[Closed] Removing 50p tax rate - seems to be a BBC campaign

stoatsbrother- you leave with my respect few on STW would have even replied - we all get stuff wrong on here but very few front up to it.
Chapeau [ roadie term - doffs cap/salutes]

I agree hurtmore but I cant see how you will achieve it without redistributing wealth to some degree.

I’m a 40% payer – when you add on NI and 9% student loan* i’m knocking on the door of 60% tax for any pay increase. If i’m completely honest work is a means to an end for me – I enjoy my job, but certainly wouldn’t be doing it if I didn’t have to (i’d be off mountain biking round the world!) – i’m working to live rather than the other way round. I can only speak from personal experience, but for me the fact that i’d only see 40% of any pay rise does not incentivise me to get a dump load more pressure and responsibility.

I don’t think Britain is a particularly unfair society, I did benefit from two good parents, but I went to a very average comprehensive, and had to work hard at college and uni to get a decent job. Certainly didn’t get it all provided for me on a plate. Hard work seems to do ok as far as I can see, same for all my mates as well – we come from a diverse set of backgrounds, but none of us it doing badly.

As for social mobility I’d assume that anyone with half a brain can see which careers are going to pay well and which aren’t, and make a choice between earning loads and not earning loads. There isn’t anything wrong per say with either choice, but it does seem silly to moan that a social worker (for example) earns less than a hospital consultant - the laws of supply and demand apply to the labour market so if you want to earn a lot, learn to do something not every can do (or chooses to do) and you’re set as far as I can see. The market clearly thinks that a bunch of people could be social workers but only a small number of people can / want to put the time in to become hospital consultants.

*A tax in all but name.

Been away for the weekend (very nice, thanks for asking) so interested to see the way this thread has developed. It seems to have gone a bit OT, but never mind.

Personally I have very little truck with the "all my success is down to shear hard work, anyone could do it" POV. Like some others here I know people who work their asses off for very little financial gain and others who seem to earn ridiculous sums of money for apparently only moderately taxing (no pun intended) work.

HOWEVER... If it were the case that the cream always rises to the top, then surely just paying a bit more tax would hardly be an insurmountable obstacle to those destined for greatness? (Or could it be that most of them know damn well they don't especially deserve their wealth?)

Just coming back to some of the other comments:

@Poly, the notion that people decide to move from their 40k position to a 50k position purely on financial grounds seems laughable to me. Once people are in that middle/upper management world it seems to me they are far more motivated by power/influence than money anyway and the pay rises just come along as a bonus.

@RJ I can't beleive you actually think that that [url= http://www.sidesofmarch.com/index.php/archive/2011/04/25/beer-and-taxes/ ]Tenth Man[/url] sh1t is really applicable in real life? You'll be teling us that a plane can't take off on a moving conveyor next. But just to join in for a moment, how do you think the Tenth Man feels now that he has no friends and has to sit around at home on his own of an evening? And lets face it, he probably only got into that position by exploiting the other nine in the first place. As I said, it is up to the rich to spread their money around a bit - otherwise revolution!

Or to put it another way:

[i]Lord Finchley tried to mend the Electric Light
Himself. It struck him dead: And serve him right!
It is the business of the wealthy man
To give employment to the artisan.
[/i]

@Stoatsbrother

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.

Yes, why indeed, that is my very question. I wouldn't expect them to do it, but my point is that they are doing it.

@teamhurtmore

I prefer to think about ways that can create the opportunity to create wealth (however, defined) rather than ways that seek to give everyone the same outcome.

OBVIOUSLY taxing the rich at 50% IS NOT "seeking to give everyone the same outcome"

So if you want those of us who differ in outlook from you to take you seriously, then stop insulting our intelligence.

But to address the arguable part of your point (which I'm going to characterise as "trickle down being preferable to level down") I still think you're wrong. There is NO trickle down effect. Money continues to be concentrated more and more in the hands of fewer and fewer people. That is a fact. And the reason it happens is BUILT IN to a debt based economy. When money is lent at interest it is BOUND to happen and the only way that that can be adjusted is by redistribution. Sure there will be individuals who make a lot of money through business, but they are actually a small part of the problem. The main part of the problem is the accumulation of more money simply from having money to begin with.

