P108 – they estimate that there are 275,000 adults out of adult pop of 49 million that earn >£150,000

Top 1% of income tax payers (“just over 300,000) pay 25% of income tax (still P108)

Still re-reading to check the numbers at the other end of the spectrum

JY said:

However i really dont see how you will reduce their burden without increasing someone else’s burden -rich[er] people

As I mentioned before, this is some of the most interesting stuff and appeals to the Rawls-ian logic I described earlier. I have read that section 3 times, and I still only just get my head round the details though.

I was aware of the contribution of benefits to total income for low income households but the concept of a 90% marginal tax rate for low-income earners was something I had forgotten.

Found it p105:

Note that within the tax system itself, little can be done for the very poorest. Around a quarter of adults live in households where nobody has a high enough income to pay tax

so it includes pensioners then I assume and is not working age adults so possibly written to make it sound larger??
I wonder what % of pensioners are on state benefits only?

JY – its probably there, just didn’t get that far. But a key theme of the report is the importance of thinking about the impact of tax over the lifetime of an individual rather than looking at a mere snapshot. That is also quite interesting eg, what happens to those who in the bottom/top brackets – how much mobility either way.

I will try and crack “inheritance tax tomorrow” as that is always a good one for debate!!

I can’t remember if it was with you or RPRT that we were debating (actaully not that polite!!) about whether raising the tax rate led to more revenue or not/elasticity of supply/why economics helps to provide frameworks but not answers etc…but this is also covered in some detail in the section on taxing high earners.

it was RPTP I am always nice 😉
What section is that – taxing rich etc as I may read that bit

I’ve not expressed an opinion as to whether the 50p tax rate is effective or not – I merely flagged up in my OP that the BBC appeared to be doing some good propaganda for those who want to get rid of it.

And I’ve not said anything about elasticity of supply.

I have said (or certainly intimated) that I am in favour of radical redistribution of wealth because the current debt based economy has an inbuilt mechanism for concentrating wealth in the hands of fewer and fewer people that has very little to do with them “earning” it.

I have also pooh-poohed the undue respect given to economic growth as a measure of progress.

Ok sorry RPRT. Forgot what we argued about. JY was spoofing me about the nice bit!! 😐

So the debate about the 50p tax continues to gather pace, but surely there is only one questions – does it work, in the sense does it actually raise any money? Its not propaganda!

Surely, the logical is that if it does, the general public would support it on the gorunds it raises money and if it dosent, than most should be happy to scrap it.

The report from the IFS yesterday is probably the best evidence we have, the report concludes ‘the introduction of the 50% rate would actually reduce revenue, costing the treausury £500m a year’. The laffer curve suggests that above 40p in the £1, the more tax is raised the less revenue is received.

Surely, based on evidence, available freely to all who wish to argue to point, the questions is whether we can afford to keep it? Yesterday more jobs were lost, and the politics of envy continue to use the 50% rate in order to satisy the lust to punish the rich. Why should the lower incomes pay higher taxes to make up the shortfall?

If the government scraps the 50% rate, they could use the money to lift more lower earners out of tax? Who could argue with that?

But, im sure people will – with increasingly emotive irrationality (bash the bankers, tax the f****rs). They may use the argument that people (really rich) want to pay more tax, but I suspect Mr Buffet would be a little more cautious with his words when asked to pay 15% more than he is paying in the US.

Politics of envy is making a comeback which is bad for us all, look what happened in the 70’s. The policy of “squeezing the rich until the pips squeak” to quote then Labour Chancellor of the Exchequer, Denis Healey.

Celebrate success, it will breed success.

The treasury say it will bring in 12 billion – thats the best evidence. If by the IFS you mean the institute for fiscal studies thats a right wing propaganda outfit.

Of course it brings in money.

why economics helps to provide frameworks but not answers etc

RPRT said this bit

about whether raising the tax rate led to more revenue or not/elasticity of supply

We all did this

JY was spoofing me about the nice bit!!

