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

[Saracen]

Equity ?
Lot's of assumptions there. How do you know what they notice and what they don't.

It's correct that tax is a tool of social policy, but it is incorrect to say that the policy is inherently fair. If we accept that the most relevant meaning of the word 'fair' in this instance would be something along the lines of "without favoring one party, in a fair evenhanded manner". The a flat tax would be 'fairer' than a progressive one.

/Dons flame suit - the marxists will be here shortly.

I didn't say it was "inherently fair" - I said it depends how you define fair. We all have a viewpoint on that, and they aren't the same. And the point is that not everyone does accept that definition of fair.

And do you seriously think someone that can afford a $45 million Gulfstream or a $100 million yacht would notice their taxes going up by £100? They'd need an accountant to tell them it had, and it would cost more than £100 to work out that it had.

But the point was .... what is "wealthy"? Or "high earner"? Is it £100,000, or is it a lot higher than that? And does it affect "fair"? What about removing the £6475 PA from someone earning £10 million a year? Or £100 million? Do you think they'll care? Someone ought to ask Richard Branson. Or, if he were a UK taxpayer, Bill Gates. Next time I meet either of them, I'll try to remember to ask.

I see nothing at all unfair in those that can afford to pay more doing so. The issue is where you set the line of "can afford", how much more they pay and what mechanism is used to do it.

[Phage]

What definition of fair would allow you to take a greater proportion of money from one person than another ?
NB Please excl social contract from your answer. Yes, I understand that this is the equivalent of the physicists frictionless vacuum, but the use of the word fair is incorrect by any reasonable definition.

[Zak33]

As ever. Serious Sam and I agree on most stuff.

If you earn more, why should you pay even more than more in tax?

It's cos we're used to it.. amd now that the goal posts have moved further still, it's getting more unfair.

[TooNice]

The world is not fair. One could be born really, really underprivileged with no chance of a normal life. There are many times where humans have shown selfishness, and yet other times where people have shown generosity. I think that at least some of the really wealthy people realise that for all the hard work they may have put to get where they are, they have been quite blessed as well, hence some are known for their vast donations (balance things a little).

Our society also seem to accept charging different price for essentially the same service. Students concession may not be 'fair' per se, yet I do not hear people complaining (often). Ditto for elderly concessions. Staff discount. Any discount that requires you to show a coupon of sort (without which you pay full price) etc. We accept (pirate excepted) that for most things, we can either take what we are offered for that price or leave it. The 'fair price' in a pseudo capitalist society is effectively what one is willing to pay for the service/product.

So perhaps another to look at fair is however much the wealthy will put up with (before heading elsewhere)? I'd say that it's the most capitalist way of looking at things. And incidentally, it's probably with a capitalist mindset that some of the -really- high earners reached where they are.

[Zak33]

I think that at least some of the really wealthy people realise that for all the hard work they may have put to get where they are, they have been quite blessed as well, hence some are known for their vast donations (balance things a little).

oh hell yes.. totally agree. Some times it's just as much luck and judgement for some of the really big earners.

And therefore there MUST, by definition be losers with bad luck too.

But does the person who IS blessed and lucky have to pay a larger multiplier of that earning?

None of this holds true to disability, and age. When you CANT work, or are too old to work, you deserve loooking after.

But the amount of these people in realtion to the working man/woman is so small that it's easily covered.

[badass]

But the amount of these people in realtion to the working man/woman is so small that it's easily covered.

You checked the current and projected UK dependancy ratio recently?
Everyone's tax is going up. It's only fair that those that should more easily be able to afford it shoulder more of the burden than those that it will have much more on an impact on. However I think that an individual should never lose more than half of their earnings to tax. That's just silly.
SeriousSam. Your attitude stinks TBH. The "I'm all right, sod the rest of you" attitude encouraged by Margaret Thatcher is totally selfish. Anyone that is only out to look after themselves deserves to fall and have no one help them up TBH.

[TooNice]

But does the person who IS blessed and lucky have to pay a larger multiplier of that earning?

None of this holds true to disability, and age. When you CANT work, or are too old to work, you deserve loooking after.

But the amount of these people in realtion to the working man/woman is so small that it's easily covered.

Replying in reversing order of the point you've made. First, I think that the issue of ageing population is only going to become more significant over time.

Why do they 'deserve' to be looked after? If we go for meritocracy in the purest form, then surely those who do not contribute do not deserve anything (the elderly who saved enough can afford to be looked after)? And yet, we as a society agree that we ought to help out the less fortunate.