But then of course you also have to think about what the aims of redistribution should be - how should the taxes be spent, which hasn't even been addressed here (don't you think it's important?). Clearly if the money were being spent on new plasma tellys for workshy benefits scroungers that would be a slightly different issue to it being spent on education (giving youngsters that equality of opportunity that you are keen on). But I'm sure we can all trust the Tories to spend our money wisely eh?

Rightplacerightime - you can accuse me of many things, but insulting your intelligence is not one of them.

I think ultimately we all have the same objective - higher economic growth and a better distribution of income - but we differ in how those objectives can be achieved. Leaving aside the moral/emotional issues involved this is not surprising as the evidence from the economics profession remains mixed. For example, the IFS and the Treasury come to different conclusions about the impact of the 50p tax rate. Why? Because while the concept of elasticity of supply is easy to describe on paper, it is very difficult to measure accurately in practice, plus as has been pointed out by others, the degrees of causation are very difficult to prove. Economic history is littered by controversies over the shape of demand and supply curves - and the answers will not be found on SWT!!

So where does this leave us? I'm not sure. Whatever the links (perceived or otherwise) we live in a society that carries a relatively high tax burden. Despite this, we agree that income distribution remains heavily skewed and largely unchanged over time, although the constituent parts of this distribution have changed - hence my example of footballers. A further irony is that income inequality actually increased under a Labour government. Even worse, ONS analysis suggests that we have to resort to the short term solution of benefits before income inequality is addressed and only slightly even then. No way to run an economy.

RPRT - of course, it is important to consider how government money is spent. But, all other things being equal, taxation and government spending have a neutral effect on aggregate demand. One is a withdrawal that funds the other which is an injection. Net effect - neutral.

I think ultimately we all have the same objective - higher economic growth and a better distribution of income - but we differ in how those objectives can be achieved.

I am not sure that is the case, many of the wealthiest seem to see it as a competition, where their relative success is more important than overall success, hence seeing tax as a burden rather than an investment is society to everyone's benefit.

MSP - I meant on this thread.

elasticity of supply

g8 by rank - tax as a percentag eof GDP
Please note we have a NHS which would remove circa 8% if we changed this to a "private company" rather than a tax.
usa-26.9
japan-27.4
canada-32
UK-39
germany-40.1
italy - 42.6
France-46.1

It is not really accurate to describe us a high tax considering we have the lowest of our EU competitors.

I think a bit like you calling our tax "penal" you are just giving your own view rather than a fact.

THM

I think ultimately we all have the same objective - higher economic growth

No, we don't.

I don't want higher economic growth, because I realise that we live on a finite planet.

I know you won't agree with my point of view, but you seem to have a fundamental inability to grasp this idea even as concept.

GDP as a measurement of progress is a busted flush.

But, all other things being equal, taxation and government spending have a neutral effect on aggregate demand.

Again, you seem to be unable to think in anything other than economic terms. The most important aspect of Government spending isn't whether or not it creates "demand", it's whether people get educated, made well, stopped from starving/rioting etc.

Again, you seem to be unable to think in anything other than economic terms.

That argument works both ways though, doesn't it? When you're there saying that people don't have equality, because Nurses work really hard but don't get paid as much as they're worth (apparently) - then the counter argument is that money isn't everything... Investment bankers who went to Eton may get better paid, but that doesn't mean they are better off!

They may not be any happier - that's true, but I think that's a point in support of my view, not yours.

Having lots of money in some cases gives one group of people power over others. I think that's wrong. That doesn't mean I think there should be a free for all, but I don't think the amount of cash one has is a very good measure of the amount of influence you should have. That's one reason that I'd like to see a more even distribution of cash than we currently have.

Personally I'm not terribly driven by money and I'm not particularly after any more for myself, but I do see the hugely corrosive effects that the profligacy of the super rich has on society, particularly amongst those at the less financially well off end of the spectrum who are also sucked in by consumerism.

[img] [/img]

Personally, I'd prefer a method of organic, sustainable farming of the rich, but it's a start.

OK , JY, I will try to answer both!!

On the tax ranking issue - very good question.