Is hurt

The laffer curve suggests that above 40p in the £1, the more tax is raised the less revenue is received.

The laffer curve is not at all represented by real world data though

The questions is whether we can afford to keep it?

Is it not whether we can afford to let the richest mebers of society continue to avoid tax? It is rather unfortunate that the poorest must pay all their tax burden but the richest can avoid theirs and we should change the law to reflect their avoidance rather than enforce better – would you like to generalise this princciple to all laws?

If the government scraps the 50% rate, they could use the money to lift more lower earners out of tax? Who could argue with that?

I , for one, am cetain that the reason the conservatives [ the lib dems aint keen]want to reduce the 50% tax rate is so they can unburden poor people from taxes rather than help the rich 😯

Even if i were to accept that higher tax rates lead to reduced incomes [ I dont] the answer is to close the loopholes they exploit rather than to capitualte to them and alter the law. We do not do this in other areas – drugs law, speed limits, prostitution etc – we increase enforcement.
This argument that you want to do it to increase tax returns is BS as closing loopholes and other methods would achieve the same result.

Politics of envy

This is such a lazy slur – like me calling your view the politics of greed. The redistribution of wealth would inevitably mean the majority being better off and a fairer world. They/we are more egalitarian than you. Envy means I want what they have when in reality I want a fairer distribution of wealth – much harder to attack someone for wanting fairness though hence the slur.

If by the IFS you mean the institute for fiscal studies thats a right wing propaganda outfit.

EXCUSE ME??????? WHAT DID YOU JUST SAY???????

The most respected, impartial economic watchdog in the country. Famously described the 2010 Coalition budget as “regressive”, caused huge headaches for Osbourne.

Totally shameless. Go hang your head.

Is the 50% tax rate immoral, “interesting” stuff from the moral maze

Moral Maze

Sometimes I get the feeling people use words like ‘propaganda’, ‘fairness’, ‘right wing’ and so on, not becuase they know their definition, but because they have heard it through the socialist worker!

mcboo

The most respected, impartial economic watchdog in the country.

Sometimes I get the feeling people use words like ‘socialist’, ‘left wing’, ‘worker’ and so on, not because they know their definition, but because they have read them in the FT!

Sometimes I get the feeling people use words like ‘propaganda’, ‘fairness’, ‘right wing’ and so on, not becuase they know their definition, but because they have heard it through the socialist worker!

Is that right?

And which “people” did you have in mind specifically?

What a stupid comment.

TJ – you seem very quick to jump to a conclusion which is odd for someone whose mantra seems to be, “show me the evidence.”

Please use the link and read who the authors of the the IFS study are, the breadth of organisations they represent, and the quality of their analysis. You may alter your pre-conception.

You will also find that the report provides support for both JY and mashie in a way that is refreshingly free from dogma!!

JY – you asked about taxing the rich. The relevant section begins on p104 and then 108-11 are particularly interesting. Some of the key points are (although I may be unintentionally biased in my selection here!!):

1. The income tax rate applying to the very highest earners has an importance out of proportion to their numbers, simply because they are such an important source of revenue (p104)

2. One pound in every four collected by the income tax system comes from just 1% of income tax payers. Of course, this largely reflects just how much more pre-tax income the top 1% of taxpayers earn than the bulk of the population do. (p104) (hardly biased TJ!)

3.the responsiveness of taxable income, and hence tax receipts, to tax rates may be quite high at the top of the earnings distribution—not because high earners’ employment decisions or hours of work are particularly responsive [there is some confusion on this point in the report], but because they may find other ways to minimize the amount of tax they pay:

by reducing their effort per hour worked;
changing the form of their remuneration;
contributing more to a pension or to charity;
converting income into capital gains;
setting themselves up as a company;
investing in tax avoidance;
illegally hiding their income;
leaving the country altogether (or not coming here when they otherwise would have).

