Progressive taxation scale
I want to apologize in advance to readers for posting this article in a hub about the future. For some reason, on the one hand, there is no hub "Economy" on the Habré, but on the other, most of you live in Russia and the state of our economy is directly related to our future. So let's go.
Recently, there has been much debate in Russia around our flat tax on personal income tax.
Everywhere they say that a progressive scale is beneficial (hereinafter referred to as the PRS) to the poor, but disadvantageous to the rich. And because of this, conversations about her remain only conversations, without going into a practical plane.
In this article I want to refute the thesis that the progressive scale is disadvantageous to Russian businessmen.
They say that the main function of the progressive scale is the redistribution of income from rich to poor. This is a fallacy: there are few rich people, so raising taxes will hardly affect the budget and, accordingly, the incomes of the poor. Yes, at the same time it is possible to nullify the tax at the poorest, but this will not significantly increase their income.
I believe that the main function of PSN is to limit the maximum income of any individual. The main property of PSN is the upper limit of annual income, the excess of which becomes economically inexpedient.
Let us consider in more detail the disadvantages of PSN for rich people and try to figure them out:
1) First, for one’s own needs somehow: buying real estate in Russia or abroad, expensive treatment of oneself or relatives and the like.
Yes, these opportunities are greatly reduced and in such cases you have to take a loan secured by real estate or the business itself, from which a person receives income. And this is the main minus of the introduction of prshn.
But let's see what could be further without such a tax.
Suppose a person urgently needed a large amount of money, he takes them out of the business and solves the current problem. But the business itself will be harmed by such an operation; it can be feverish for some time. And as a result, it can decrease in volume and even cease to exist. And this harm is all the more likely the greater the amount taken out.
So, a person receiving an urgent solution to a current problem creates problems for his future income. But problems are created not only for him personally, workers suffer, 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 counterparty stable and operating like a clock suddenly starts to delay deliveries or payments and creates problems literally out of the blue. Yes, in this situation, in addition to taking out money, there is another possible reason - poor management. But it often arises from the desire of the owner to pull out of the business much more than he is now bringing. That is, when urgently taking money out of business, harm is caused to society and the economy.
If there is a limit on the maximum annual income, then the temptation to sharply increase the profitability of the business will decrease. It will become economically unprofitable, it will be easier to take out a loan and pay it back a little later, while neither the business, nor its employees, nor counterparties, nor society will suffer.
That is, if there are temporary inconveniences with taking a loan and loss of interest, in the end, the owner himself will feel better - his business will continue to generate income and develop steadily.
2) The second case of the need for big money is when the business owner needs money for investment.That is, when a business begins to generate stable income and works already with minimal control of the owner, he thinks about diversification, about what needs to be done a second, third or twentieth business in another area in order to be protected from the influence of the situation in a particular current market. To do 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 organize a new business himself. He can entrust this to his organization, and already, as a legal entity, it will create a new legal entity.
Why is this approach more correct:
With the minuses finished.
ProsN benefits 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 delayed (strategic) advantages. Let's look at them:
1. The difference between the largest income and the smallest will decrease. This will reduce the number of property layers of our society. This will give an increase in the volume of markets for various goods, since the layers will merge with each other and there will be more people in each of them.
I’ll try to decipher: the product not only performs a certain function, but at its price it is oriented to a certain category of people, people with lower income simply won’t buy it, since they don’t have money for it. People with large incomes will not buy it either, since other goods with the same but expanded functionality and a higher price that these people can afford are sold for them. As a result, the general, it would seem, market is divided into many different layers, under which it is necessary to create special products, 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.An increase in markets along with a decrease in prime cost will aggravate competition and lower prices, which will positively affect the lives of all segments of the population, especially the poor. Which, in turn, will reduce social tension and strengthen the political stability of our country.
3. Over time, part of the income that rich people don’t get will go to increase workers' wages. Which will increase the middle class of our country and positively affect our lives. People who earn more than they need to survive will spend more on entertainment, on improving their lives, will save more.
What will make our economy more diverse, and therefore more sustainable.
4.The reduced income difference will positively affect the lives of small towns and the entire Russian outback. There will also be presented vacancies with the "capital" wage. That is, for a decent life, people will not have to leave for Moscow. They will be able to live well in their small towns. And the fact that in these cities there will be more high-level specialists will improve their life. Highly paid people will both spend their money on the spot and apply their experience and mind to improve their environment.
5.The introduction of PPS will change the attitude of owners to their business. The desire to make money quickly, to quickly get the result will decrease. This will positively affect the survival and stability of their organizations. The reliability of counterparties will also increase, which will also positively affect the work of economic entities.
