In order to avoid a modest percentage of income tax underpayments, Britain’s equivalent of the IRS has come up with a startling new proposal which would de facto make every wage earner in Britain an employee of the state.

CNBC

The UK’s tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.

The proposal by Her Majesty’s Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid.

Currently employers withhold tax and pay the government, providing information at the end of the year, a system know as Pay as You Earn (PAYE). There is no option for those employees to refuse withholding and individually file a tax return at the end of the year.

If the real-time information plan works, it further proposes that employers hand over employee salaries to the government first.

“The next step could be to use (real-time) information as the basis for centralizing the calculation and deduction of tax,” HMRC said in a July discussion paper.

HMRC described the plan as “radical” as it would be a huge change from the current system that has been largely unchanged for 66 years.

Even though the centralized deductions proposal would provide much-needed oversight, there are some major concerns, George Bull, head of Tax at Baker Tilly, told CNBC.com.

“If HMRC has direct access to employees’ bank accounts and makes a mistake, people are going to feel very exposed and vulnerable,” Bull said.

And the chance of widespread mistakes could be high, according to Bull. HMRC does not have a good track record of handling large computer systems and has suffered high-profile errors with data, he said.

The system would be massive in terms of data management, larger than a recent attempt to centralize the National Health Service’s data, which was later scrapped, Bull said.

If there’s a mistake and the HMRC collects too much money, the difficulty of getting it back could be high with repayments of tax taking weeks or months, he said.

“There has to be some very clear understanding of how quickly repayments were made if there was a mistake,” Bull said.

Liberal blue state soak-the-rich tax policies have real consequencs, as New Jersey is discovering the hard way. New Jersey Business News article.

Can you imagine what the wealth drain from California over the same period must look like?

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest.

Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.

“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”

This was not always the case. The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes.

“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.

The proposed nationalization of America’s health is in serious trouble with public support shrinking and Congressmen running fir cover, so what do you suppose the Chosen One has in mind for his next major political initiative?

James Pethokoukis thinks he has identified the objective of the Obama Administration’s next major offensive: an American VAT.

There have been serious proposals from sensible people that the US should eliminate the Income Tax and replace it with a VAT. No need to worry about that replacement idea with Obama. He’ll be looking for both.

Does President Obama have a secret plan to raise taxes on middle-class Americans — and,well, pretty much everybody else — with a European-style, value-added tax? Actually, it’s not such a big secret. Connect the dots:

1) The joint statement from the just-concluded G20 Summit in Pittsburgh called for balanced global growth — which means Americans must spend less and save more and reduce its budget deficit.

2) That same weekend, John Podesta, co-chairman of Obama’s presidential transition team and an outside White House adviser, tells a Bloomberg reporter that a value-added tax is “more plausible today” than ever, adding that “there’s going to have to be revenue in this budget.” A VAT is a kind of consumption tax.

3) Yesterday, the Center for American Progress, the liberal think tank with close White House ties, holds a conference on the rising national debt. While speaker after speaker — Paul Krugman, Roger Altman, CAP President Podesta (again), Laura Tyson — admits entitlement spending must be reduced, they also agree that taxes must be raised. Altman suggests $400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it. That’s $400 billion a year, by the way, not over ten years.

4) Also, yesterday was the first meeting of President Obama’s tax reform panel led by former Federal Reserve Chairman Paul Volcker. In a two-part interview with Charlie Rose airing yesterday and today, Volcker says that if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers. “Those are two big ones,” he says.

5) As they used to say in the Soviet Union, “It’s no coincidence.” This is also the conclusion of one Washington insider with ties to the White House economic team: “Does this all add up to a trial balloon? Of course, it’s a trial balloon. And I expect the administration will propose major tax reform, including a VAT.”

Obama’s campaign promise to not raise taxes on households making less than $250,000 a year was always considered a joke here inside the Beltway. It’s the economic “consensus” — and this was true even before the financial meltdown and recession — that rising entitlement costs would eventually mean a higher tax burden for the American people.