(p109)

4. it is not clear whether the 50% rate will raise any revenue at all. (p109).There are numerous ways in which people might reduce their taxable incomes in response to higher tax rates; at some point, increasing tax rates starts to cost money instead of raising it.

5. The question is, where is that point? Brewer, Saez, and Shephard (2010) addressed precisely this question for the highest-income 1%. Their central estimate is that the taxable income elasticity for this group is 0.46, which implies a revenue-maximizing tax rate on earned income of 56%.29 This in turn (accounting for NICs and indirect taxes) corresponds to an income tax rate of 40%. So, according to these
estimates, the introduction of the 50% rate would actually reduce revenue. [one view]

6. However, there is no escaping the uncertainty around the estimate of a 40% revenue-maximizing income tax rate [my view and others’]. It was based primarily on what happened to incomes when tax rates changed in the late 1980s; but people’s ability to respond to tax changes may well have changed since then. Increases in international mobility and in the availability of complicated financial products may have increased people’s scope to respond, while a succession of anti-avoidance measures may have reduced it.

So economics gives us tools but not always the easy answers!!

TJ – a supposedly RW propaganda outfit is unlikely to present a balanced view?

Take this – start with an observation

Whatever the precise revenue-maximizing tax rate, it seems unlikely that much additional revenue can be raised simply by increasing the income tax rate for the very highest earners.

Throw in the complication

But it is important to realize that this is not the only tool available for extracting money from this group. [RW propoganda approach????] Widening the income tax base—removing reliefs and clamping down on avoidance—not only raises money directly but also reduces the scope for shifting income into tax-free forms and thereby makes tax rate increases more effective revenue- raisers. And there are, of course, other taxes aimed at the wealthy (notably inheritance tax), which might have the potential to raise revenue.

And then add another balancing view:

In addition, we should not forget that the revenue-maximizing rate is itself not necessarily the rate that we should impose on this group. If we value their welfare at all, or have concerns over long-term behavioural effects, then we might want a rate below the revenue-maximizing rate in any case.

I don’t want to butt in to what is a very entertaining argument, but this politics of envy thing is such a load of b*llox. You really think those of us who believe in a lower differential in wealth between top and bottom are simply envious? It’s not the politics of envy, it’s the politics of fairness and common sense. Sure the figures may well tell us that the tax take is less with higher top rate tax rates, but there’s a moral element to this too, and I reckon most ‘normal’ people would probably accept a slightly lower total tax income as a price worth paying to protect the principal of fairness.

whilst we are all getting very serious and emotive about this subject, I got my daily dose of silly humour from reading this

Britain may contain up to 60 million slaves

I have known of the IFS for years – yes of course calling it a rw propaganda outfit is hyperbole – but it does have a clear and consistent rightwing bias in its analysis. Thats why it agrees with you so much.

Dazh – this may or may not be aimed at me, but for sure I have used this term. So let me answer.

1. I believe strongly in reducing the differential in wealth between the top and bottom
2. I disagree that a one-dimensional “tax the rich bas****s” approach is the optimal solution
3. This is where envy can/may/does (delete as appropriate) gets in the way of rational debate
4. Most normal people would seek a solution that delivers the required result – there remains considerable confusion over how to do this. Putting the tax rate up is not the answer in itself (although it may be!!)
5. What is fairness? Is this a utilitarian concept (maximise overall happiness), is it respecting individual liberty (the more libertarian approach) or is it promoting a virtuous society? These will often conflict. The problem with the whole “what is fair’ issue is that people will always have different opinions on what this means. Just look at this thread?

TJ – its funny how you assume that I am RW?

On the hyperbole issue – the word “envy” is also slightly inflammatory I suppose, but I was quoting Immanual Kant!!

What is fairness? Is this a utilitarian concept (maximise overall happiness), is it respecting individual liberty (the more libertarian approach) or is it promoting a virtuous society? These will often conflict. The problem with the whole “what is fair’ issue is that people will always have different opinions on what this means. Just look at this thread?