After a couple of decades of this situation, the owners will look at their business as a long process that will bring long income not only to them, but also to their children and grandchildren. That is, the same thing will happen that happened in countries with a long capitalist history.
6.Economic crime will decrease, as it will be more difficult to withdraw and whitewash significant amounts. They will either need to be kept in the accounts of legal entities that are well controlled by banks. Either cash out through criminal schemes, or fall under tax evasion. And any large amount of cash will immediately raise questions about its origin and the payment of taxes from it.
That is, the long-term functioning 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. This will again have a positive effect on the economic climate and relations between businesses.
So, I believe that the pros of the progressive scale for the rich far outweigh the minus, which can be offset by the low cost for them.
Proposal for the introduction of a progressive personal income tax rate.
So, what I propose to do with personal income tax:
Thanks for attention!
PS I forgot one of the main advantages of PrSHN:
7.Now the movement of money between legal entities and individuals is unlimited in both directions. The introduction of the cash register will limit the movement of money from legal entities to physical ones. Salaries and incomes will settle down 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, it will be possible to greatly increase the amount of funds of legal entities by increasing their lending for investment purposes without fear of greatly accelerating consumer inflation. Yes, a little of this money will go to individuals as part of the increase in salaries and incomes, but this will not be a very large percentage. As a result, there is a chance, through a small additional inflation, to provide increased economic growth.
Recently, there has been much debate in Russia around our flat tax on personal income tax.
Everywhere they say that a progressive scale is beneficial (hereinafter referred to as the PRS) to the poor, but disadvantageous to the rich. And because of this, conversations about her remain only conversations, without going into a practical plane.
In this article I want to refute the thesis that the progressive scale is disadvantageous to Russian businessmen.
They say that the main function of the progressive scale is the redistribution of income from rich to poor. This is a fallacy: there are few rich people, so raising taxes will hardly affect the budget and, accordingly, the incomes of the poor. Yes, at the same time it is possible to nullify the tax at the poorest, but this will not significantly increase their income.
I believe that the main function of PSN is to limit the maximum income of any individual. The main property of PSN is the upper limit of annual income, the excess of which becomes economically inexpedient.
Let us consider in more detail the disadvantages of PSN for rich people and try to figure them out:
- The rich will pay much more taxes. This is not so: after the introduction of the cash register, they will lower their income as individuals. They will transfer part of their expenses to legal entities and avoid tax increases.
- The second drawback of introducing the CSP: with falling incomes, businessmen will not be able to buy expensive things and real estate. This shortcoming, like the first one, is apparent: after the introduction of the tax, the prices of expensive things and houses will greatly decrease in order to be affordable for the income of their customers.
- And finally, the third drawback. They will become much less profitable as individuals. Yes it is. But here we need to figure out why these people need large amounts:
1) First, for one’s own needs somehow: buying real estate in Russia or abroad, expensive treatment of oneself or relatives and the like.
Yes, these opportunities are greatly reduced and in such cases you have to take a loan secured by real estate or the business itself, from which a person receives income. And this is the main minus of the introduction of prshn.
But let's see what could be further without such a tax.
Suppose a person urgently needed a large amount of money, he takes them out of the business and solves the current problem. But the business itself will be harmed by such an operation; it can be feverish for some time. And as a result, it can decrease in volume and even cease to exist. And this harm is all the more likely the greater the amount taken out.
So, a person receiving an urgent solution to a current problem creates problems for his future income. But problems are created not only for him personally, workers suffer, 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 counterparty stable and operating like a clock suddenly starts to delay deliveries or payments and creates problems literally out of the blue. Yes, in this situation, in addition to taking out money, there is another possible reason - poor management. But it often arises from the desire of the owner to pull out of the business much more than he is now bringing. That is, when urgently taking money out of business, harm is caused to society and the economy.
If there is a limit on the maximum annual income, then the temptation to sharply increase the profitability of the business will decrease. It will become economically unprofitable, it will be easier to take out a loan and pay it back a little later, while neither the business, nor its employees, nor counterparties, nor society will suffer.
That is, if there are temporary inconveniences with taking a loan and loss of interest, in the end, the owner himself will feel better - his business will continue to generate income and develop steadily.
2) The second case of the need for big money is when the business owner needs money for investment.That is, when a business begins to generate stable income and works already with minimal control of the owner, he thinks about diversification, about what needs to be done a second, third or twentieth business in another area in order to be protected from the influence of the situation in a particular current market. To do 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 organize a new business himself. He can entrust this to his organization, and already, as a legal entity, it will create a new legal entity.