My original comment was based on the KPMG stats. This is arguably an overly simplistic set of data as it merely compares marginal rates of taxation. On this basis, the UK has the 83 out of 86 highest rate of marginal tax. Hence my subjective conclusion that we have a penal rate of tax 😉

Thinking about it, it is probably better to use effective rates of tax. The OECD did a study on this. It still shows us as having a relatively high rate of effective tax (ie, including social security contributions etc) and ranks us as 6th highest among 30 economies. But in this case, the gap between the UK and other economies is not a high/penal (you chose :wink:) as when you only look at marginal tax rates.

On tax and elasticity of supply, my understanding (gulp!) is that tax affects the price or labour supply ie, if you increase/decrease tax this reduces or increases the price that we get from supplying our labour. A change in tax, will have an income effect and a substitution effect and the net effect of these will determine the overall impact and elascticity of supply. There is lots of debate about these effects and the shape and hence elasticity of labour supply - particularly on whether they differ over time and at different levels of income. My understanding FWIW, is that elasticity of supply increases at higher levels. This is why (leaving any value judgements aside) I do not support higher tax rates - if my understanding is correct, they will not increase revenue that RPRT (and I) wants to spend on educating people, making them well and stopping them starving and rioting. Please do no assume that I am a Tory here - people on both sides of the political spectrum find themselves on both sides of the debate here!! What is also interesting/boring (again you chose) is that there is lots of debate about how these effects vary at different levels eg, 40p, 50p etc. Taxable income elasticity (ie the extent to which taxable income responds to a change in the tax rate) is linked and is another hotly debated issue eg, IFS versus Treasury. There are far more qualified economists at both organisations than you and me (I guess) so if they can't agree, I doubt that we will here!!

Happiness - I was wondering when this would creep into the [s]argument debate! Believe it or not, but given the choice, people will pick a well-paid job with a less happy lifestyle (long hours, stress, uninteresting tasks) over a less well-paid job with a happier lifestyle. That is the main finding from an experiment involving thousands of adults and students conducted by a team of economists.

The researchers asked people to choose between a number of scenarios. Choices included picking either a job paying £49,000 per year which lets you get 7.5 hours of sleep a night or a job that pays £73,000 but which allows just 6 hours sleep. Many gave one answer for what would make them happiest (usually more sleep, less money) and another answer for what option they would choose (more money, less sleep). They would often choose an unhappy option if they thought it would give them greater purpose, social status, control or help their family.

The lesson for the government is simple: ditch all the nonsense about trying to promote happiness, which in fact merely reduces opportunities. At a time when the proportion of young people not in work, education or training is at a record high, we need more jobs and more economic growth, not mumbo-jumbo and compulsory reeducation. We need to boost Gross Domestic Product (GDP), not worry about Gross National Happiness (GNH). The previous government’s obsession with our “work-life” balance was always based on a meaningless artificial dichotomy. It some cases its sole purpose was to justify laziness and a culture of entitlement. It certainly feels very 2007 to speak in those terms these days. If we want to afford to consume more in the years ahead – including more healthcare and other services – we will need to work harder, longer and smarter to pay for it.

mashie,

I think you have neatly summed up the exact opposite of my POV.

rp - sorry! I think we all would love to live in a 'utopian' world, but some of the thoughts / ideologies on here are too simplistic and not grounded on realistic principles

I sense an implied criticism.

OK then, lets look at GDP.

What do you think would be the ideal rate of growth of GDP?

Most economists today agree that 1.5-2% GDP growth per year is the most that our economy can safely maintain without causing negative side effects. Studies have shown that over the past 20 years, annual GDP growth over 2% has caused a 0.3% drop in unemployment for every percentage point over 2%.

However, growth needs to be carefully balanced because over time, the growth in GDP causes inflation, either through oversupply of money or through the effects of low unemployment (goods and services will increase faster than supply, causing prices to rise, or higher commodity prices, raw material costs).

So, its a fine balancing act, I see the next twenty years as being an age of austerity, partly due to the over reliance by man kind on finite resources. We will have to make tough choices, if we continue to consume at our current rate than inflation and low growth will hurt us all, hitting the very poor the hardest (not just in the UK but also the third world)

The age of auterity will be unpopular, governments will fall, there will be riots on the streets, debates about the gap between the rich and the poor will divide everyone, but I am a firm believer that our habbits / expectations / desires need to be rebalanced if we are to survive for the long term and leave a leagcy our kids can be proud of.

