Agree with most of the recent comments here. The problem with NI is that it’s one of the least progressive taxes - it would indeed be better to wrap it up in income tax. It’s also true that people in the UK (misled by the media) want both low tax and high services.
The more fundamental mistake, however, is the whole idea that taxes ‘pay for’ public services.
This is wrong in so many ways I don’t know where to begin - yet it’s so often repeated in the UK media as if it’s true that everybody there seems to just take it for granted.
Here is the accurate way to conceptualise public spending:
- The state (or state bank) creates money to pay for public services.
Under certain circumstances, and if the new money does not enhance the productive capacity of the economy, the creation of the new money can sometimes lead to inflation.
- In this case, tax is used to remove the inflationary pressure.
That’s it. That’s what taxation does: it controls inflation. Nothing to do with ‘paying for’ anything. And the wealthier you are, the more you benefit from taxation, since it protects the value of your assets.
A lot of the misapprehension came from Thatcher’s ‘handbag economics’ - the idea that state finances are like household budgets - still believed by the know-nothing wing of the Tory Party and its media.
But you only have to think about it for 2 seconds to see the analogy is false:
- Households don’t create money out of nothing - economies do!
- When a household spends money, it goes out of the household - but most spending in economies just circulates through other households - and is taxed again and again.
- Not to mention the fact that money is always social anyway - it never really ‘belongs’ to anyone, nor is it ever ‘earned’ except on the back of socialised infrastructure (education, law, roads, health, etc).
There was a particularly clear example today of how misleading the usual reporting of all this is.
There’s a scheme in Northern Ireland to give everybody - over 1.4 million people - a £100 high-street shopping voucher. The BBC reported the ‘cost’ of the scheme to be roughly £145million - totally ignoring the obvious fact that as soon as people actually start spending the vouchers it starts coming back in taxation of its circulation: VAT on the shop sales, NI and PAYE of the shop staff, etc, etc; and when in turn they spend their wages… VAT, PAYE, etc, etc.
It is, I guess, the old problem that a simple but wrong statement trumps a complex but correct statement.