Indeed! fair could quite easily be argued to be everyone paying an equal proportion of their income as tax. I’m yet to see anyone explain why this would be unfair…

Sometimes I get the feeling people use words like ‘propaganda’, ‘fairness’, ‘right wing’ and so on, not becuase they know their definition, but because they have heard it through the socialist worker!

I dont get this repeated slurs you are doing now. Clearly folk have differing views but it is just lazy slurs you are throwing about now. Saying you have alow view of the opposing view and /or their intelectuall abilities adds nothing to you argument. It may show us how right you are though – see what I did there 😉

JY – you asked about taxing the rich. The relevant section begins on p104 and then 108-11 are particularly interesting. Some of the key points are (although I may be unintentionally biased in my selection here!!):

I will get back to you on this once I have read the sections but cheers for the reference

EDIT: I dont think he aimed it at you but at mashiehood who sems to have got all emotive and polemic whilst accusing others of doing the same – see llast few posts
IMHO Teamhurtmore best let him and TJ do that one and save thosewho are slightly less entrenched [ though not agreeing] to have the grown ups debate 😉

Indeed! fair could quite easily be argued to be everyone paying an equal proportion of their income as tax. I’m yet to see anyone explain why this would be unfair…

excellent point and I therefore assume you must accpet that fair would also mean everyone having the same proportion to start with then

ZU – interesting point. I am reading this as talking about a constant marginal rate of tax ie, we all face the same % rate? One benefit of that approach is that it would gain favour from those who support individual freedom as the main driver of fairness, while still achieving a progressive tax regime that would be favoured by those who see fairness in more utilitarian terms. As long as there is a tax free allowance at some level, a flat rate tax system will still be progressive as it leads to higher effective tax rates as incomes increase.

JY – thanks. Frankly I have no view on the biases of the IFS, but sufficiently comforted by the breadth of representation in the authors’ report. Whatever, it is an interesting read, albeit took me several attempts in some sections, from which I learned new things and challenged my own preconceptions!!

Dazh – this may or may not be aimed at me, but for sure I have used this term. So let me answer.

No, more at mashiehood.

2. I disagree that a one-dimensional “tax the rich bas****s” approach is the optimal solution

Me too. But the idea of taxing the rich more is not based on envy, but more on the fact that the rich get far more out of this society than the poor in relation to the work they put in or the talent they may posess (IMO).

4. Most normal people would seek a solution that delivers the required result – there remains considerable confusion over how to do this. Putting the tax rate up is not the answer in itself (although it may be!!)

Assuming most normal people are capable of rational decision making. In my experience the exact opposite is usually true.

5. What is fairness?

A good question. I’d suggest the starting point for a definition should be to ask the question as to whether it is fair that billionaires and the starving/homeless can co-exist in the same society?

Actually TeamHM, I don’t agree with a tax free level or progressiveness – to encourage an inclusive society, I think everyone needs to contribute equally (from each according to his ability). Someone earning ten thousand pounds should not be given a “free ride” – they would have greater “ownership” and inclusion as part of society by contributing equally – equally, no tax relief or set offs at the top level, a single tax bill based on income (including income from savings and investments)

Get rid of the council taxes, get rid of the additional taxes, fuel taxes, get rid of all the overheads and administration costs of the bollocks tax credits system…

Fairness?

Using the tax system to redistribute the countries wealth from those who have the power to take a large chunk to the powerless who get little.

The wealth inequalities in this country are a disgrace. That some people, without risking any of his own money, take such a large proportion of the profits that are created by the work of many is simply not fair. its not to do with worth or with reward. Its simply about that power and is not justifiable.

To use the tax system to redress this imbalance is not only fair – its the right thing to do. Countries with less imbalance in wealth are happier for everyone – even the rich.

I find it amazing that my views attract so much ‘selective’ scruitny. Does anyone care to actually respond to the statement ‘politics of envy continue to use the 50% rate in order to satisy the lust to punish the rich. Why should the lower incomes pay higher taxes to make up the shortfall?

or

If the government scraps the 50% rate, they could use the money to lift more lower earners out of tax? Who could argue with that?

