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Do those things first, cut taxes for the working poor and then cut the top rate in a couple of years, say to 45%.
you like the government and you think they might do this - cut taxes for the poor first .. it highly unlikely a tory govt will do this to say the least*.
It is a fair point to say that Lab set them up though especially saying it was temp. At some point it will be withdrawn but timing will be very difficult for them.
Politically it would be naive in the extreme to reduce it whilst everyone was feeling the pinch [ cuts, reduced growth , deficit level etc ] and the slogan is we are all in this together.
* I agree with trying to remove the poorest from taxation via a large personal allowance with quite high rates beyond that.
Someone suggested a mid-range tax of 30% for people earning 35k-ish.
Assuming one person earns 35k and their partner around 10k.
A combined income of less than the national average for two people but getting taxed harder?
Anyway, why does George Osbourne look like a corpse?
grantus poor example as tax is based on the individual rather than done as "households".
Currently child benefit is a very good example of this.
There is [b]no evidence[/b] for tax cutting increasing revenue, quite the opposite.
Mega-yawn. TJ, do you always fall back on this tactic?
OECD, Oxford Economic Papers (try around 1991) for starters. They have data from real experience of cutting tax rates in the UK and not pure modelling assumptions. The evidence is very real and clear.Then go to an economics textbook and look up elasticity of supply. It really is very simple and logical.
Better still, get your mtb and do something more interesting.
you like the government and you think they might do this - cut taxes for the poor first .. it highly unlikely a tory govt will do this to say the least*.
Well I have news for you chap. Raising the base rate threshold was part of the coalition agreement and was in the first budget. Lets have more of the same.
http://www.bbc.co.uk/news/10378577
Don't be a hater.
jonb - Member
I get the impression the 50% tax was never about revenue and still isn't. It's a political tool being used by the two main parties to win votes in the name of "fairness".
mcboo - Member
The 50% tax was a clever bit of politics brought in in the dying days of the last government. Was never about raising substantial revenues, was all about setting a nice elephant trap for the Tories who would have to justify cutting it in the middle of a tough recovery......and here we are.
I agree with these sentiments, I also think it increases wage inflation at the top as these guy's are savvy and will just argue their take home is going down, or like certain union leaders divert pay into the pension scheme.
I do agree that executive pay needs to be put in the spotlight, the FD and CEO of my company got bonuses for "performance" which they could have in no way influenced due to time served <3 mths. Coming up with a viable model to do it is the hard part.
When the top tax rate was 95% the rich had soemthing to moan about. At 50% I just don't see the problem. "To be fair, a tax system must be progressive", one of my economics lecturers.
But Edukator - you need to ask yourself whether a higher tax rate really is progressive. In the 1980's when tax rates were cut two interesting thing happened - (1) revenues went up and (2) the % of revenues coming from higher earners also went up.
Plus if you take HK now with its very low personal rate of tax, the highest earners pay a much larger percentage of revenues that they do in this country where the rate of tax is significantly higher.
So we have the one of the worst rates of tax in the world (TJ source KPMG) and we have lower percentage of high earners/total revenue than other countries. Our tax system doesn't work in progressive terms. That only happens when benefits are taken into account - and that surely is a poorly designed system? (TJ source ONS)
As Alistair Darling, the former chancellor, acknowledged yesterday: "In the long run you have got to keep your tax rates internationally competitive, which means something like the two rates we used to have."
So the last Labour Chancellor would like the rate dropped sometime, just not yet.
Anyway back to the OP - no this is not a BBC campaign. Why do you think an organisation widely believed to be too left wing by the Tories would do that? Or the Guardian who also covered it a lot.
punative (aka "progressive" ) tax rates increase tax avoidance as their is a greater incentive to avoid paying it. this ia aided by having a tax system as complex as ours.
Personally I think we should be trying to make tax accountants redundant rather than boosting their income
Why is it only with very rich tax avoiders do we think we should alter the law rather than increase enforcement/close loopholes? Should we increase speed limits and stop enforcing it because lots of people speed? legalise drugs? Prostitution? Gangs?
Saying people actively avoid tax and then using this as an argument to reduce tax is an odd argument. Why would these people still not reduce their burden doing the same stuff? Seems clear their moral conscious and responsibility to society is unlikely to be changed by a reduction. It would seem more logical to assume people avoid tax , if they can, whatever the rate.
