Progressive scale of taxation
I want to apologize in advance to readers for posting this article in the hub about the future. On the one hand, for some reason, there is no “Economy” hub on Habré, but on the other, most of you live in Russia and the state of our economy directly relates to our future. So let's go.
Recently there has been a lot of controversy in Russia around our flat scale of personal income tax.
Everywhere they say that the progressive scale is profitable (hereinafter referred to as PS) to the poor, but disadvantageous to the rich. And because of this, conversations about her remain only conversations, without turning into a practical plane.
In this article I want to refute the thesis that the progressive scale is unprofitable for Russian businessmen.
It is said that the main function of the progressive scale is the redistribution of income from the rich to the poor. This is a fallacy: there are few rich people, so their increase in taxes will hardly affect the budget and, accordingly, the incomes of the poor. Yes, at the same time it is possible for the very poor to zero the tax, but this will not significantly increase their income.
')
I believe that the main function of PRSP is the limitation of the maximum income of any individual. The main property of PSB is the upper limit of annual income, the excess of which becomes economically inexpedient.
Let us consider in more detail the disadvantages of PRSP for rich people and try to understand them:
1) First, for your own needs, somehow: buying real estate in Russia or abroad, expensive treatment of yourself or relatives, and the like.
Yes, these opportunities are greatly reduced, and in such cases you will have to take a loan on the pledge of real estate or the business itself, from which a person receives income. And this is the main disadvantage of the introduction of PRSHN.
But let's see what could be next without such a tax.
Suppose a person urgently needs a large amount of money, he takes it out of business and solves the current problem. But the business itself will be harmed by such an operation, it may be in a fever for some time. And as a result, it can decrease in volume and even cease to exist. And this harm is more likely than a large amount is removed.
So, a person, getting an urgent solution to the current problem, creates problems for his future income. But problems are created not only to him personally, workers are suffering, some of whom have reduced income, and some lose their jobs. But that’s not all, interacting organizations also suffer. Everyone knows the situation when a stable and working like a counterparty suddenly starts to delay delivery or payment and creates problems literally out of the blue. Yes, in this situation, in addition to taking out money, another reason is possible - the deterioration of management. But it often arises from the desire of the owner to pull out of the business much more than he now brings. That is, if you take money out of business urgently, harm is done to society and the economy.
If there is a limit on the maximum annual income, then the temptation of a sharp increase in business profitability will decrease. It will be economically unprofitable, it will be easier to take out a loan and pay it back little by little, while neither the case, nor its employees, nor the contractors, or the public will suffer.
That is, if there are temporary inconveniences with taking a loan and losing the amount of interest, in the end, the owner himself will be better - his business will continue to generate income and develop steadily.
2) The second case of the need for big money is when a business owner needs money to invest. That is, when it starts to bring a stable income and work already with minimal control of the owner, he thinks about diversification, about what to do second, third or twentieth business in another area to be protected from the influence of the situation on a particular current market. For this, he often receives a large amount from the current enterprise as an individual and invests it in a new enterprise.
But there is another way, and more profitable. The owner may not himself organize a new business. He can delegate this to his organization, and already, as a legal entity, it will create a new legal entity.
Than this approach is more correct:
With minuses finished.
Benefits PRSHN for owners of organizations.
It should be recognized right away that the progressive scale does not have immediate advantages for business people, but there are positive advantages (strategic). Let's take them and consider:
1. The difference between the biggest income and the smallest will decrease. This will reduce the number of property layers of our society. That will give an increase in the volume of markets for various goods, since the layers will merge among themselves and in each of them there will be more people.
I will try to decipher: the product not only performs a certain function, but also by its price it is focused on a certain category of people, people with less income simply will not buy it, since they have no money for it. People with high incomes will not buy it either, since other products are sold for them with the same, but enhanced functionality and higher price that these people can afford. As a result, the seemingly common market is divided into many different layers, under which it is necessary to create special goods, and the worst thing is that each layer does not contain as many people as it could.
