£100k + earners in for a shafting next year?

[Saracen]

I would love to be able to be taxed 50%

Be careful what you wish for.

By the way, have you ever worked out what you are effectively taxed at? I don't just mean income tax and NI, but by the time you've taken the other taxes, most notably VAT, into account?

Take your pre-tax income, and deduct the Income tax and NI. From what you have left, do a quick analysis of how you spend it and on what, and how much taxes ..... VAT, Council tax, insurance tax, import duty and excise duty, car tax, TV licence and so on. For a lot of people, they'll be lucky if they're only paying 50%. The trick is that they don't notice the rest.

Add up all the little bits, and see which side of 50% you're on, and by how much. But be sitting down when you do it.

[pp05]

Saracen it's likely to be more than 50%.

My personal opinion is personal allowance should be increased for all citizens. 6500 is nothing.

[dave87]

PP05, how would you then balance the books? As for every £ you increase the personal allowance by you stand to lose at least 20p in tax - across most of the population... so £10m (assuming 50m people paying at least 20% tax) for each £1 it is increased by...

[j1979]

I'm sorry, but £100k a year *is* obscene. Tax the buggers to hell, that's what I say

I earn less than 1/3 of that. My wife is at uni and therefore brings in her student loan plus a few very helpful bits of extras from selling books on Amazon, doing mystery shops, stuff like that, but probably no more all told than ~ £5k a year. But once you account for all our expenses, bills, shopping, rent, council tax, etc. we end up with around £300 a month, effectively spare.

So please, please tell me who on earth needs to earn more than £100k a year. Seriously.

yep me too... going on what you say, i probably earn half what you do. It makes me feel sick to think people earn so much! I hope higher tax will make them leave! in my opinion, higher wages do not denote higher IQ just a higher level of greed. Don't get me wrong i don't begrudge someone higher wages, but when they complain about tax it just shows how greedy they truly are!

we have a whole new generation of Thatcherites in this country, a whole generation brainwashed as to what "achievement" is.

[Cozwin]

I think although it is needed, problems will likely occur from this. For example to take Stephen Fry who has publicly said that if tax raises to 50% he will leave the country, now if we say that he and many other rich people who don't mind leaving for the likes of USA leave, then how will it help us in the long run.

And as said by others, if you raise tax in the lower brackets you get outcry on becoming too much like Torrie, however.

If we look at the rumor of Torrie plans such as Vat increase to 20% etc surely this is going to just screw everyone over.

So its a lose lose either way for someone.

But as said above, rich people should pay, because the amount of money for example celebrity footballers and tv personalities make is obscene, mix that with the tax dodging most of them do anyway.

However i think some administrative changes could be took, for example companies avoiding corporation tax here by setting up in Ireland, big loss to economy yet they still profit from it.

[dave87]

But as said above, rich people should pay, because the amount of money for example celebrity footballers and tv personalities make is obscene, mix that with the tax dodging most of them do anyway.

I'm always interested in this argument. Surely if we raise taxes, and they are minimising their tax liability, they aren't going to get hit by it, and therefore is going to make little to no difference?

And whilst yes, they have the ability to take the burden, why should it exclusively be the rich that dig us out of a hole created by irresponsible lending/fiscal suicide on the part of the government. That I find interesting....


And no, I'm not earning anywhere near enough to get taxed at 50%.

[TooNice]

@j1979: Equating high wage with greed has probably has much truth as equating low wage with laziness. I call BS either way.

And the irony is that most people in this country can't resist contributing towards the people I would be tempted to call obscenely rich. You know, those footballers (and other huge celebrities). If it wasn't for their millions of fans, they would not be earning over 10x more than the 100kers. As someone who is not a big fan of the game, I feel that what they earn is obscene, and yet, objectively, I know that they -are- being paid for supplying entertainment for millions who demands it.

You hope that high tax will make high earners leave. Let's hypothetically say that is your wish is granted. Or that we deport everyone who own more than 100k. Or we just repossess everything and distribute everything equally, to do with whatever they want with it. What do you think is likely to happen in 5-10 years time? Amongst the people who decide to start their own business, some will be more successful than others, that's more or less inevitable. They may not have higher IQ, but perhaps better business acumen, and are better at understanding what product will sell. So let's say that Company A earns 10x more than Company B as a result of it. Is the person who started Company A necessarily more greedy than the one who started Company B? Does that person make you sick? Should we just close down the company A for couple of years so that competition catch up in the spirit of 'fair play' of sort?

As for achievement, I think that it means different things for different people (a disagreement != brainwash). It could be, but isn't limited to monetary objectives. But just because it's not, doesn't mean there is anything wrong with it IMHO.

And no, I do not earn nearly enough to be affected. But I'd say that I have as much right to complain about a tax rise that affects me whether I earn 10k, 100k or more.

