[Closed] Tartan austerity

In my opinion it's fairer that those who can afford to should pay a little more.

Yes, but 'fairness' doesn't increase overall tax revenue for all the well known reasons.

They were smart enough to invest their massive oil wealth so they could run a budget surplus.

So if we were 'smart enough' we could invest our non-oil wealth so we could run a surplus.

You need to explain why one country investing is wise, whereas another country investing is dumb.

Flying ox I didn't make it clear. I think there is merit in the idea of raising the tax threshold to the equivalent of the living wage as defined by The Scottish Poverty Alliance. I would increase the higher rate of tax or establish a 3rd "even higher " rate for those on very high income. I can do all this without feeling any desire to shoot any one.

Yep, that's exactly what it is

Or alternatively, most people think it's wrong to increase tax more for lower earners more than twice as much as you do for higher earners. A 2% increase on base rate is 10%, a 2% increase on higher rate is 4.44%. A 5% increase is 25% and 11.1%.

This isn't the politics of envy, it's the politics of sanity. The taxation powers were designed to be crippled and unfair, and to be unused by any of the feasible governments of scotland. It's a silly artificial restriction that served no other purpose- and if Westminster thought it was such a good idea to tie increases, why was it not introduced nationally?

TBF I've never seen anyone seriously dispute this; people make political capital off it by ignoring the reality of the powers but who thinks it's a good idea to use it?

Those numbers ignore the personal allowance, which has a pronounced mitigating effect. To give them their due, the coalition and the Conservatives have raised the allowance:

[url= http://chokkablog.blogspot.co.uk/2015/12/swinney-confused-or-aiming-to-confuse.html ]http://chokkablog.blogspot.co.uk/2015/12/swinney-confused-or-aiming-to-confuse.html[/url]

I do think the SNP are painted into a corner in that their rhetoric of greater equality etc doesn't match the likely effects of them squeezing the rich, creating a skewed tax rate within one country. This is partly of their own doing as they promised the Scots the moon on a stick in the event of a Yes vote, but are now being bruised by fiscal reality I think.

How long is the commute from Newcastle to Edinburgh/Glasgow these days for all those financiers, lawyers and doctors who would be squeezed by higher taxes on the wealthy but probably aren't quite wealthy enough to employ accountants to tax dodge for them? In that circumstance, do you pay your taxes in your country of domicile or employ? Serious question. Same question for an iScotland with a Schengen-style open border?

Or alternatively, most people think it's wrong to increase tax more for lower earners more than twice as much as you do for higher earners. A 2% increase on base rate is 10%, a 2% increase on higher rate is 4.44%. A 5% increase is 25% and 11.1%.

How about actual pounds and pence? A 2% tax rise across the board would have someone earning £20k paying an extra £188/year or £15.67/month. Someone earning £60k would be paying an extra £988/year or £82.33/month. If you look at it this way then I'd say the [i]higher[/i] earner has had the greater increase to their tax burden, not the lower earner. If you still want to do percentages, the £60k earner's extra tax from a 2% rise means a 2.36% reduction in take home pay while the £20k earner has a 1.13% reduction in take home pay.

Why do people assume that the higher earner must just have this £82.33/month sat in a jeans pocket somewhere doing nothing and not being missed, purely on account of them being a higher earner? It's still money that can't be spent on anything else. Should they not be allowed that money? Why not?

I can do all this without feeling any desire to shoot any one.

In my defence, I never said [i]you[/i] were mouthbreathing or non-aspirational, just that "squeezing the rich" is likely to appease that kind of individual.

When does taxing those who can afford a little more stop? When all their income above £42k is payed in tax. For many paying 40% the figure is already really 50% with NI.As for who can afford it, that's one way running an economy comrade, straight into ground. We as a population seem to have lost the idea that in most cases there is a connection between contribution and income. Fairness doesn't really come into it, in a market economy you have to pay for the skills and commitment you need.

I still think Westminster is fundamentally broken and incapable of fixing itself, so the only solution is Scottish independence.