That is, reducing the income fork will simplify the positioning of goods, reduce the number of their types and at the same time reduce the cost of production by increasing its volume.
2. The increase in markets, together with a decrease in cost, will exacerbate competition and lower prices, which will positively affect the lives of all segments of the population, especially the poor part of it. That, in turn, will reduce social tensions and strengthen the political stability of our country.
3. Over time, a portion of the incomes that rich people will not receive will go to raising the wages of employees. That will increase the middle class of our country and have a positive impact on our lives. People who earn more than they need to survive will spend more on entertainment, on improving their lives, they will save more.
What will make our economy more diverse, and therefore more sustainable.
4. The reduced income difference will have a positive effect on the lives of small cities and the whole Russian hinterland. There, too, will be presented vacancies with "capital" wages. That is, for a decent life, people will not necessarily have to leave for Moscow. They will be able to live well in their small towns. And the fact that there will be more high-level specialists in these cities will improve their lives in them. Highly paid people will spend their money on the spot as well as use their experience and intelligence to improve their environment.
5. Introduction PSB will change the attitude of the owners towards their business. The desire to make money quickly, to get a result will decrease. This will positively affect the survival and stability of the work of their organizations. The reliability of counterparties will also increase, which will also have a positive impact on the work of economic entities.
After a couple of decades of such a situation, the owners will look at their business as a long process that will generate income not only for them for a long time, but also for their children and grandchildren. That is, it will happen, the same thing that happened in countries with a long capitalist history.
6. Economic crime will decrease, since it will be more difficult to withdraw and whitewash significant amounts. They will either have to be kept in the accounts of legal entities that are well controlled by banks. Either cash out through criminal schemes, or be subject to tax evasion. And any large amount of cash will immediately raise questions about its origin and the payment of taxes on it.
That is, the long-term operation of economic criminal schemes will become more complicated, their organizers and beneficiaries will not be able to pretend to be law-abiding citizens for a long time. Again, this will have a positive effect on the economic climate and relations between businesses.
So, I believe that the advantages of the progressive scale for the rich far outweigh the minus, which can be offset by low costs.
Proposal for the introduction of a progressive scale PIT.
So, what I propose to do with the income tax on individuals:
Thanks for attention!
PS I forgot one of the main advantages of PS:
7. Now the movement of money between legal entities and individuals is unlimited in both directions. The introduction of PSB will limit the movement of money from legal entities towards individuals. Wages and incomes will run out for some time and will no longer depend on the amount of money circulating between legal entities. That is, of course, after solving the issue of illegal cashing in, it will be possible to greatly increase the volume of funds of legal entities by increasing their lending for investment purposes without fear of strongly accelerating consumer inflation. Yes, some of this money will go to individuals within the framework of increasing wages and incomes, but this will not be a very large percentage. As a result, there is a chance to increase economic growth by a small additional inflation.
Recently there has been a lot of controversy in Russia around our flat scale of personal income tax.
Everywhere they say that the progressive scale is profitable (hereinafter referred to as PS) to the poor, but disadvantageous to the rich. And because of this, conversations about her remain only conversations, without turning into a practical plane.
In this article I want to refute the thesis that the progressive scale is unprofitable for Russian businessmen.
It is said that the main function of the progressive scale is the redistribution of income from the rich to the poor. This is a fallacy: there are few rich people, so their increase in taxes will hardly affect the budget and, accordingly, the incomes of the poor. Yes, at the same time it is possible for the very poor to zero the tax, but this will not significantly increase their income.
')
I believe that the main function of PRSP is the limitation of the maximum income of any individual. The main property of PSB is the upper limit of annual income, the excess of which becomes economically inexpedient.
Let us consider in more detail the disadvantages of PRSP for rich people and try to understand them:
- The rich will pay much more taxes. This is not the case: after the introduction of PSP, they will lower their incomes as individuals. They will transfer part of their expenses to legal entities and avoid tax increases.