Maybe it was a joke inside the campaign, too. Since being elected, Obama has raised cigarette taxes and has advocated raising healthcare taxes, energy and small business taxes, in addition to corporate taxes. What’s more, economic advisers like Larry Summers seem eager to get rid of all the Bush tax cuts, not just those on so-called wealthy Americans.

And it’s also no secret that economists love the idea of a VAT. It promotes savings over consumption, and its hidden nature may mean it has less behavioral impact on taxpayers. Conservative economist Bruce Bartlet puts it this way, “As a broad-based tax on consumption, it creates less economic distortion per dollar of revenue than any other tax–certainly much less than the income tax.” Indeed, a VAT is part of cash-strapped California’s newly proposed tax reform.

Liberals love the idea of a VAT because it’s, well, so European — also because it does raise tons of revenue to expand government. And that is what Obama wants: more revenue to pay for bigger government. Is a VAT better than the soak-the-rich approach favored by Democrats such as Nancy Pelosi and Charlie Rangel? Sure. Of course, the concern is that a VAT would be in addition to new soak-the-rich taxes.

60% of Americans pay no income taxes right now. Democrats want people who do pay taxes to buy everybody their health care, too. How do they plan to pay for all this?

With more than a trillion dollars in new taxes, falling primarily on small business owners and investors, as the Wall Street Journal explains:

(The) draft bill would impose a “surtax” on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.

In addition, many more smaller business owners with lower profits would be hit by the Rangel plan’s payroll tax surcharge. That surcharge would apply to all firms with 25 or more workers that don’t offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.

Here’s the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.

Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there’s more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised—which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn’t been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.

States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.

Mr. Rangel also wants to apply his surcharges to investment income like capital gains. So the combined effect of repealing the Bush tax cuts and the new surcharges would be to raise the tax on stock appreciation by at least 60%—to as high as 24% from 15% today. President Obama has been worrying about a capital squeeze on small businesses, but raising the capital gains tax would only further starve them of funds. ...

America’s successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world. The corporate federal-state tax rate applied to General Electric and Google is about 39% in the U.S., and the business tax rate is about 25% in the OECD countries. So the U.S. would have close to the most punitive taxes on small business income anywhere on the globe.

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Greg Mankiw notes that the final tax impact after state sales taxes are included would take over half of top earners’ incomes.

(Some) calculations seem to ignore sales taxes, which are significant in many states. Because income earned will eventually be spent and thus subject to sales taxes, sales tax rates need to be combined with income tax rates to find the true tax wedge that distorts the consumption-leisure decision. Once sales taxes are included, a top earner in a typical state would face a marginal tax rate of about 55 percent.

So much for an economic recovery. If this monstrosity passes, get ready for many years of economic chaos and decline. Teach your kids how to ask “Will you have fries with that?” in Mandarin would be my advice.

Jonah Goldberg admires the gaping chasm between democrats’ expressed enthusiam for paying taxes and their actual personal behavior in some recent examples in the news.

During the presidential campaign, Joe Biden insisted that paying your taxes is a patriotic duty. No, scratch that. He said that supporting a tax hike was the American thing to do. “It’s time to be patriotic,” he told America’s putative tax slackers. When asked whether he might be questioning the patriotism of people who don’t want higher taxes, Biden, as is his wont, took things to the next rhetorical level. Forget patriotism, insisted Joe, paying higher taxes is a religious obligation.

The man who gave an average of $369 a year to charity over the previous decade fulfills his religious obligations by cutting a tax check—a check he’s required to cut by law.

Now it’s always perilous to take Biden’s statements too seriously, but it does seem eminently fair to say that his comments reflect a common, if not universal, attitude among Democrats. Taxes aren’t a “necessary evil” so much as a joyous affirmation of the possibilities of government and the lifeblood of a more hopeful society. “Taxes are what you pay to be an American”—like “membership fees,” says Democratic language guru George Lakoff.

Lionel Shriver, in the Wall Street Journal, describes how environmentalism is used by Government in Britain to justify reduced services, fee increases, and more totalitarian surveillance.