@TheFlyingOx the most important political point about tax rises is to tell the electorate someone else is paying, obviously "the English" / Westminster plus then of course to make refernces to plundered / mismanaged / wasted oil revenues. Nationally now in the UK the top 1% pay 27% of the personal taxes, but for politicians its fertile grpund as they can afford to pay more and they are like a pot of gold at the end of the rainbow

I concede that you do have a point about taxation stumpyjon.There's no bottomless pit of money. Then you open up a much bigger issue

Fairness doesn't really come into it, in a market economy you have to pay for the skills and commitment you need.

[i]How about actual pounds and pence? A 2% tax rise across the board would have someone earning £20k paying an extra £188/year or £15.67/month. Someone earning £60k would be paying an extra £988/year or £82.33/month. If you look at it this way then I'd say the higher earner has had the greater increase to their tax burden, not the lower earner. [/i]

+1

Which is why I suggested a 1% cut of base rate tax, because it benefits EVERYBODY.

And taking it from the other direction. Just because I earn more, why should I pay a GREATER percentage.

Slightly OT, but has there been any research into the physiological impact of working full time, but still not earning enough and falling back on state hand outs?

Edit, and I mean research not opinion pieces.

[i]Slightly OT, but has there been any research into the physiological impact of working full time, but still not earning enough and falling back on state hand outs?[/i]

No idea, but can't imagine the average person really considers it - it's just "income" as far as they are concerned. A bit like how Farmers, companies and other business-recipients of taxpayers money just see it as "income".

The Flying Ox - Member

I've slept on this, and I'm afraid I still don't know what you're getting at. The numbers don't add up. Plus, it's easy to obfuscate when we use percentages.

Just doublechecked and they do add up. Why don't you try and show me the error?

I'm not sure why this is controversial tbh. 20% to 22% is a proportionally greater increase than 40% to 42%, which is proportionally greater than a 45 to 47%, because of maths.

And I'm working with percentages because that's how tax works and because it's the best way to show the impact of a percentage change in tax.

The Flying Ox - Member

How about actual pounds and pence? A 2% tax rise across the board would have someone earning £20k paying an extra £188/year or £15.67/month. Someone earning £60k would be paying an extra £988/year or £82.33/month. If you look at it this way then I'd say the higher earner has had the greater increase to their tax burden, not the lower earner. If you still want to do percentages, the £60k earner's extra tax from a 2% rise means a 2.36% reduction in take home pay while the £20k earner has a 1.13% reduction in take home pay.

Your numbers are wrong; I'm not sure where you've gone wrong but a £60000 earner pays an extra £1341. The £20000 earner's tax burden has increased by 10%, the £60000 earner's tax burden has increased by about 9%. This disparity increases the more you earn. At £150000 your tax burden goes up by only 5.64%, at £500000 it goes up by 4.73%.

But it really is as simple as 20% to 22% being a bigger change than 40% to 42%.

Holyrood is no different to Westminster, thats the view many of us hold. The longer the SNP are in power the more people will realise that, so for that reason I say long may they continue in government there.

Holyrood has PR, and no House of Lords. As a system, it's far better. The current SNP dominance is a blip, that won't be the normal state of affairs after independence. Loads of people - me included - are not naturally SNP supporters, they're a means to an end.

Your numbers are wrong

On the "relative" impact I can see @Northwinds point but you to look at both that and absolute amounts paid. Also total tax burden where partocularly in the UK where there is no vat on food the wealthier pay a lot more tax on an absolite amd percentage basis.

IMO we all pay insufficient tax to have the services we'd like. However as its been shown repeatedly people won't vote for tax rises to pay for them. The Labour policy is to say someone else (tax payers or companies) will pay not their core voters,

Hah, you're right actually, just doublechecked that and I'd applied 44% for the revised higher rate not 42%

Ironically my argument's actually stronger with this correction, so thanks! £988 is a 7.37% increase in tax paid, where I'd calculated it as 9%.

Yes, and a 2.36% reduction in take home pay (for £60k) is more than a 1.13% reduction in take home pay (for £20k). Percentages can be used to suit any argument. Explain how you think it's unfair on the lower paid that a 2% increase in income tax across the board means that the higher paid endure more than double the percentage reduction in their take home pay?