Mega-yawn. TJ, do you always fall back on this tactic?
back at you as I said in my more details post [ you ignored or did not read]would you like to use the data from the thatcher tax cuts of 1979 to support your view ? Well would you? As it is so simple and logical it should be easy for you to explain with this as you reference point with real figures how tax cuts always lead to more revenue.
in the 1980's fridge sales went up and so did the instances of AIDS .... casual then surely? Clearly nothing else is affecting the measure we are both using other than the variables we mention. For example I assume tax rates have gone down this year in the UK should we assume it is to do with 50% tax or could the global economic slowdown and increased unemployment etc be the cause - GDP reduces tax reduces obviously ? Again Thatcher cut taxes in 1979 but you dont want to discuss this time line do you because the data from this time frame does not support your view. iirc the same holds for the USA under ReganIn the 1980's when tax rates were cut two interesting thing happened - (1) revenues went up and (2) the % of revenues coming from higher earners also went up.
You are cherry picking from a favourable time frame to promote your philosophical view of taxation rather than showing us an undeniable fact.
as an aside
You may wish to be a bit more precise with a claim. Is it really lower than all countries -if not which ones ? Presumably it is higher than some and some of them have lower taxes than us which would go against your view just like Thatcher from 79 onwards.and we have lower percentage of high earners/total revenue than other countries.
The problem is finding a truly progressive system to evaluate and see if it really does have the desired results.
As it stands it's the poor that pay the highest proportion of their earnings in tax when you consider all the different ways people are taxed. VAT, community charge, NI, income taxes, Tv licence, tax disc... .
I pay the higher tax rate, I'm happy to, I consider that it's my social obligation. For years when I didn't earn as much I always said the rich should pay more tax, so it would now be hypocritical of me to try and avoid paying it as I've had my money's worth out of the nhs alone.
As Edukator points out, the poor pay a higher proportion of their income in taxes than the better off, I can still live very nicely thank you and pay, so why the hell should I get out of paying tax by judicious use of an accountant?, so I don't bother...... which family and friends consider to be a bit daft to be fair.
I've forgotten what my original point was now and where i was going with it dammit........
Thank you for your contribution to social justice, krieger. If only the super rich with their trusts in the Bahalmas, their tax-exempt forestry, their Swiss bank accounts and their mates in government that vote the measures that mean they pay almost no tax thought like you..
Ta very much, I like living in this country,so I'm quite happy to pay my way, Still can't remember what my original bloody point was though.....I think you may have just made it for me.
In an ideal world income tax would not exist, instead VAT is where the revenue should come from. However we do not live in an ideal world, and i I don't see if you start reducing tax rates why not start at the bottom? which benefits everyone anyway....
For tadeuszkrieger
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So you're in favour of the tax that hurts the poor most replacing income tax, wrapan. I assume ypu are earning over £100 000 p.a. and are worth several million so you personally benefit from the system you propose.
Hmm, now, sorry, but I'm having difficulty remembering... Just who was it that scrapped the reduced 10p tax rate, and therefore increased taxation for the lowest earners...
Slipped my mind I'm afraid... any ideas anyone? I'm guessing it must have been the evil Tories, right ❓
Slipped my mind I'm afraid... any ideas anyone? I'm guessing it must have been the evil Tories, right
You are entirely correct that the previous Government were evil tories as well. Give yourself a gold star.
Oh, and the BBC, royal charter, answers to a government that is in the pockets of the super rich (and has been for years). What do you expect them to say?
FFS Junkyard - this is a mtb forum not an economic one. So excuse me for not quoting [b]every[/b] period of economic history here.
Let me start however by agreeing with you - you make valid general points about causation versus correlation, fair enough. And in this case, the real analysis is indeed complicated by the multiple factors involved and created a lot of debate among professional economists. So let me now argue from a position of trying to prove something and let my simply say that is is false that raising tax rates necessarily leads to either higher revenue or higher earners paying a higher proportion of overall tax revenues.
You are right that I quoted the 1980s because it suited my argument but my starting point was actually (1) that it was the most contemporary example and (2) I could remember the figures from when I studied economic history. You quote the Thatcher tax cuts - I do not know the actual revenue figures (sorry!!) but I do know that between 1981 and 1988 the % of tax revenues paid by the top 1% went up from 11% to 18%. Not as dramatic as the later cuts but the direction was the same.
Ditto, the Reagan years. The IRS analysis concluded from this period that "tax payments and the burden of the tax burden borne by the top 1% climbed sharply."