Mashiehood – I do not believe those things follow – nor does the treasury.

2. I disagree that a one-dimensional “tax the rich bas****s” approach is the optimal solution

But don’t you think that even discussing (not us, people with influence) reducing taxes on the rich when 100,000 people are losing their jobs and many others are being asked wither to freeze or cut their pay (not to mention having their pensions slashed) is effectively giving 2 fingers to the majority of the population?

Z11

Indeed! fair could quite easily be argued to be everyone paying an equal proportion of their income as tax. I’m yet to see anyone explain why this would be unfair…

I’ve tried.

Here it is again.

In our debt based economy money gets lent out by those who have it to those who don’t.

It has to be paid back with interest.

The only way for that to happen is for the economy to grow and for new money to be created.

As the cycle progresses those who made the loans end up with a higher proportion of the total wealth.

The rich get richer because they are rich.

edit: so we either change the system or redistribute through taxation.

RPRT – and thats what i mean by politics of envy. People are loosing their jobs as a result global economics and the treasury would rather take a £500m hit, and be seen as being hard on the ‘rich’, so as to be seen to be fair rather than abolishing the tax and using the receipts for the greater good.

mashie,

Too many assumptions there for me I’m afraid.

it is an interesting read

You should get out more 😀

I find it amazing that my views attract so much ‘selective’ scruitny. Does anyone care to actually respond to the statement ‘politics of envy continue to use the 50% rate in order to satisy the lust to punish the rich.

Firstly in debates like this, which can get heated and political [ we have Z-11 and TJ from the right and left respectively to show us how to do this], you cannot spout out inflamatory stuff like you have and think people will go …oh lets enegage with thatt poster they seem reasonable and it looks like we could debate this a bit further. As you seem keen here have this
I responded re your choice of phrase of envy as have others CAN YOU READ. However as you argue they pay less tax under this 50% rate Can I ask how we would we be punishing them ? By reducing it they pay more so perhaps you shoulsd ask why you use the politics of envy to punish the rich by reducing the tax? It is you who preach the politics of enevy as you admit you want them to pay more !!!

If the government scraps the 50% rate, they could use the money to lift more lower earners out of tax?

it is beyond wishful thinking to suggest the Tory govt will do this. I did respond to that one BTW.

HTH

RPRT – for sure and that is a real issue. This is a very emotive topic and emotions and dogma make rational debate difficult. I think this applies to other issues as well – public sector pensions/striking; ensuring banks play their vital role/fundamentally changing their business models and competitive dynamics. I guess this is where Milliband finds himself in a hole. Cameron is on a perception loser from the outset, so bizarely this gives him freedom. But Milliband is constrained much more by this, as shown by his challenge with the TUC conference this week.

TJ – the problem is that none of us have a monopoly on defining fairness. You appear to approach this from the perspective of a virtue concept (ie a vision of society) combined with an element of utilitarianism in maximising benefits for the largest number of people. But in doing this, you appear to accept that the freedom of individuals should be compromised. Others (I guess ZU and mashie) would feel uncomfortable with that view and would promote the freedom of individuals more.

Each of us may have a categorical view on what is the right thing to do, but at least be sensitive to the fact that this may not be fair for everyone!! (Even your friends at the IFS are happy to admit that openly)

Plus – I have a question for you, but it is in two steps – tell me who your favourite footballer is? Or alternatively your favourite sportsmen that you would pay to go an watch?

ZU – have your read Robert Nozick’s “Anarchy, State and Utopia” – I guess you would enjoy it?

Plus – I have a question for you, but it is in two steps – tell me who your favourite footballer is? Or alternatively your favourite sportsmen that you would pay to go an watch?

(a) David Beckham
(b) David Beckham if he got his kit off.

But then I don’t really follow football! There may be ones that are more hunky that I don’t know of. If so please replace name in (a) and (b).