RPRT - you started this thread by questioning whether the BBC had a 'hidden agenda' and seemed concerned about a lack of balance. Interestingly two days before your post, they had the following on their website:

http://www.bbc.co.uk/blogs/seealso/2011/09/daily_view_should_highest_earn.html

Not necessarily the commentators that I would choose but balanced enough (surely) for your fears to be unwarranted. I am sure you will enjoy the blog of Richard Murphy!

And for some light-hearted relief (including Laffer/Laughter curves) try this:

http://www.ft.com/cms/s/0/05fc4fd4-da18-11e0-b199-00144feabdc0.html#axzz1Xg0q7VIG

mashie,

nice bit of cutting and pasting, but I asked what [b]you[/b] think. Did you not have anything in mind until you found those first couple of paras?

THM,

That article in itself seems reasonably balanced, but it hardly balances the two headline news articles.

i give up!

why so soon mashie that is the third time I have read that cut and pasted on STW- keep it up
Hopefully one of the times I read it it will actually give a reference to the study and some actual details....fingers crossed dont let me down- Economist studying social values whatever next? Psychologists on macro economics? Shall i just cut and past my response ?

WTF are you doing mashie saying reduced unemployment is a negative effect of GDP growth 😯 Dont all right wingers maintain unemployment is because they are workshy shysters rather than because it as an attempt to control inflation "finally balance growth v Negative stuff like low unemployment 😯
TBH inflation matters not one jot if you have no work or wealth or income. It is off course very importnat if you have great personal wealth a swe dont want that to be reduced by inflation . Heartless and I am not even that convinced by the economic argument

mashie,

I am genuinely interested in what you think. But just cutting and pasting someone else's opinion, without even attributing it isn't very interesting. If I wanted to know what some random economists think then I could just stick to Googling and not hang around forums.

I only asked what you thought GDP should be because you said:

We need to boost Gross Domestic Product (GDP)

I was kind of expecting you to have some sort of figure in mind.

RPRT - the first two paras are fact / opinions - a basis from which an argument / debate is prepared.

My thoughts are just that - balanced growth (2% if you want hard numbers), keeping close tabs on inflation and employment.

However, my last two paras looked to the future, natural resources and inflation linked to increase in costs associated with humna consumption of natural resources. Those are my thoughts.

so you want to make sure we keep some people unemployed then whilst we make sure we do not tax the rich too much ?
Seems likes a most excellent idea

Just got to make the kids' tea. I'll be back.

RPRT - are you happiest when you are arguing? 😉 The BBC headlines seem to follow a chronological order of when various announcements where made. So if Lawson made a statement that day, it's hardly surprising that he is the headline.

It's funny that you "attack" me for arguing from an economics perspective. I only do this because economics gives us tools to answer the questions that you and others raise. Frustratingly though, it doesn't give us the answers. I actually approach the whole issue far more from a philosophical stand point even though this has the same frustrations as economics! So, if you want to attack my foundations - read John Rawls "Theory of Justice" (1971) - possibly the most important book on political philosophy to have been written in the past 50 years. He addresses the issue of a just society, what is meant by equality and what is the role of taxation?

"No one deserves his greater natural capacity nor merits a more favourable starting place in society. [b]But is does not follow that one should eliminate these distinctions[/b]. There is another way to deal with them. The basic structure of society can be arrange so that these contingencies work for the good of the least fortunate."

Blimey, you two, give Mashie a break!

The target of approximately 2% growth in entirely consistent with economic history that indicates that above this level inflationary and balance of payments pressures (high marginal propensity to import) tend to rise and choke off growth in the UK.

THM,

The chronology of the BBC stories wasn't my point (have you actually managed to follow any of my points so far?) Go back and read the post that I started this thread with. What surprised me wasn't that they covered the story, but the prominence they gave it given the other things that were happening in the world.

Not sure about your next bit though:

...economics gives us tools to answer the questions that you and others raise. Frustratingly though, it doesn't give us the answers.