On the final point, yes I can answer that but let me throw the question back. The UK has one of the most penal rates of tax in the western world - ranked 83 out of the 86 economies studied by KPMG. Do we have one of the most equitable distributions of income (pre-benefits)?
Funny that, KPMG, a company that specialises in advising it's clients on how to pay the least tax claims Briatain has penal tax rates. But fails to mention that those using its sevices successfully manage to use the Britaish tax system to pay virtually no tax.
The problem is that a 50% tax on earnings over £150k is a relative drop in the ocean compared to the monies lost on the 10% tax band for low earners. There's a lot more of them than there are millionaires, see?
But income tax is only part of the tax burden as any fule kno and the very well off aren't going to suffer as much hardship resulting from things like VAT and Fuel Duty as those on lower incomes.
In 2007, 50p out of every £1 spent in Britain found it's way back to the treasury before the end of the year.
I don't know what my point is here, or where I'm going with these statistics other than to say that the supposed "trickle down" effect from the wealthy has proved to be utter bunk in terms of lower / middle class social mobility so I don't see why they shouldn't pay 50% on earnings over and above £150k which is frankly and obscene amount of money to earn anyway when the average salary is £25k.
So there.
You quote the Thatcher tax cuts - I do not know the actual revenue figures (sorry!!) but I do know that between 1981 and 1988 the % of tax revenues paid by the top 1% went up from 11% to 18%. Not as dramatic as the later cuts but the direction was the same.
I think [ if true I dont know] then
1. this is an artefact caused by unemployment removing a few people from the pool of those who paid tax.
2. i am not surprised the very rich prospered under a tory govt whilst the rest of us got shafted.
3.It does not prove that tax cuts did this nor this does it prove it would have been less if the tax rate was higher. Economics has no golden proof for either of us.
The UK has one of the most penal rates of tax in the western world - ranked 83 out of the 86 economies studied by KPMG. Do we have one of the most equitable distributions of income (pre-benefits)?
kpmc- could you say which study - there are thousands there - quick google never heard of them and I would prefer to read before commenting. It might be tomorrow before i comment if you post a link as I suspect it is complicated.
the use of the word penal is interesting - how do you work out how much a tax system punishes you?
You started quite aggressively yet argued quite reasonably ...this is not the STW way 😉
Ok enough of the aggro (sorry!) Junkyard (and Edukator), but let's keep it real. I only quote KPMG data, the 'penal' bit was me. But lets not get too "conspiracy theory" here. All KPMG was supplying was ACTUAL tax rates - where better to go than a global auditor? No apologies there.
In this case I simply equated penal with high. Nothing more. No comment on types of tax and which are more penal and to whom 😉
As I said before, the whole debate comes down the the labour elasticity of supply and, as always, economists will argue to 'til the cows come home about the shape of the curve - as long as it suits their point!! We will not solve that here. But it is an interesting topic to argue "quite reasonably"!!! 😉
But it is interesting to note that in the US and the UK parties of all political pursuasion have "tended" 😉 to come back to a point of accepting that high rates of tax solve very little. Even JFK!
[i]i am not surprised the very rich prospered under a tory govt whilst the rest of us got shafted.[/i]
The very rich have prospered (benefitted from the tax regimes) under every government since the 70s, and everyone (including the rich) suffered under the high inflation that preceeded.
Labour/tory isn't the question, Junkyard, New Labour allowed the very rich to avoid paying tax (whilst increasding taxes that hit the poorest) more successfully than Thatcher ever did.
Junkyard - one final come back on point two.
Please go to the ONS website and read their analysis about income inequality in the UK. Please note the periods when income inequality worsens in the UK and when it gets better/stabilises (you dont need to go back hundreds of years :wink:) Then "correlate" (sorry, bad pun) with the party in power. It's quite illuminating.
Labour/tory isn't the question, Junkyard, New Labour allowed the very rich to avoid paying tax (whilst increasding taxes that hit the poorest) more successfully than Thatcher ever did.
This is very true. The statistics for social mobility bear this out. The top 10% earners are experiencing an average increase in wealth of 8 times that of the middle earning bracket which has been more or less moribund since the 1980s.
Those born in to low to middle earning families are less likely to improve their standard of living than their Victoria era equivalents.
95% was a very high tax rate and counter productive. 40-50% is not. "trop d'impot tue l'impot" (too much tax kills tax revenue) is true. It's a question of where you place "too much". That is a comparative thing.