[malfunction]

And what was the point of exempting the first £x,000 of income from Income Tax in the first place? It was to provide a safety net to allow people with low incomes to pay for essentials, like food, clothes and shelter. It wasn't to allow wealthy people and high earners to reduce their tax bill.

To be honest, this move is WAY overdue. And it ought to be accompanied by a substantial increase in the PAs for those on low incomes.

Couldn't agree more - I'm personally in favour of a much higher personal allowance - to the tune of £15,000 or so - and accompanying higher tax rates above that to balance the books. Something along those lines would also allow us to scrap things like tax credits which just seem bloody stupid to me - taxing people then admitting they can't afford to live and hence reducing their tax burden... Why not just raise the levels in the first place? It would be a lot easier and cheaper to administer surely?

I'd prefer it if it didn't make too much of a difference for middle income earners. No prizes for guessing where my salary lies...

Of course, the reason this is being done, and done now, is (IMHO) entirely political. It's to appeal to grass-roots Labour, the core vote. It's to appeal to the social engineers in the party that want to bleed the rich, and it's designed to appear to do that. In other words, it's naked political opportunism and electioneering, and it's designed to allow Brown to pose as the "socialist" that's addressing inequality, while he prattles on about the Tory's inheritance tax policy, ignoring the fact that as Chancellor, Brown could have down this and any number of other things to address social inequality over 13 years, and instead, abolished the 10% tax band.

So, while I'm incredibly cynical about why they're doing this and doing it now, I still think that in the circumstances, there's nothing at all wrong with doing it.

Do they ever do such things for reasons other than self interest / preservation?

I always thought a sliding scale is better anyway, 0/20/40/50% is too 'steppy'

For what it's worth current rates there's already a relatively smooth sliding scale - percentage wise - for overall deductions compared to the ramp in tax levels from 20k onwards:

 20k = 21.4%
 30k = 24.6%
 40k = 26.2%
 50k = 28.4%
 60k = 30.5%
 70k = 32.0%
 80k = 33.1%
 90k = 34.0%
100k = 34.7%

Or to put it another way:



In terms of actual deductions there's a very straight line:



But there are still multipliers involved:

A person earning 80k pays over 6 times as much tax as someone earning 20k
A person earning 90k pays over 4 times as much tax as someone earning 30k

...hence the earlier comments about it being higher earners that pay the majority of the tax (in this case likely people earning a lot more than 100k -- even with the best accountants -- are probably paying the majority of the tax even if they aren't paying the full flat rate for various perfectly legal reasons) which is how it's always going to be unless we cap the amount of tax you pay (which I believe is the case in the Isle of Man - I believe it's capped at 100k of *deductions* not earnings which means you'd have to earn a *lot* to benefit from it and is obviously a strategy designed to attract people with that amount of money to the island)

[Barrichello]

I'm sorry, but £100k a year *is* obscene. Tax the buggers to hell, that's what I say

I earn less than 1/3 of that. My wife is at uni and therefore brings in her student loan plus a few very helpful bits of extras from selling books on Amazon, doing mystery shops, stuff like that, but probably no more all told than ~ £5k a year. But once you account for all our expenses, bills, shopping, rent, council tax, etc. we end up with around £300 a month, effectively spare.

So please, please tell me who on earth needs to earn more than £100k a year. Seriously.

Well £100k a year is definitely not obscene for example if you are living in London, have you checked how expensive it is to live here? Its nuts. You talk about having spare money left over etc well anyone would want that. Its nice to increase ones savings/money towards childs savings/put extra money away towards a SIPP etc.

£100k a week though (footballer wage style) is 52X that "obscene" amount, what category does a footballer come in at?

It is all relative in the end, the footballer or the person on 100k a year is worth what their employer is happy to pay them.

We should not penalise people even more for wanting to push themselves harder to be more successful and improve their financial situation for themselves and their family.

Better that we hope that not to many higher earners do move away for tax reasons such as this, i know many that have already.

[scaryjim]

Well £100k a year is definitely not obscene for example if you are living in London

I'm sorry, but I don't buy that living in London is 3x as expensive as living in Manchester. I accept that it is a lot more expensive, but not 3x. And even if it was, that wouldn't make earning £100k any less obscene, it'd just make living expenses in London equally obscene. Has it occured to you that the reason it's so expensive to live in London is that house prices etc. have been pushed up unrealistically *because of* the small number of people who earn such high wages? If the highest wage earned by anyone living in London was no more than £100k, would the cost of living there be so high? I doubt it personally...

£100k a week though (footballer wage style) is 52X that "obscene" amount, what category does a footballer come in at?

Ridiculously obscene, lynchable, or "first against the wall when the revolution comes". Take your pick Frankly, professional sport is top of my list of worthless overpaid professions, and if I was in charge the whole thing would be knocked back down to earth. So it's probably a good thing I'm far too lazy to lead a revolution

We should not penalise people even more for wanting to push themselves harder to be more successful and improve their financial situation for themselves and their family.

