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

[Zak33]

In fact.. moving my argument further....

Bloke A sits at a desk earning £35 k per year. So does his colleague, bloke B

Bloke A does his job, eats his lunch, goes home on time

Bloke B works through lunch on his personal laptop and in the evenings works on a second project and earns enough money to put him through a training course than costs £10,000 over 3 years.

3 Years later... bloke A is earning the same, and bloke B qualifies for his extra job and moves up to £60k per year.. but his new job takes more hours, but he never meets a girl, never has kids.. and does another course, costing £20,000 of his own money again, and has no social life.. but in 3 years.. he jumps to a higher salary of £120,000.

Is he being greedy and does he deserve that salary?

I think he does. If the market pays that salary.. he earns it. And he's spent £30,000 (in this country) getting there.... PLUS lost a social life. What value is that... can it BE valued?

He's now paying more in tax than bloke A earnes BEFORE tax....

FAIR?

[scaryjim]

tbh, I'm well aware that my position is impractical. Most people are far too greedy to accept that the more they earn the higher a % they pay. Then, as you say, they leave or finds ways to avoid taxation, and tax revenue gos down. That doesn't mean that the way things work is right, though...

In practical terms, I'd actually be more inclined to reduce personal taxation all round and balance that with an increase in consumption taxation. I'd accompany it with a complete review of all current consumption taxes (VAT, fuel, alcohol / tobacco, stamp duty etc.) with the target of improving overall use of resources. Yes, that would mean massive tax hits on fossil fuels, alcohol and tobacco, and anything I consider to be a geunine luxury. But then people would be a lot more inb control of their own tax burden based on their consumption patterns. And of course, everyone would feel good because they'd get more cash in their pockets to start with.

So, who's gonna vote for me?

EDIT: replying to cross post:

<hypothesis>

Is he being greedy and does he deserve that salary?

...

He's now paying more in tax than bloke A earnes BEFORE tax....

FAIR?

Is he being greedy? I don't know - did he put all that effort in *just* to earn more money, or did he do it because he wanted a different job with more responsibility and more challenges, and the higher salary just happens to come with that job? Greed is a motivation, not a result. Obscenity, on the other hand, is a result. People quite often end up being obscene unintentionally (then they end up in some of the dodgier gossip mags!). I'd argue that regardless of his motivastion, the size of the salary is obscene.

Is it fair? I'd say definitely yes on that one. Anyone who works knows that they'll foot a tax bill, and they know the more they work they more they pay in tax. It's not like the amount of tax is being sprung on him after he's worked his way up the salary scale. So yes: I think it's perfectly fair. The fact that he's paying more in tax than the other bloke earns doesn't change the fact that he'll be taking home well over 3x what the other bloke takes home.

[Saracen]

Nobody likes paying more tax. Probably, nobody likes paying any tax. But it pays for things we take for granted, like a health service, and roads.

And it's worth remembering that because higher tax rates only apply at margins, they only affect extra income, once you hit that rate. Below it, you pay the same rate as everyone else. So if a marginal rate hits at £100k, they only pay that higher rate on the increments over £100k, and pay the rate rate on the first £100k as everyone else earning under £100k would be. It's hard to argue with the progressive tax principle that we pay more according to our ability to pay. That has long been the principle, and quite right too. This is just tinkering with the mechanism.


It all comes down to fairness, and to how much of a break those that are struggling get given on tax. There's nothing carved in stone about the £6475 we currently get as a PA. It could be less, it could be more. And just as higher rate payers pay more on that marginal income, so removing the benefit of PA is simply another way of saying that you pay more when you can afford to.

Someone made the point earlier about Laffer curves, and they're right - jack up the marginal rate too much and people either don't bother earning, or move abroad. That leaves us with the reality that while it might be desirable (in many people's eyes) to clobber really wealthy, the pragmatic aspect to that is, by and large, it simply don't work. What, IMHO, will work is this type of tinkering. It's small enough to not to take us over the tipping point on the Laffer curve, small enough not to cause people to flee for greener tax fields and, for anyone that notices, likely to be electorally popular, especially to Labour supporters and especially in election year.

And these types of things have a habit of becoming the expected norm. It's causing some moaning now, but in a few years, it'll be gown things are, and the new accepted norm. It's like the removal of MIRAS - lots of people didn't like it, but most people didn't notice or didn't understand what was happening, or just didn't care enough, and now it's just the norm not to have it.