While Holland allows musicians to pay very little tax, Switzerland has a system based on property values and various island are tax havens, there will always be tax refugies. In most cases I would argue they are "good riddance to bad rubbish" - the mony they take with them would only have festered in a off-shore trust if they'd stayed..
Basically everyone is saying that anyone who earns more than them should be taxed more, right
But RJ, everyone who earns more than me [i]does[/i] pay more tax than me. No?
That may sound self-contradictory, but it's the proportion of taxation to wealth and social mobility that's more of an issue don't you think?
Who said social mobility was a good thing? We all need people to serve us in Mcdonalds and clean our cars, for this we need the plebs, no? Or do you want your bin man to be earning 50k a year with an Oxbridge degree?
Let's take the current trend of social mobility across the upper, middle and lower income households.
Upper income households have the highest rate of social mobility of all. Even in these so called hard times, the top 10% of earners are still getting richer at the rate of 14% per annum.
Middle income households are experiencing nearly stagnant growth overall, which has remained this way since the early 1980s.
Lower income households income growth is lowest of all, eight times less than that of middle income homes.
Remember, this is solely by income... Is this fair? Tell me what you think. And what about the economic ramifications of stagnant growth for the majority of households?
I think it's a product of capitalism. "Fair" depends on your point of view I guess.
So what's yours?
My (overwhelmingly unpopular) point of view is that you reap what you sow, everyone has a chance at making a success of it under a capitalistic system; if you don't then that's tough shit. What's your view on it?
What do you define by "sow", hard work or your parents' ability to sustain you through your education?
You don't need rich parents or an expensive education to make money by inventing things or working hard, that's obvious surely?
But the social mobility statistics would suggest otherwise. Sure, people do make better of themselves, but it's a damn sight harder than it's been since the 1970s. Unless your parents are rich of course.
Britain PLC has to compete with the rest of the world for resouces. A system which fails to make the most of its own human resourses will make it uncompetetive with countries that better exploit human capital. That means giving the poor access to education, health and providing infrastructure that makes them as productive as possible.
Taxing the poor out of education, leaving them little choice but to reamin in cheap areas where there is no work and perpetuating benefit dependancy does nothing to drive the economy forward or ultimately increase tax revenues.
Making the poor pay most of their income in tax is counter productive. Making the rich pay merely half their income in tax has little impact of their lifestyle or ability to contribute positively to society.
A notion of "ability to pay" is essential to a tax system and lacking from most the tax systems in the world. VAT is one of the bluntest tax instruments used and yet institutionalised continent wide by the EU.
The longer this government is is power the more they begin to resemble nazis.
It's comments like these that go to explaining why it took me so long to realise that Surrounded By Zulus and Zulu Eleven are (apparently) different people. That and the fact that I'm thick.
You don't need rich parents or an expensive education to make money by inventing things or working hard, that's obvious surely?
Brutally you do, if you want a house look to the bank of mum or dad, if you want a decent education move to a decent catchment area, you need to know the game, If your poor and working 16hours a day with your kids hanging around on the street, no chance. You will always get the odd person making it against the odds, but the reason they are noteworthy is because they are the exception.
And this is the thing, hard work, look around and you will see plenty of people working hard for crap money, so hard work is not the answer.
Remember that half the population is of below median intelligence, so clearly some people will be better able to do certain tasks compared to others. Effort does not lead to money.
Further the system we have, and have always had favours those with money and passively prevents those without getting to the top.
My (overwhelmingly unpopular) point of view is that you reap what you sow, everyone has a chance at making a success of it under a capitalistic system; if you don't then that's tough shit. What's your view on it?
is that a troll or just naive?
Would you like to use some statistics to show that everyone has an even chance? Why are the cabinet made up of privately educated millionaires rather than hard working council house born folk?
It is a myth of capitalism - yes you may get a richard Branson and an Alan Sugar but you also get landed gentry and inhereted wealth with little change. Old school tie network etc
You don't need rich parents or an expensive education to make money by inventing things or working hard, that's obvious surely?
yes we should all invent something and obviously someone who collects bin is lazy as is the care worker doing 60 hours a week for the minimum wage.
Capitalism is based on winners and loosers , obviously you need far more many looser than winners [ think pyramid ] so most folk will loose. If you are born into wealth you will almost certainly be wealthy and if you are born poor you will almost certainly be poor. The stats do not support your view unless you wish to give great weight to outliers and ignore the overwhelming majority. So yes some may escape [relative]poverty but most dont and hard work alone wont help you.