You could say that two 'inequality' (the fact that we are not born with the same cards, and taxing more the ones who are most fortunate) do not make it fair, yet they -are- somewhat balancing. Tax is frankly never going to be fair to everyone. Even if we all pay the same tax, some people would use national service more than others, and as such 'gain' more from them. So my final stance is like as follows. No, I do not think it is 'fair' to tax anyone anymore than any other. However, it is likely necessary to keep national services functioning (getting those services to run more efficiently would help too I am sure), and if that is the case, I am afraid that I would rather that the rich get taxed more, than everyone paying the same, though higher sum (to make up the difference). I am not sure how much tax would need go up to balance it out, but I don't think it would take much to choke the poorest. I think that the rich are entirely entitled to complain, and we ought to consider ourselves lucky if that's all they do. For them to leave the country en masse would definitely not do the country much good. Actually, there are many countries with lower tax than the UK, but are there any countries where income tax is not progressive?

[Zak33]

Why do they 'deserve' to be looked after? If we go for meritocracy in the purest form, then surely those who do not contribute do not deserve anything (the elderly who saved enough can afford to be looked after)? And yet, we as a society agree that we ought to help out the less fortunate.

I have an inbuilt moral compass...

as a sales man I'm happy to sell something to someone and try to make the mot money possible.. but I see no good and valid reason t shaft someone who is literally too retarded to know better, and hence would only help them.

Some one with no use of their legs and heavy breathing difficulty (for example) deserves assistance.

A soldier with an arm missing and post traumatic stress dissorder deserves help

But a lazy waster with no intent on getting a job does not

[TooNice]

I'd say this moral compass is not too different from anyone else's due to the value instilled by society. Though I note that in some countries, you will see people with no legs try to make a living (usually selling things). With little help from the government, they *have* to.

I don't think that you will find many defend leeches to the system. But even if you were to flush them out (and assuming it is cheaper to do so), I rather suspect that the government will still need to raise *a lot* of money through taxation. Right now it would be to reduce national debt, and even if we had no debt, more money, when used properly, could result in better public infrastructure (which arguably would make this a better/more desirable country to live in).

So it comes down again to, in other to raise X amount of money to sustain/improve the country, how should we go about taxing everyone. Would it be in anyway sustainable to tax everyone the same sum, or even the same percentage?

[Saracen]

I'd say this moral compass is not too different from anyone else's due to the value instilled by society. Though I note that in some countries, you will see people with no legs try to make a living (usually selling things). With little help from the government, they *have* to.

I don't think that you will find many defend leeches to the system. But even if you were to flush them out (and assuming it is cheaper to do so), I rather suspect that the government will still need to raise *a lot* of money through taxation. Right now it would be to reduce national debt, and even if we had no debt, more money, when used properly, could result in better public infrastructure (which arguably would make this a better/more desirable country to live in).

So it comes down again to, in other to raise X amount of money to sustain/improve the country, how should we go about taxing everyone. Would it be in anyway sustainable to tax everyone the same sum, or even the same percentage?

You simply can't tax everyone the same sum. Some people won't be able to pay it.

How much can you tax someone earning £10K? Or £20K. If you tax them enough to run services, you don't leave them enough to afford to live, eat and put a roof over their heads. Or, you tax them so much that they end up owing more in tax than they have in income. You get to a point where people either can't or won't pay.

And on the subject of taxing everyone the same percentage, while some people are unhappy about high earners getting their PA's progressively removed, I didn't see anyone moaning too loudly about the National Insurance breaks high earners get.

NI doesn't kick in until you get past the primary threshold (currently about £5k), and we then all (or all employees on PAYE) pay 11% .... until the upper warnings limit (£844 pw from 2009/10 on, or about £44k).

So ..... those on incomes under about £44k pay 11% NI on anything they earn above £5k. Those on high earnings get a tax break. Above £44k, they pay 1% on the surplus. So if earning £113k, in order to have completely lost PAs under the new scheme, you have been paying a lower NI rate on £113K - £44k .... or £69k.

So .... as we're being equitable, and fair, and just, and charging everyone the same, let's decide to abandon the removal of PAs for the high earners, but in the interests of treating everyone the same,
abandon the upper earnings limit on NI too. So they get that £6475 of PAs back, which, at 40% tax means they pay £2590 less in Income Tax. But they pay £6900 more in NI because, after all, we're taxing everyone the same.

Do that and you'd hear the screams from high earners.

And, while we're at it, let's remove all the additional allowances and loopholes. Let's abandon higher rate tax relief on employer pension contributions, allowing some well-paid individuals to top-load their excess income into tax-effective pension contributions instead if income taxable on the normal basis, like the low paid get, with no choice to play accounting games.