Northwind, you're still ignoring the personal allowance I think, although don't have a calculator handy:

http://chokkablog.blogspot.co.uk/2015/12/swinney-confused-or-aiming-to-confuse.html

Ben, no second chamber is a good thing? Most countries have one.

A second chamber is debatably a good idea (though often as a control on a FPTP system) - that doesn't mean the HoL is a good idea.

airtragic - Member

Northwind, you're still ignoring the personal allowance I think

Nope, it's in there in both mine and Ox's calculations.

The Flying Ox - Member

Explain how you think it's unfair on the lower paid that a 2% increase in income tax across the board means that the higher paid endure more than double the percentage reduction in their take home pay?

For the same reasons that we have tax banding in the first place; the higher earner is more able to pay and is less impacted by increases. The only reason his income "endures" a greater reduction is that it's greater in the first place.

But it's also subject to an even greater tax rate. I'm almost convinced that you're deliberately missing the point, seeing as pretty much everything else I read from you on this forum is measured and sensible.

Northwind - Member

airtragic - Member

Northwind, you're still ignoring the personal allowance I think

Nope, it's in there in both mine and Ox's calculations.

Well in that case, I make a 2% tax rise for your 20k earner 2% of 20k-£10600=£188 on top of their existing £1880, a 10% tax rise but only a 1.03% drop in their disposable, which is the important bit, ignoring NI.
The 40k earner has 2% more on £29400, so still 10% more tax, but a 1.72% drop in their disposable. The 60k earner has 2% more on the 20% band (an extra £635) and 2% more on the 40% band (an extra £364) so they're taking a 2.75% hit on their disposable. Looks quite progressive to me?

OK, I wonder if I can explain it differently. What we're talking about here is the tax varying powers- not UK tax policy on the whole but the narrow ability that Scotland has to vary income tax

And here, the tax varying powers are, mathematically, disproportionate- that's just a statement of fact, 2% extra on 20% is a greater change than 2% extra on 40%. There's no way for the current scottish government tax raising powers to be used that doesn't increase lower tax bands proportionally more than higher tax bands, and raise the amount of tax paid by lower rate tax payers proportionally more than higher rates, it's mathematically impossible.

Your objection seems to be against the UK's progressive tax system, rather than the scottish tax-raising powers- and the basic concept that higher earners should pay more.

And this is where we part, I think, because to me it's just obviously the case that someone earning £60000 is more able to deal with a reduction in their take-home than someone earning £20000. It's fair to ask a strong person to carry a heavier load and it's fair to ask a high earner to pay more tax, simply because taking £1000 in tax from someone who earns £60000 has a smaller impact on them than taking £200 in tax from someone who earns £20000.

For what it's worth, the scottish government's tax altering powers don't allow them to change any of this, even if they wanted to. If you want flat tax, take it up with westminster but it's a bit of a hard sell.

airtragic - Member

only a 1.03% drop in their disposable, which is the important bit

Why is that the important bit? A 1% drop in the disposable income of a £20000 earner has a greater impact on them than a 2.75% drop in the disposable income of a £60000 earner. It's not a simple numerical comparison because the disposable incomes themselves aren't comparable.

But you were arguing for using % rather than absolute figures before. I don't object to the progressive tax system per se, and I agree that higher earners should pay more, but I think the important thing is the size of the take to the Treasury, rather than the principles. I think that squeezing high earners more risks more capital flight/aggressive avoidance, particularly if you have a lower-taxing neighbour as Scotland does or iScotland would, reducing that take to the Treasury. The take-home is the important bit because that's what you've got to spend after tax and therefore, how well-off you feel.
Incidentally, I don't consider £60k to be some kind of rock-star wage. It's nowhere near the point where you wouldn't have to budget and think about money. So I don't think it's a safe assumption that the 60k earner will have a spare grand to splash around more than the £20k earner can afford £200.

So this Tartan austerity, do it mean that kilts have no pattern from now on? Does it mean they are getting shorter them man skirts?