- The second drawback of the introduction of PRSP: with fallen incomes, businessmen will not be able to buy expensive things and real estate. This disadvantage, like the first - apparent: after the introduction of the tax, the prices of expensive things and houses will greatly decrease to be affordable for the income of their customers.
- And finally, the third drawback. They will become much less receive income as individuals. Yes it is. But here it is necessary to figure out why these people need large sums:
1) First, for your own needs, somehow: buying real estate in Russia or abroad, expensive treatment of yourself or relatives, and the like.
Yes, these opportunities are greatly reduced, and in such cases you will have to take a loan on the pledge of real estate or the business itself, from which a person receives income. And this is the main disadvantage of the introduction of PRSHN.
But let's see what could be next without such a tax.
Suppose a person urgently needs a large amount of money, he takes it out of business and solves the current problem. But the business itself will be harmed by such an operation, it may be in a fever for some time. And as a result, it can decrease in volume and even cease to exist. And this harm is more likely than a large amount is removed.
So, a person, getting an urgent solution to the current problem, creates problems for his future income. But problems are created not only to him personally, workers are suffering, some of whom have reduced income, and some lose their jobs. But that’s not all, interacting organizations also suffer. Everyone knows the situation when a stable and working like a counterparty suddenly starts to delay delivery or payment and creates problems literally out of the blue. Yes, in this situation, in addition to taking out money, another reason is possible - the deterioration of management. But it often arises from the desire of the owner to pull out of the business much more than he now brings. That is, if you take money out of business urgently, harm is done to society and the economy.
If there is a limit on the maximum annual income, then the temptation of a sharp increase in business profitability will decrease. It will be economically unprofitable, it will be easier to take out a loan and pay it back little by little, while neither the case, nor its employees, nor the contractors, or the public will suffer.
That is, if there are temporary inconveniences with taking a loan and losing the amount of interest, in the end, the owner himself will be better - his business will continue to generate income and develop steadily.
2) The second case of the need for big money is when a business owner needs money to invest. That is, when it starts to bring a stable income and work already with minimal control of the owner, he thinks about diversification, about what to do second, third or twentieth business in another area to be protected from the influence of the situation on a particular current market. For this, he often receives a large amount from the current enterprise as an individual and invests it in a new enterprise.
But there is another way, and more profitable. The owner may not himself organize a new business. He can delegate this to his organization, and already, as a legal entity, it will create a new legal entity.
Than this approach is more correct:
- First, in the existing business, people are already working and it is they, and not just one owner, who will have to assess the prospects for a new business. Even if they are not professionals in the new field, but their knowledge of finance, accounting, team organization, sales and production will be very useful for assessing the current state and prospects of a new business.
- Secondly, they, as responsible persons in the old case, will be able to more correctly assess the need, schedule and amount of financing for a new case, taking into account the interests of the old one, from which money will be taken. They will be able to give advice on their professions, to help pick staff. That is, a new business in this case will be better assessed and professionally started.
With minuses finished.
Benefits PRSHN for owners of organizations.
It should be recognized right away that the progressive scale does not have immediate advantages for business people, but there are positive advantages (strategic). Let's take them and consider:
1. The difference between the biggest income and the smallest will decrease. This will reduce the number of property layers of our society. That will give an increase in the volume of markets for various goods, since the layers will merge among themselves and in each of them there will be more people.
I will try to decipher: the product not only performs a certain function, but also by its price it is focused on a certain category of people, people with less income simply will not buy it, since they have no money for it. People with high incomes will not buy it either, since other products are sold for them with the same, but enhanced functionality and higher price that these people can afford. As a result, the seemingly common market is divided into many different layers, under which it is necessary to create special goods, and the worst thing is that each layer does not contain as many people as it could.
That is, reducing the income fork will simplify the positioning of goods, reduce the number of their types and at the same time reduce the cost of production by increasing its volume.
2. The increase in markets, together with a decrease in cost, will exacerbate competition and lower prices, which will positively affect the lives of all segments of the population, especially the poor part of it. That, in turn, will reduce social tensions and strengthen the political stability of our country.