I said it before and I'll say it again, high earners already get plenty of tax breaks, and the one on NI alone is worth more than the change in PAs.

[oolon]

Also the problem with increasing tax on high earners is its easy for them to afford accountants to look at what saving can be made, poor people generally over pay without realising it.

[peterb]

the assumption that NI is another income tax is not quite true.

Income tax is on a total earnings per year basis, while NI is on an earnings per employment per tax year.

So if you had two jobs that paid £5000/year each, you would pay tax on £10,000 (less allowances) the total income. But you wouldn't pay any NI contributions because £5000 is below the Lower Earnings limit (and the emplyer wouldn't pay any contributions either)

However if you had one job, paying £10,000/year, you would pay the same income tax, AND you would pay NI contributions, so you would be worse off in terms of take home pay.

AS for progressive taxation - where is the limit drawn.

We are already seeing means testing for fines. If you are convicted in court for (say) doing 70 in a 40 limit, the fine you get will depend on your income. One the one hand, you could argue it is the same offence, so the punishment (in monetary terms) should be the same. Or you could argue that in terms of work (on a time basis) the penalty should be (say) 2 hours of labour - in which case the monetary value will be different. Of course that doesn't take into account different types of work.

And why not extend the principple to buying food? or other goods

You go into a supermarket and buy a loaf of bread and a tin of beans. How much do you earn? £6/hour - that will be 40p please.

Next customer earns £60/hour - ah, that will cost you £8.00 then sir.

Would that be fair?

[Bugbait]

Been too busy to jump into this discussion until now...

So ..... those on incomes under about £44k pay 11% NI on anything they earn above £5k. Those on high earnings get a tax break. Above £44k, they pay 1% on the surplus. So if earning £113k, in order to have completely lost PAs under the new scheme, you have been paying a lower NI rate on £113K - £44k .... or £69k.

I would argue that if high earners were paying a flat rate of tax instead of staggered then there would be less screams if the NI was "discounted" above £44k. The problem is a (much) higher staggered rate + non-discounted NI contributions.

And, while we're at it, let's remove all the additional allowances and loopholes. Let's abandon higher rate tax relief on employer contributions, allowing some well-paid individuals to top-load their excess income into tax-effective pension contributions instead if income taxable on the normal basis, like the low paid get, with no choice to play accounting games.

I said it before and I'll say it again, high earners already get plenty of tax breaks, and the one on NI alone is worth more than the change in PAs.

I've always been an advocate for flat tax rates, not that Australia or the UK (my two key countries of residence for tax purposes) are ever likely to adopt such a scheme. Why should someone pay more tax per dollar/pound just because they have a higher earning potential? Because they can afford it? Reeks of tall poppy syndrome to me. Even with a flat scheme the higher earners are paying more nominal tax. In return for a flat tax rate, they could remove all the loop holes (yes, there are many for those in the know) and greatly streamline the taxation system.

One tax break that Australia uses but the UK doesn't (as far I'm aware) is a discount on Medicare/NI for those that have private health cover over a certain threshold. In Australia (when I last checked anyway), people in the higher tax bracket would pay 3% Medicare (equivalent to NI for most parts) unless they had private health cover, which would reduce the contribution to 1.5%. For the vast majority in this bracket, the 1.5% saving was more than enough to pay for very good or the best private health cover. This meant that they didn't need to rely on the state funded system and thus took a notable burden off state funds in return.

You also mention pension contributions. There's a portion of NI that goes to the state pension, however I'm fairly sure anyone can request that this be redirected to their own, privately managed pension pot. Loop hole? Maybe, but it also has the potential to take a strain off the overburdened state pension system.

Not sure why so many are hung up on the PA. TBH, once you're over £100k the PA allowance is neither here nor there in real spending power terms. I guess it's really just a matter of principle for some. A much meatier issue in my books is the 50%+ tax rate for high income earners. Never believed in crippling those that strive for more.

Something else to consider: Higher income earners generally like to have nicer things. This includes more expensive houses and cars, more VAT paid in consumables, nice dinners, etc. There's a luxury tax on new cars over a certain threshold isn't there? Also a higher stamp duty rate for more expensive houses? It's not like high earners only get benefits on "breaks" at every turn.

[TooNice]

You simply can't tax everyone the same sum. Some people won't be able to pay it.

Sorry that was actually a rhetorical question. I can imagine the chaos.

That said I am a little more enlightened regarding tax break. Well, I am pretty sure the people who are affected will take all those considerations into account before they complain or decide that they are still better off elsewhere. Fair is kinda academic (though interesting), but I am sure the government is just interested in the result (getting elected and improving the services - I hope, and paying back those debt). And that goes for the people affected too (to move or not to move).