So have I got this straight? economics gives us tools to answer the questions, but doesn't give us the answers?

In the spirit of a shared quest for knowledge though, I'll read your book if you read mine? Limits to Growth, the 30 Year Update. by Meadows, Randers, Meadows - possibly the most important book for people locked into the belief that past performance of the economy can be sustained into the future.

Like the quote though:

"No one deserves his greater natural capacity nor merits a more favourable starting place in society. But is does not follow that one should eliminate these distinctions. There is another way to deal with them. The basic structure of society can be arrange so that these contingencies work for the good of the least fortunate."

Is the next sentence... "By taxing the f***ers!"

I do wonder,

simple question, the world is finite, growth even at 2% is effectively infinite given long enough.

How can the two be reconciled?

😆 @RPTP

Social and economic inequalities are to be arranged so that (Rawls, 1971, p.303):
a) they are to be of the greatest benefit to the least-advantaged members of society (the difference principle).
b) offices and positions must be open to everyone under conditions of fair equality of opportunity

i suppose the best way forward might be to return to the black ball approach, local government is done by picking a ball out of a sack, if you get the black ball, then you are a councillor.

No elections as such, with heavy punishment for abuse of position, think jurors as an approach.

RPRT - 🙂

1. Yes, I think you were being paranoid with the BBC!!

2. On economics not giving the answers - this is true of many social sciences/humanities. There are certain economic tools that help us to frame a debate. In the case of taxation, these include concepts such as elasticity of supply. But the conclusions are rarely clear cut. Different data will give you different shapes of supply and demand curves and will lead to different conclusions. So while, economics can lift the debate away from mere dogma/stupidity, it doesn't give answers. Like philosophy, this can be unsettling and exciting at the same time.

3. Have read the intro of Limits to Growth on Amazon. Thank you - some interesting points and some questionable ones so far. I will read more later. Out of interest, do the authors show any graphs that use a logrithmic scale? I am naturally suspicious of "growth'' charts that miss this point. I am ashamed to admit my ignorance about this book especially as it's conclusions (1) had a big impact and (2) seem very contraversial. In relation to your question above re economics, I was amused to read one critique of the World 3 model that stated, "The World3 model was not intended to be predictive or for making detailed forecasts, but to provide a means for better understanding the behaviour of the world economic system. “In this first simple world model, we are interested only in the broad behavior modes of the population-capital system.” (Meadows et al., 1972, G. Turner p.91).

4.

Is the next sentence... "By taxing the f***ers!"

I will give you two quotes though - One from Kant (who Rawls seemed to draw a lot from) and one from Rawls himself.

Kant: "envy is the vice of mankind"

Rawls: "it is rational to envy people whose superiority in wealth exceeds certain limits" ...nevertheless this is not the basis for a theory of justice.

Junkyard - the key thing about the difference principle is that it has a vision of equality that doesn't require an equal distribution of income and wealth..."those who have been favoured by nature, whoever they are, may gain from their good fortune only on terms that improve the situation of those who have lost out."

Rawls views are often summarized in the saying that "inequalities are allowable only to the extent that they improved the condition of the least advantaged in society.” But I think he goes further than this to say that the goal is to reduce poverty among the less fortunate, not to reduce the higher incomes among the more fortunate. He argues that the ability of the fortunate to earn more is a welcome source of tax revenue to boost the rewards of the poor.

economics can lift the debate away from mere dogma/stupidity

When is this likely to happen?

Out of interest, do the authors show any graphs that use a logrithmic scale? I am naturally suspicious of "growth'' charts that miss this point.

What point?

THM, so i assume you are saying a return to a more victorian philanthropism is a way forward? where employers were more likely to supply accommodation, schooling, libraries, museums, etc. i.e. using the wealth they have for the benefit of the community.

mashie

My thoughts are just that - balanced growth [b](2% if you want hard numbers)[/b], keeping close tabs on inflation and employment.

However, my last two paras looked to the future, natural resources and inflation linked to increase in costs associated with humna consumption of natural resources. Those are my thoughts.

I'm glad you've got some awareness of the physical limits that we face BUT, I think that your simultaneous beliefs that we can have 2% GDP growth and a sustainable future are out of whack.