As they campaigned for midterm regional elections on Thursday, the biggest issue that British politicians met on doorsteps was a load of rubbish. Specifically, one load of rubbish, where before there were two. Pressed to meet European Union targets for reducing landfill volume, many local councils now collect refuse only once every two weeks. As flies and vermin gather while food scraps achieve a fine perfume, residents have grown so enraged that bin-men are under repeated physical attack.

The logic of fortnightly collections—if you can follow it—is to encourage recycling. Lest widespread consternation over garbage seem petty, fortnightly collections now emblemize a broader source of indignation: the U.K. government’s self-righteous “green” justifications for reduced services on the one hand, and thievery on the other.

Halving the frequency of waste removal conveniently saves money. A host of other new “green” measures in the U.K. will make money: $200 fines for poorly separated recycling, or microchips implanted in wheelie bins to weigh residential refuse—dragging Britain’s surveillance culture to a new low, and facilitating charges for waste disposal by the kilo. Furious that they are already paying once for this service through local taxes, some householders have ripped the microchips from their bins.

The premier example of having to pay twice for the same dispensation, all under the guise of environmentalism, is the British government’s proposal to bring in “road pricing,” unveiled last December. This literal highway robbery would charge motorists up to $2.56 per mile to drive on roads whose construction they had paid for to begin with. Announcement of the scheme stirred the complacent, slow-to-anger British public to circulate an Internet protest petition that secured 1.8 million signatures.

And little wonder. Since the average British commuter travels 9.6 miles each way, a nine-to-fiver in a built-up area would pay $50 a day for the privilege of going to work. The Sunday Telegraph calculates that even in moderately populated Yorkshire, where the first pilot programs are planned, road-pricing would cost the average family $6,000 a year. ...

Environmentalism has become the fashionable fig leaf to cover for extortion. If a tax is “green” it is “for the sake of the planet,” and fairness doesn’t come into it. Neither, apparently, does greed. Hence Britain’s petrol duty—the fourth highest in the world at over $4 a gallon plus 17.5% VAT levied on both the fuel and the duty ( in the U.K., even taxes are taxed)—has nothing to do with sticky fingers; it’s to confront the all-purpose bogeyman of global warming.

Mayor Ken Livingstone has installed a “congestion charge” for central London. At $10 per day at inception, the charge has risen to $16 in three years; the area covered by the charge doubled in February. Mr. Livingstone further proposes that high carbon-emission “Band G” vehicles—not only SUVs, but smaller sedans like the Ford Mondeo—be charged instead £25 per day, and be excluded from the 90% residents’ discount. That’s fifty bucks—every weekday, if you live or work in the congestion zone, or $13,000 a year. Richmond council has followed suit, tripling the cost of parking for Band G cars to £300—meaning even outside of central London it will cost close to $600 a year to park in front of your own house. But that’s ok! It’s for the sake of the planet.

Britain pursues monetarily punitive policies to advance environmental goals. Expediently, punitive fiscal policies line treasury coffers. They not only disproportionately penalize the less well off, and stultify economic growth; these fees, fines, duties, and charges lurking on every corner also create a larger social climate of oppression, resentment, and paranoia.

Mark Steyn identified the author as “an American lady novelist in London and a Guardian columnist of conventionally leftie views” writing under a nom de plume, but he complimented and linked her column, and added the following comments.

It’s not enough that the average Briton is captured on closed-circuit TV cameras in his car, in the street, in the shopping mall, and even in country lanes where the rural constabulary have hidden them in trees to catch illegal fox hunters. Now the government is monitoring his garbage. If they ever take up Sheryl Crow’s all-we-are-saying-is-give-one-piece-a-chance toilet-paper rationing, you can bet the enforcers will mandate CCTVs in every bathroom if not microchips in the bowl.

If George Bush put a microchip in your garbage under the Patriot Act, there’d be mass demonstrations across the land. But do it in the guise of saving the planet and everyone’s fine with it.

Hat tip to Glenn Reynolds (for the Mark Steyn item).