[i] I think that squeezing high earners more risks more capital flight/aggressive avoidance[/i]

Yep. A bit like with small owner-managed businesses where you'd rather spend the money on something better than let the taxman have more.

pah, I thought this thread was going to be about Wee Eck's trousers 😀

airtragic - Member

But you were arguing for using % rather than absolute figures before.

I was using percentages to show the proportional change in tax paid as a result of the percentage change in rates, yes. I can't see any better way to do that. The entire point I'm making is about the impact and limitations of the current tax powers. Mostly what seems to be coming back is arguments about the progressiveness of the national tax policies, which seems to miss the point.

I think it's helpful to think about [i]why[/i] the powers are limited in this way. What productive reason could there be? As I've mentioned, it's not a limitation Westminster would accept, or as far as I know one you find in use in any other progressive tax system in the world. It's just a weird artificial restriction that only limits the usefulness of the powers. I've never seen any attempt to argue that it wasn't added for political reasons. And it seems very much to me that the point I'm arguing is exactly the same point they were making when they wrote the Act

airtragic - Member

The take-home is the important bit because that's what you've got to spend after tax and therefore, how well-off you feel.

I wouldn't dispute that; the part I dispute is the usefulness of comparing percentage changes for people whose take-home is wildly different, and where different proportions of spending go on basic necessities vs luxuries etc.

I wouldn't dispute that; the part I dispute is the usefulness of comparing percentage changes for people whose take-home is wildly different, and where different proportions of spending go on basic necessities vs luxuries etc.

I used to earn somewhere in the region of £10k, deciding if people deserved to be let into the country or not. I lived in a 2-up/2-down terraced house share, didn't have a car, didn't have a mobile phone, didn't have internet, etc. I paid my way through university with basic bar/kitchen jobs and subsequently used my education and experience to work my way through the ranks, and I now own a house in a nice bit of the world and can afford a mobile phone, a car, an internet connection, etc. My mortgage payment alone is 4x what my rent was in the early days (and that's more indicative of how cheap my rent was, rather than how expensive my mortgage is). The difference is that I invested in my future and now earn enough for that to be a reasonable outgoing.

Do you think these things come for free? Do you think that those who earn more should forego these things and instead give every extra penny they earn over what you earn to the government? The fact remains, you claim that the powers available to the Scottish Government are un-useable on the grounds of penalising lower earners, when in fact they are demonstrably less fair to people whose earnings fall into the higher tax bracket. I'm talking "take home pay" here, not some woolly percentages that can be interpreted one way or another.

I think it's helpful to think about why the powers are limited in this way. What productive reason could there be? As I've mentioned, it's not a limitation Westminster would accept, or as far as I know one you find in use in any other progressive tax system in the world. It's just a weird artificial restriction that only limits the usefulness of the powers. I've never seen any attempt to argue that it wasn't added for political reasons. And it seems very much to me that the point I'm arguing is exactly the same point they were making when they wrote the Act

No doubt there was a bit of politicking around SRIT, although the desire t avoid too big a skewing of tax rates within one country may also have been a factor. Do you think there's any politicking around the SNP's decision not to use the powers, despite their demonstrable progressiveness, and just stir up some more grievance against big bad Westminster, in line with the ultimate goal of separation? Had you gone independent/FFA, it seems likely that the SNP would be implementing rather more austerity than Westminster are. The Westminster govt isn't the only one that takes cynical politically motivated decisions.

Someone else has done the sums/graphs:

http://chokkablog.blogspot.co.uk/2015/12/srit-blunt-but-undeniably-progressive.html

The fact remains, you claim that the powers available to the Scottish Government are un-useable on the grounds of penalising lower earners, when in fact they are demonstrably less fair to people whose earnings fall into the higher tax bracket.

So someone earning £20k is so close to the poverty line that losing £4/week means they go hungry? Get a grip.

So someone earning £20k is so close to the poverty line that losing £4/week means they go hungry? Get a grip.

That missing £16 a month may not sound a lot but when you don't have a lot to start with it could easily put someone into a situation where bank charges are applied. That £16 can turn into £50 in the space of a month and then they are in real trouble the following month.