Firstly, one of the reasons that I don't like to see GDP as a measure of progress is that it makes no judgement about the value of goods and services EXCEPT in financial terms. So the building of sea defences to mitigate climate change is viewed as a +ve thing. As is all packaging. As is the production of virtually disposable electronics gadgets that get replaced every year . As is tobacco production. etc etc.

But secondly, GDP growth expressed as a % is an exponential function (this maybe what THM was on about with his logarithmic scale question above)

If you are worried that we may be approaching (or over) some of the physical limits of our planet (maybe fish, timber, clean water etc etc. are already being used faster than they can be replaced.) Then perhaps you'd like to hazard a guess at how long it will be before a 2% growth rate will take to DOUBLE our GDP (and presumably DOUBLE, or near double our DEMAND on some of these already scarce resources)?

RPRT - missed this yesterday and its all gone quiet here as the SWT aggro turns to God and helmets!! But just to add a little bit of kerosene to keep the embers glowing!!

http://www.telegraph.co.uk/finance/economics/8761237/50p-tax-rate-costing-Treasury-500m.html

RPRT - you will have to excuse the link and the bias that inevitably will bring 😉 😉

I haven't read the actual IFS report only this Torygraph summary, so I am not sure how much of the perceived loss is due to tax avoidence or evasion (quoted in the article) and how much to the elasticity of supply (not quoted at all). The former is more inflammatory (even though it is understandable in a non-moral judgement sense), the latter is more objective and interesting.

From the IFS press release:

Government, through the tax system, takes around £4 in every £10 earned in the economy. It is not surprising that getting tax design wrong can be hugely costly. [b]Yet the level and quality of debate on tax policy is inadequate;[/b] there has rarely been any clear sense of direction from governments; and expensive and damaging mistakes have been all too common.

In the UK poor tax design contributes to an inefficient housing market, distortionary taxation of financial services, excessive reliance on debt finance, employment levels lower than they need be and distorted and
inefficient savings and investment decisions. The review sets out a long term strategy for reform, and in doing so speaks to immediate policy priorities.

When does the winter of discontent/strike thread start-up. I am sure that would be some nice, moderate conversation all round!!

The Institute for Fiscal Studies warned that the tax has led people earning more than £150,000 to resort to legal tax avoidance schemes to escape paying the higher rate. ......It could lead to more people investing in tax avoidance, illegally hiding their income or even leaving the country altogether. I wouldn’t have introduced the 50p rate in the first place”

What superb logic. Abolish the 50p rate because people are avoiding it. Should we abolish burglary laws because too many are getting away with it or gun laws because too many are carrying illegal weapons? How about abolishing VAT as some are avoiding paying. The answer is obviously to close the loopholes but the super rich wouldn't like that.

http://www.ifs.org.uk/mirrleesReview/design

at 500 pages ish enjoy yourself should keep you quite for a while

Taxes account for between 30% and 50% of national income in most developed economies, with the UK lying somewhere in the middle of that band.

You realise there are legal tax avoidance schemes? They are a popular monetary vehicle where only the tax avoider and their accountants and lawyers win. There's even a box on your tax return to tick if you are part of one.

Now if you taxed the "rich" less, what do you think they would do with the money? They would spend it and help boost the economy. Nobody sits on piles of gold like Scrooge Mcduck you know, they make their money work for them, which creates jobs, income, tax receipts etc

Somehow the FT managed to cover the IFS report without mentioning the 50p tax rate.

[url= http://www.ft.com/cms/s/0/f0e8eb46-de10-11e0-a115-00144feabdc0.html#axzz1XvK0oaZk ]FT article[/url]

And yet the Torygraph came up with the headline "50p tax rate 'costing Treasury £500m'" for its coverage.

Funny that, eh?

so they have no money in the bank just sitting there then? These billionaires are out spending it all- thanks to the two in the premiership those huge fees for players and wages have been a big help and far better than if it was used via general taxation obviously? In fact they would do more of this if we just took a lot less of their money .... Seems unlikely tbh.

they make their money work for them, which MAY create jobs, income, tax receipts etc

It is a childish fairy tale account you have to suggest they use their money to benefit us all that is not matched by reality.