We're not penalising them, we're asking them to share their success with the country that made them. I thought one of the points of trying to persuade everyone to go to university was that they could earn more and therefore pay more in tax? As I mentioned previously, having very high earners doesn't actually benefit normal people, because it pushes up prices: particularly of housing but also of the general cost of living. There are outlying areas of Manchester where you basically can't afford to live unless you're a professional sportsperson, because the influx of a small number of very highly paid professionals has pushed accommodation prices through the roof. And I consider that obscene.

[TooNice]

And share they already do (quite a lot). I am not sure where we are on the Laffer curve now, but push too hard and your total tax revenue drops. And the wealthy are probably the ones who are least bothered by public service funded through taxes.

There will always be areas that is not accessible to everyone. Even if you get rid of all the very rich people, the guy who is paying minimum wage most likely won't be able to afford what the guy who earns 30k could. If it's a small number of them, then they can only take up that much space even if they each buy a multimillion pound mansion.

As for the cost of living argument, I am not convinced either. There are currently shops for different market segments. Ridding of the wealthy won't suddenly make Poundland any cheaper, though I suppose that if you could make them all disappear, Harrods (etc.) will have to make room for something else, and we'll end up with a few thousands folks who'll need to find new jobs. Would London Underground cost any less if the wealthy decide to go elsewhere? Again, I sort of doubt it, we may see a few less sports/luxury car on the streets, but again, probably not enough traffic jam or reduction of Underground fees (obscene, quite frankly).

[Saracen]

PP05, how would you then balance the books? As for every £ you increase the personal allowance by you stand to lose at least 20p in tax - across most of the population... so £10m (assuming 50m people paying at least 20% tax) for each £1 it is increased by...

It's a lot less than 50 million, by the time you take into account children, the unemployed, students with no income, the elderly with limited pensions, etc.

But I take the point.

You have to balance it. If you increase the basic PAs, then you have to claw it back elsewhere if it is to be revenue neutral. But remember, everyone paying tax gets the benefit of an extra amount tax free. So, if you increase basic PA from (roughly) £6500 to £10,000, then everyone earning £10,00 or more benefits by the same amount, which is the £3500 difference, times the basic tax rate. i.e. £700.

So, you reduce the band at which 40% kicks in, to recover that amount, and/or increase basic rate.

As all taxpayers, including higher rate taxpayers, benefit by the increase in PAs, you can balance the point, and rate, at which you redress that. If you increase basic rate, you start to recover from people earning more than £10,000, and the amount by which their £700 benefit reduces increases as you go up the income scale. At some point, they end up neither gaining, nor losing. And after that, they pay more, thereby achieving exactly the redistributive effect this was supposed to achieve, that is .... taxing the loewest earners a bit less, paid for by taxing those earning more a bit more.

Alternatively, you reduce the point at which 40% bites. So a 40% taxpayer starts paying 40% earlier, and some people become 40% payers that previously were not. But .... the person that is now paying 40% is still better off by £700 (or so) because of the reduction in PAs, and you can pitch the new 40% band so that those just paying 40% are no better nor worse off. If you do that, it'll be tax neutral for those just going into the 40% band, but you will have an overall revenue shortfall, because more people have benefited than paid extra.

So, you then either have to reduce expenditure, increase rates or change some other tax benefit. For instance, why are some child benefits not means related? Do we want a couple earning £50,000 EACH to be receiving state benefits, when someone earning £15k is helping to pay for it?

It's a social engineering question, and a value judgement. For instance, consider Disability Living Allowance. It is not means tested. So, assume I'm a billionaire. .... or just assume I have a large net worth, good cash (or liquid assets) and a whopping great pension and investment income. I could be receiving £250,000 a year in pension and investment income, yet I can still get state aid for mobility problems.

What, precisely, is the point of the welfare state? Surely, it's to provide for those in need. It isn't supposed (IMHO) to be free money for those that don't need it, but support for those that do. Is it really fair and equitable for someone on £15k a year to be paying tax when some of that money is redistributed to those with a far greater income, and perhaps, assets. Suppose I'm a property developer with a £10 million portfolio of houses I'm renting out. Surely, if I'm in need, I can either pay for it from my own income without needing non-means-tested benefit, or I can sell a house?

The problem is that the state has taken on more and more in itself, and grabs all the revenue it can to pay for it, often without regard for just how equitable it is to do it, when what it should be doing is adequately supporting those in real need, and letting those with the means fend for themselves.

It's fine for government to use taxpayers money to bail out banks to the tune of a couple of hundred billion, or whatever, but at the same time, people are losing their jobs and homes. If the government has enough taxpayer funds for nuclear deterrents, aircraft carriers, ID card systems, intrusive NHS databases and so on, why not spend some of it buying the homes of those being repossessed and evicted, and often I might add, from the very banks it so expensively bailed out? Return those people to what amounts to state (council) owned homes.