At the end of the day, it won't matter whether we like it or not, it's a done deal and Brown certainly won't change it, firstly because he's done it because he knows it will work, and secondly because it will be pretty popular with the vast majority.

[scaryjim]

Nobody likes paying more tax. Probably, nobody likes paying any tax.

*raises hand* I'm the freak here. I like paying my tax, given that it provides policing, health care and other essential services. I'd much rather that than the alternative. Also, while I wouldn't *like* paying more tax, I'd be happy to do it if I genuinely believed (or it could be unequivocally demonstrated to me) that the more tax was making those services better.

Of course, that generally isn't the case.

[Saracen]

....

Is he being greedy and does he deserve that salary?
....

No, and probably, respectively. "Deserve" is a value judgement and I'm not sure there's enough infor there to judge.

Does he deserve to do well? Yes, undoubtedly.

....

He's now paying more in tax than bloke A earnes BEFORE tax....

FAIR?

He's also earning a lot more, after tax, than Bloke A. So "Fair"? Yup.

....

I think he does. If the market pays that salary.. he earns it. And he's spent £30,000 (in this country) getting there.... PLUS lost a social life. What value is that... can it BE valued?

Losing his social life to ambition was, of course, entirely his choice. What value has it? Well, he can't put that high a value on it or he wouldn't have done it. And if he can't put a value on it, the tax system sure shouldn't try to. The tax system doesn't judge social values, or social costs. If it did, perhaps we'd have nurses paying 0% tax and footballers paying 150% tax. All the tax system assesses is income and expenditure.

Besides, as his training pays off, and it pays for long term, all he pays is a higher marginal rate, and even then, only if he earns. He could always take a year or two off and look for that social life, because he presumably has saved all that extra income so he can afford it.

He hasn't?

He spent it on cars, holidays and flat-screen TVs?

Well, then there's the price of the lost social life ..... gadgets and holidays that the other bloke can't afford on his lower salary.

It's the same trade-off we all make when we go to university .... less money now, expensive education, reap the benefits later (we hope).

[Saracen]

....

Of course, that generally isn't the case.

And, or course, that's an entire separate issue.

On the one hand, is it right that we pay tax to provide common services? We all (or almost all) benefit in one way or another from policing, education, health, transport and so on. So I'd say yes, it's right that we pay.

From there, it's a case of deciding the social values that underpin who pays what, and the criteria on which we decide that. What is, or isn't "fair". I think that "pay according to ability to pay" is, at least within the constraints of the Laffer curve principle, fair. So do you, I suspect.


Whether we get value for money, or whether governments pee it down the loo for us, and whether some governments are better at that than others, is another whole topic. Given my commonly known cynicism about governments, and the degree to which I despise Brown (* note 1), my views on that won't come as a shock to many.




* Note 1) .... not that I despite him personally. He may well be an amiable and friendly bloke for all I know, never having met him. I despise him for what he's done to this country, usually while pretending to do something else.

[badass]

So, who's gonna vote for me?

No one with brain cells.
We all ready have a government that puts ideals so far above practicalities they bankrupt the country that also happen to be a bunch of inverted snobs.

What would you prefer:
1. A decent standard of living for the vast majority of people but a very small number of individuals getting paid obscene amounts and not really paying as much tax as they should. Tax for the average person is reasonable (say for the sake of argument it's around 25-30%)
2. No welfare state because the governemnt cannot afford it and 1/3 of people living in poverty. However the super rich, should they wish to live here will get taxed loads! Unfortunately there aren't that many here because they all moved elsewhere due to the silly taxes demanded by inverted snobs.

[scaryjim]

No welfare state because the governemnt cannot afford it and 1/3 of people living in poverty. However the super rich, should they wish to live here will get taxed loads!

You didn't actually read the paragraph before the one you quoted then? Each to their own.

[Zak33]

I think what I'm saying is that the GOAL posts for the higher earner have moved for thousamds of people who have pushed that extra mile (or more) and worked their arses off to get to the extra dough that they want (greed is good) and are just about to earn it... when...our country decides that we're in deep crap and those top earners needs to pay more than they might have a few years ago. And on a scale of 20% to 40% which we've come to grudgingly get used too..... to move another scale in at 50% (plus NI) AND reduce the tax free allowance at the bottom end making the 20% band and 40% band and 50% band all kick in 6500 earlier.... is a kick in the nads for some people I think.

And I for one don't think that increasing tax on the people at senior management level and above is a way to motivate a country into stimulating profit and to get individuals to slog it out all night for a better income.