3. Over time, a portion of the incomes that rich people will not receive will go to raising the wages of employees. That will increase the middle class of our country and have a positive impact on our lives. People who earn more than they need to survive will spend more on entertainment, on improving their lives, they will save more.
What will make our economy more diverse, and therefore more sustainable.
4. The reduced income difference will have a positive effect on the lives of small cities and the whole Russian hinterland. There, too, will be presented vacancies with "capital" wages. That is, for a decent life, people will not necessarily have to leave for Moscow. They will be able to live well in their small towns. And the fact that there will be more high-level specialists in these cities will improve their lives in them. Highly paid people will spend their money on the spot as well as use their experience and intelligence to improve their environment.
5. Introduction PSB will change the attitude of the owners towards their business. The desire to make money quickly, to get a result will decrease. This will positively affect the survival and stability of the work of their organizations. The reliability of counterparties will also increase, which will also have a positive impact on the work of economic entities.
After a couple of decades of such a situation, the owners will look at their business as a long process that will generate income not only for them for a long time, but also for their children and grandchildren. That is, it will happen, the same thing that happened in countries with a long capitalist history.
6. Economic crime will decrease, since it will be more difficult to withdraw and whitewash significant amounts. They will either have to be kept in the accounts of legal entities that are well controlled by banks. Either cash out through criminal schemes, or be subject to tax evasion. And any large amount of cash will immediately raise questions about its origin and the payment of taxes on it.
That is, the long-term operation of economic criminal schemes will become more complicated, their organizers and beneficiaries will not be able to pretend to be law-abiding citizens for a long time. Again, this will have a positive effect on the economic climate and relations between businesses.
So, I believe that the advantages of the progressive scale for the rich far outweigh the minus, which can be offset by low costs.
Proposal for the introduction of a progressive scale PIT.
So, what I propose to do with the income tax on individuals:
- The transition to a progressive scale must be made gradual. To begin with, setting the difference between the smallest and the largest incomes is 100 times. This difference, of course, is too big to show the above advantages. But sharply limit the income of people is not worth it. The market for declining revenues will not be quickly restructured, and the economy may have problems.
- The income of each citizen is divided into 4 parts, from each of which to take its tax rate.
- Part of the income of approximately less than two moths (250 thousand per year) is not taxed at all.
- The second part of the income from 250 thousand to 2.5 million a year to impose at the current rate of 13%
- A third part from 2.5 million to 12 million a year to impose a higher rate, for example 26%. This part is necessary in order to divide the income ranges of ordinary wage earners (they will fall into the second range) and the owners of organizations who can afford to pay the increased tax in order to have an increased income.
- And finally, the fourth part above 12 million rubles a year should be subject to a prohibitive rate from the range of 70-90%.
- In order to simplify tax collection for citizens, as well as to oblige to pay the tax to the organization where the person works. They will pay based on the assumption that a citizen receives income in one place, which will occur in most cases.
- Citizens who receive income in several places will file a tax return, or a tax return for such people will themselves charge additional tax and inform them about it.
- In 5-10 years, when this system becomes stable, it will be possible to think about reducing the difference in income. Although, even if you do not touch the proposed parameters, inflation will inevitably cause an increase in the minimum wage, and the difference itself will partially decrease.
Thanks for attention!
PS I forgot one of the main advantages of PS:
7. Now the movement of money between legal entities and individuals is unlimited in both directions. The introduction of PSB will limit the movement of money from legal entities towards individuals. Wages and incomes will run out for some time and will no longer depend on the amount of money circulating between legal entities. That is, of course, after solving the issue of illegal cashing in, it will be possible to greatly increase the volume of funds of legal entities by increasing their lending for investment purposes without fear of strongly accelerating consumer inflation. Yes, some of this money will go to individuals within the framework of increasing wages and incomes, but this will not be a very large percentage. As a result, there is a chance to increase economic growth by a small additional inflation.
Source: https://habr.com/ru/post/450192/
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