As Chancellor, you have a value decision to make if you were to increase basic PAs. If this supposed to be revenue neutral, or are you going to fund it by cutting something else ... such as the ID card project, or an aircraft carrier, or whatever.

You could make increasing PAs revenue neutral, but the implication is that if some pay less, some pay more. It's like when Brown cut the basic rate to 20% from 22%, and paid for it at least in part by cutting the 10% rate altogether, only in reverse. That stunt meant the poorest taxpayers where worse off to cut the basic rate for everyone else. Increasing PAs could, if done right, do the same thing in reverse. Or they could cut spending tp pay for it. After all, if people are taxed less, they spend more, right? So this ought to be right up Brown's street, since he's so keen on "stimulating the economy" .... except where it means reducing the government's ability to legally pick our pockets.

[oolon]

Well tax rather annoys me, most of my time working I have spent being hit hard by high rate tax payer and then the next year earning almost nothing. I don't mind so much about this supertaxes I just find it unfair you cannot average out your tax over multiple years. However the government has actively made it difficult to use allowances, for example the "bed and breakfast" rule in share transactions. We have ended up with a system that amazingly difficult to calculate.

On the plus side I did my tax return and got 900 quid back from the tax man... thanks for the note telling me I didn't need to file this year I guess I did! Thats a strange thing every year I have a surplus I get a note telling me not to file, and every year I owe them I get one telling me too file...!

[oolon]

It's a social engineering question, and a value judgement. For instance, consider Disability Living Allowance. It is not means tested. So, assume I'm a billionaire. .... or just assume I have a large net worth, good cash (or liquid assets) and a whopping great pension and investment income. I could be receiving £250,000 a year in pension and investment income, yet I can still get state aid for mobility problems.

Yes that sounds unfair, however there is a part your argument misses, how easy is it to means test the benefit? We employ large number of people checking if people are deserving of money. Some benefits we pay more to administer than we pay out in benefit, which in book is insane! Some argue it would be better to pay pretty much everyone then claw back the money from wealthier in other ways by say income/property taxes, and that has the advantage that people will pay the tax however may not take the benefit. Not sure I believe in the "flat tax" system that radicals evangelise, I can see its attraction however the transition period can be very painful (normally for the worst off).

Ok I don't earn over 100k however I do believe that I should get more of my income than the state does, and when NI (which is income tax by another name)* is taken into account it is well over 50%.

* Anyone who says NI pays for you pension is wrong, its income tax, labour broke the link by increasing it formally to pay more into the NHS. If it was a pension they would give you an NI statement each year of what you payed in etc...

[Saracen]

I agree that there's an issue over the cost of testing, but I'm not convinced it's that difficult to assess, especially in these days of computers. We all have tax records, either based simply on PAYE or on tax returns. At the very least, that gives a good start.

In addition, if people with larger incomes have to justify a claim for what top many is a relatively small amount, they're unlikely to do so.

Another example is the winter fuel payment. My parents had a pension more than double the average national wage, yet would get this. It's not taxed and not means tested, and a House of Commons committee calculated that just 12% of those getting this were in "fuel poverty".

Indeed, you can expand that cost versus income raised argument to apply to the whole income tax regime, which by any standards, is vastly complicated. So many charges, allowances, exemptions and special cases have been made over the years that it confuses the hell out of me, and I have years of training and education as a Chartered Accountant (albeit a long time ago and I don't practice).

A good case can be made for going through all those exemptions etc, and dumping a lot of them. Make the whole thing much simpler and, if nothing else, we can cut down on accountancy costs and on the size of the Inland Revenue, for a start. If not exactly a flat tax, then certainly a much simpler one .... that wouldn't cost as much.

But it comes back, I guess, to .... does the system work? And if we have the poorest getting taxed, and people far better off getting benefits, then clearly it doesn't work if the objective is that the welfare system should provide a safety net for those in need.

[Zak33]

Equating high wage with greed has probably has much truth as equating low wage with laziness. I call BS either way.

bang on... totaly bang on.

If two dudes have the same identical job and one can do it all in 3 hours and one takes 3 weeks... what should you pay them?

The same amount? Prolly, many thingas weork like that... cos it's the same job and once it's done its done. But.. in my world you'd not just pay the fast bloke the same...... you pay the fast worker more , give him a BONUS for getting it done so fast....and move him onto a new job and get him to make you (and earn himself) more.

Greed is still good. It always will be. But it's not got to do with high wages.... if ANYONE here was offered a mammoth increase in work load, pressure and stress.. but with a salaray of £100k rising yearly on performance, IF they took it and then IF the taxation went up, they'd be bitter about it.