Neither myself or my missus are 40% tax payers, but if either of us made it to that level, we'd be expecting it... you can see it coming a mile off... it's been there for a long time. And IF we made it, we'd simply pay extra into our pensions and claim the extra back on a tax return. BUT... if we were already way into that level and closing in onto £100k salaries, and then we found that we had to lose out £6500 tax free band by the time we were up to £113k and if we dared go the extra mile, pull in some big deals and pull £150+ that it would get worse... we'd be more aggrieved again.

And while I agree that tax isn't motivational... we all know it needs paying.

So.. my theory is simple.. stop taxing the payers more and more...just tax them what we already expect..... and go find all the tax dodgers instead.

Not just the high earners... not just the people using tax lop holes (such as my idea of payin into my pension extra dough to get the tax back.. cos that's not aloop hole.. it stays in the system) but also all the cash in handers, the travelling people with new Mercs and BMW's and trailers... and no tax code.. there are millions of people on the fiddle every week.

Chase them?

Or are the tax payers an easier target cos they just bow down, and do as they're told?

[badass]

You didn't actually read the paragraph before the one you quoted then? Each to their own.

I must have missed that. Maybe I was reading what I wanted to see rather than what you actually typed after seeing your posts about £100k earners and for that I apologise.
I actually also happen to believe that taxation on energy and raw materials needs to go up as well (indirectly taxing consumption) in order to rebalance the cost of human labour and time versus the more limited energy and natural resources.
However I think doing so will trigger another recession as consumption drops.

[SiM]

Or are the tax payers an easier target cos they just bow down, and do as they're told?

In the short term, not many people will move away to avoid it, they will just bow down and take it. In the long term more will leave the country, unless they have a good reason to stay. The current reason to stay is London's rank in the professional finance services industry (hedge funds and investment banking)... in the long term that can easily change, and when it does, many people will leave the country. Politicians only care about the short term - i.e. getting votes.

[Barrichello]

While on the subject of 100k earners, its fair enough companies paying 100k for employees in my opinion (although without these these punitive tax rises) but how do you feel about the compulsory tv tax you pay for 382 BBC staff who earn over 100K?

http://www.telegraph.co.uk/news/7230...an-100000.html

http://www.telegraph.co.uk/news/7231...-salaries.html

[scaryjim]

I must have missed that. Maybe I was reading what I wanted to see rather than what you actually typed after seeing your posts about £100k earners and for that I apologise.
I actually also happen to believe that taxation on energy and raw materials needs to go up as well (indirectly taxing consumption) in order to rebalance the cost of human labour and time versus the more limited energy and natural resources.
However I think doing so will trigger another recession as consumption drops.

No worries, I read what I want to see instead of what's there on forums all the time.

I think raising consumption tax would be fine as long as it was accompanied by a sensible rethink of personal taxation. Give people more to spend, balance it with making some items (not all) more expensive. It would be difficult to ensure that the two changes balanced each other, though...

While on the subject of 100k earners, its fair enough companies paying 100k for employees in my opinion (although without these these punitive tax rises) but how do you feel about the compulsory tv tax you pay for 382 BBC staff who earn over 100K?

I'm disinclined to read anything written by the torygraph, but I assume the "compulsory tax" you're referring to is the TV license, and frankly I don't care one jot about it because I don't have one. It's only compulsory if you watch TV as it is being broadcast, and I haven't watched broadcast TV at home for over 2 years, don't miss it one bit, and watch anything I'm interested in on iPlayer catch up or DVD (prewtty much everything I would be interested in comes out on DVD eventually).

And as a last aside to anyone who thinks greed is good - what do you think motivated the sub-prime lending and high risk banking deals that actually crashed the global economy a year and a bit ago?

[SiM]

what do you think motivated the sub-prime lending and high risk banking deals that actually crashed the global economy a year and a bit ago?

Too low central bank rates for too long.

[scaryjim]

You don't think there might have been an element of greed in there then?

[SiM]

You don't think there might have been an element of greed in there then?

Chuck Prince, former CEO of Citigroup, July 2007:
"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”
Source: FT interview

The whole world runs on self interest/greed. It is everywhere. It is unavoidable. It is what makes economies run. Without it the world would be not be like it is now. Not technological advances, no pharmaceutical advances etc. These are all done for one reason, profit.

So of course if the opportunity to make money is there (sub-prime lending) - people will take advantage of it (call it greed if you want - but it is human nature)... and then they will pray that they can get out before it collapses or hope that the collapse is not too bad. It has happened in the past with other things and it will certainly happen again in the future.