Why is this approach more correct:
- Firstly, people already work in the existing business and it is for them, and not just one owner, who will have to evaluate the prospects of a new business. Even if they are not professionals in the new field, but their knowledge of finance, accounting, team building, 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 business, will be able to more correctly assess the need, schedule and amount of financing of the new business, taking into account the interests of the old, from which money will be taken. They will be able to give advice on their professions, help to select staff. That is, a new business in this case will be better evaluated and professionally launched.
With the minuses finished.
ProsN benefits 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 delayed (strategic) advantages. Let's look at them:
1. The difference between the largest income and the smallest will decrease. This will reduce the number of property layers of our society. This will give an increase in the volume of markets for various goods, since the layers will merge with each other and there will be more people in each of them.
I’ll try to decipher: the product not only performs a certain function, but at its price it is oriented to a certain category of people, people with lower income simply won’t buy it, since they don’t have money for it. People with large incomes will not buy it either, since other goods with the same but expanded functionality and a higher price that these people can afford are sold for them. As a result, the general, it would seem, market is divided into many different layers, under which it is necessary to create special products, 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.An increase in markets along with a decrease in prime cost will aggravate competition and lower prices, which will positively affect the lives of all segments of the population, especially the poor. Which, in turn, will reduce social tension and strengthen the political stability of our country.
3. Over time, part of the income that rich people don’t get will go to increase workers' wages. Which will increase the middle class of our country and positively affect our lives. People who earn more than they need to survive will spend more on entertainment, on improving their lives, will save more.
What will make our economy more diverse, and therefore more sustainable.
4.The reduced income difference will positively affect the lives of small towns and the entire Russian outback. There will also be presented vacancies with the "capital" wage. That is, for a decent life, people will not have to leave for Moscow. They will be able to live well in their small towns. And the fact that in these cities there will be more high-level specialists will improve their life. Highly paid people will both spend their money on the spot and apply their experience and mind to improve their environment.
5.The introduction of PPS will change the attitude of owners to their business. The desire to make money quickly, to quickly get the result will decrease. This will positively affect the survival and stability of their organizations. The reliability of counterparties will also increase, which will also positively affect the work of economic entities.
After a couple of decades of this situation, the owners will look at their business as a long process that will bring long income not only to them, but also to their children and grandchildren. That is, the same thing will happen that happened in countries with a long capitalist history.
6.Economic crime will decrease, as it will be more difficult to withdraw and whitewash significant amounts. They will either need to be kept in the accounts of legal entities that are well controlled by banks. Either cash out through criminal schemes, or fall under tax evasion. And any large amount of cash will immediately raise questions about its origin and the payment of taxes from it.
That is, the long-term functioning 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. This will again have a positive effect on the economic climate and relations between businesses.
So, I believe that the pros of the progressive scale for the rich far outweigh the minus, which can be offset by the low cost for them.
Proposal for the introduction of a progressive personal income tax rate.
So, what I propose to do with personal income tax:
- The transition to a progressive scale must be made gradual. To begin with, setting the difference between the smallest and largest incomes is 100 times. This difference, of course, is too big for the above advantages to appear. But sharply limit people's income is not worth it. The market for declining incomes will not quickly rebuild, and the economy may have problems.
- The income of each citizen is divided into 4 parts, from each of which take your tax rate.
- Part of the income of approximately less than two moles (250 thousand per year) is not taxed at all.
- The second part of the income from 250 thousand to 2.5 million per year is taxed at the current rate of 13%
- The third part from 2.5 million to 12 million per year is taxed at an increased rate, for example 26%. This part is needed in order to separate the income ranges of ordinary employees (they will fall into the second range) and the owners of organizations who can afford to pay a higher tax in order to have an increased income.
- And finally, the fourth part above 12 million rubles per year should be subject to a prohibitive rate from the range of 70-90%.
- In order to simplify the collection of tax for citizens, as well as before obliging to pay tax to the organization where the person works. They will pay on the assumption that the citizen receives income in one place, which will happen in most cases.
- Citizens who receive income in several places will file a tax return, well, or the tax for such people will themselves charge the tax and inform them about it.
- In 5-10 years, when this system settles down, 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 PrSHN:
7.Now the movement of money between legal entities and individuals is unlimited in both directions. The introduction of the cash register will limit the movement of money from legal entities to physical ones. Salaries and incomes will settle down 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, it will be possible to greatly increase the amount of funds of legal entities by increasing their lending for investment purposes without fear of greatly accelerating consumer inflation. Yes, a little of this money will go to individuals as part of the increase in salaries and incomes, but this will not be a very large percentage. As a result, there is a chance, through a small additional inflation, to provide increased economic growth.