Now this is an honest question. How does income work for the Royal family? I would imagine that they do not have to pay tax but rather receive them but do they receive a fixed/percentage of it every year?

[SeriousSam]

Judging by some of the replies to my post, people either missed the point or completely misunderstood what I had written. How I end up accused of being a “Thatcherite” when I quite pointedly stated that she was deluded in believing that privatisation was the panacea to solve all our economic woes. Still I was intentionally provocative in some of my language so I suppose it’s not surprising that some of what I wrote was misconstrued in its intent. In any case I’ll try and elucidate further without pulling out my soapbox.

To start with I realised that I forgot one facet of my argument as to why having upper tax bands is unfair, as ironically it prejudices against those in whose favour it is supposed to work. The economy is like a giant food chain except that its resource, i.e. wealth, moves up and down the system. Extra tax bands create zones of inefficient wealth dissemination at their boundary, constraining the accumulation of wealth below them. Consequently those above the band gain wealth at a faster rate than those below, creating a greater disparity between the “rich and “poor”. So not only is it unfair that those that work harder (in most cases) for a larger salary also get penalised for it, but also because it affects everyone below them in the economic “food chain”.

The problem we have is that governments (and some of the population agree with them) believe that they can do a better job of disseminating wealth, even though (a) complex systems work best when not interfered with and (b) the extra resource required to manage the tax and benefit systems consumes part of the very resource it is supposed to redistribute. Yes we need income tax as otherwise we wouldn’t be able to provide social infrastructure, but it should only be one band for all*. However, for the reasons I stated in my previous post we will end up carrying on with the same inefficient system, and when times are tough some governments will try and claw back more wealth to balance the books despite it having an adverse effect on the people it is supposed to be trying to help.

*In fact the whole system requires an overhaul including national insurance, tax breaks / incentives and all the other unnecessary complications.

Now whilst capitalism can work in this respect I don’t actually believe in it as a sustainable system. Ironically the problem stems from us not the system itself, because we have no perception of the true cost of things. Since the industrial revolution we as a species have lived on the cheap, and created both a resource deficit and an excess of population. We have been going about our lives under the perception that resources are infinite irrespective of consumption rate, whereas they are anything but that. The issue that we face is how we ensure the survival of our species, because there are essentially three basic paths we can take.

1. We carry on as we are until the proverbial hits the fan and our civilisation collapses in pretty much apocalyptic fashion and we have to pray that enough of us survive

2. We accept the inevitable collapse and throw our energies into minimising the impact it has on us to reduce the risk of us being wiped out

3. We take some very hard decisions and utterly change our whole global society in an attempt to avoid the collapse and minimise the risk of us being wiped out

Currently we are following path 1 whilst being deluded into thinking that we are progressing towards somewhere between path 1 and 2. All this blarney about cutting CO2 emissions to combat climate change does is obfuscate the real problem, in that our “developed world” society is unsustainable.

No matter how far we advance technology creating alternative energy sources and so forth, we will hit a “limit” which is set by what we consume in order to stay alive i.e. water and nutrients. This then sets a constraint on the minimum amount of land required in order to produce them. Currently we use oil to artificially depress this requirement, but at some point we won’t be able to use oil or any other form of fertiliser other than that of biological synergy. Scarily we could need somewhere up to 20 “planet earths” in order to feed our global population in the future (calculating an absolute figure is difficult as a number of the key variables are unknown; population, population distribution, rate of consumption, area of viable arable land). Obviously we don’t have more than one earth, so people are going to die, even if we all lived at third world consumption rates.

This however is just the beginning of the problem as; the amount of energy available to power technology is finite, the amount of elements in the earth used to make things is finite. No matter how efficient we get there are limits which we cannot avoid because there are no natural ways of them being replenished or that the timeframe is so vast as to make no difference. Consequently we are going to have to give up on a lot of things that we currently take for granted. Even before that they will become limited and thus their “cost” will increase. So assuming we stick with our “developed market economics” until the bitter end then we will not be able to support as many people without adversely affecting society itself. This is why I raise the point of us having to consider how much “dead weight” we can support, not because of some neo-thatcherite everyman for himself belief, but because of a “survival of the species” perspective.

[shaithis]

I wonder how much of an issue this would actually be if there were not so many "tax dodgers"?

Those self-employed people who manage to dodge a fair amount of tax every year with their silly 1-man companies, umbrella organisations and free (or at least subsidised) pension schemes, life insurance etc?