, and therefore efficient that instead of penalising people for what they contribute, they should only pay for the benefits they receive from the community. Which the market measures as the rental value of land their property occupies.

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  2. Hello, Bruce. I’ve only just come across your website. Did you know that there’s a facebook group called Socialism Is Evil? Are you on FB? Do you have a youtube channel? Anyway, I agree with you on pretty much everything except the Queen advocating. (Would you have really wanted Tony Blair or Gordon Brown as our head of state?!)

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