Wealth makers and takers

How many people on here contribute more to the economy in fiscal terms than take from it? I was asked this in the pub by a Farmer who happily admits he gets lots more out via single farm payment VAT recovery etc. I did a rough count and my business/personal life and I certainly put a lot back in – I suppose where is the balance among folks

The point at which a household switches from being an overall “taker” to a “giver” is where disposable income, after all taxes and benefits are taken into account, passes a threshold of about £27,000, Smith & Williamson found. This would be where a household’s gross income fell somewhere between £35,000 and £38,000.

http://www.telegraph.co.uk/finance/personalfinance/tax/10638283/How-much-we-give-the-state-in-tax-and-how-much-we-get-back.html

Simple answer….

longer one is more complicated when you start looking at governments creating the conditions for wealth creation such as roads and rail etc. For a business for example what use is making a product if you have no means of getting it to customers.

I suppose its a question of whether you’re looking at any given year or whole of life.

How many years of net ‘making’ does it take to offset the years of net ‘taking’ you’re responsible for as a child /student / young low earner and how much does it take to offset your retirement, pension and your long, slow, lingering death, the medical costs, your prescriptions, social care etc. For most of us the majority of the value we get from the NHS and care services – something like 80% of our lifetime care costs – is in few weeks before we die.

What clouds the question is the contribution we make as individual tax payers isn’t the whole picture as governments have various other income streams like corporation tax etc which are broadly for our benefit rather than those businesses – businesses don’t get a decade or more of funded education or home help or 3 decades of repeat prescriptions and a hip replacement. But most make the same or greater contribution, pound for pound.

a Farmer who happily admits he gets lots more out via single farm payment VAT recovery etc

I suppose he didn’t clarify – but is that as a proportion of his turnover or his profits. With things like farming subsidies – as broad brush as they are – is the beneficiaries are greater than the recipient. The subsidies pay for the quality and security of our food supply, as well as things like landscape and natural habitat management which we all benefit from – so although those farmer are private businesses they’re actually implementing public policy by proxy and should maybe think of themselves more as civil servants rather than benefits claimants

More people ‘take out’ than people who put in – that’s why we have a deficit in our nations bank balance.

Also I am never quite sure how productivity impacts in this type of thing? I.e does our low productivity contribute to our deficit in real terms – I agree with the comments about single farm payments but can we in the brave new world actually afford this approach?

Well, I don’t earn anywhere near that much. But I do run a business which generates thousands and thousands of pounds of VAT payments, which I collect and send to the government free-of-charge.

More people ‘take out’ than people who put in – that’s why we have a deficit in our nations bank balance.

More is taken out than we put in but that doesn’t mean more people are net recipients – benefits of any kind, including pensions are only about 1/4 of the governments outgoings but income tax and NI is nearly a 1/2 of the governments income.

I agree with the comments about single farm payments but can we in the brave new world actually afford this approach?

It’s been well quoted that in the brave new world we can both have cake and eat cake and on top of that other even get fat 😉

On Mr Hammonds new overdraft?

Hmm.

While I’ve earned over that “threshold” for the last 15 years (the previous 25 being spent largely in education), I’m not sure I’m in any way a wealth creator – I’m just a (reasonably well paid) wage slave.

Earn more than that but I’m a public servant, so all debit from me I’m afraid!

wobbliscott – Member
More people ‘take out’ than people who put in – that’s why we have a deficit in our nations bank balance.

Not quite! But if I understand the point you are trying to make, in numbers alone, just over 50% of the U.K. Population received more in benefits than they paid in taxes.

Me.

Over my life I have come to the firm conclusion that a system which relies on you putting in today to pay for everyone today on the basis someone else will do the same for you in the future is fundamentally and fatally flawed. I would go as far as to say to believe in it was naive in the extreme.

I think if people really understood and appreciated the figures above, namely gross income of £38k is breakeven, we’d have a far more balanced debate about taxation. Note as I understand it that figure is for a single person so break even for a family is more like £80-90k at least. People do not fully grasp all the things that need to be paid for, infrastructure, police, health service, education, pension provision etc and just see tax/ni taken and the fact they don’t claim benefits and think – I pay in and don’t get out.

This quote from the Telegrapgh piece is something I have been posting about (to much abuse) fo years. With just 300,000 people paying 30% of all income tax you have a very unstable and high risk tax base / policy. These people (to use some avian metaphors) are not the Golden Goose or Sitting Ducks.

The burden on very top earners is more acute. The IFS said that in 1980 the top 1pc of earners paid 11pc of all income tax, a proportion that has leapt to 30pc. The IFS warned that this made for an “unstable” tax system, and even HMRC has indicated that receipts from higher earners are less predictable, in part because wealthy people can easily emigrate.

With just 300,000 people paying 30% of all income tax

Perhaps that doesn’t mean they’re unreasonably burdened. Maybe it’s that wealth is unhealthily accumulating with a tiny minority of the population and that the distribution should be addressed.

@johnners I get that argument. So how do you propose to address, for example, the wealth of Bill Gates, Mark Zuckerberg etc ?

One way to address that wealth disparity is for all rich people to leave the country. Then remaining wealth is more evenly distributed.

Some years we’ve been ‘over’ paying and some years ‘under’ paying, I’m pretty sure that applies to pretty much everyone over their lifetime.

Also we took out less at times, such as when using private school, as well as paying vast amounts of PAYE. But since taking a step back to a more ‘simple’ life we’ve made a concious effort to spend far less meaning we can earn far less (but still way above ‘average’), so obviously paying far less in.

And while been fundementally a ‘socialist’, any system IMO that takes more than 50% of your income in taxes (not VAT as that is linked to spending) is just wrong – end of.

With just 300,000 people paying 30% of all income tax

Ignore anything based solely on income tax.

It’s a very biased way of looking at the figures.

Also, this reduces everything to economics, which doesn’t reflect what people actually *do*. It makes it look like people doing the actual work, depend on the richest, whereas the opposite is true.

It’s not trivial to decide what it meant by contributing to the economy. Do you mean contributing in tax versus taking in benefits? I’d hope that most adults of working age are doing that but children and pensioners generally aren’t. Over a lifetime, it may not be necessary for people to “break even” if the economy grows, there’s more money available for their retirement.

Almost all of my income came from the govt anyway (though in fact the Japanes govt, as it happens) so I guess that makes me the biggest leech 😆

b r – Member
And while been fundementally a ‘socialist’, any system IMO that takes more than 50% of your income in taxes (not VAT as that is linked to spending) is just wrong – end of.

Also remember to separate tax rates and tax take as levels the top rates are only paid on income above a point.

Over my life I have come to the firm conclusion that a system which relies on you putting in today to pay for everyone today on the basis someone else will do the same for you in the future is fundamentally and fatally flawed. I would go as far as to say to believe in it was naive in the extreme.

The alternative being? a loan pot set up on your birth with your personal tally allocated throughout life? As a society we pay tax to run the country we live in and to invest in it’s future. What people pay in should be an amount they can.

In terms of the big earners if a government is run well then the conditions created allowed those people to make their money. I think it was Elizabeth Warren (though I’ll stand corrected) who in opposition to the small government/tea party type approach was to remind business that governments create the conditions for business to make money, that could be educating the work force, bringing them into the world or building the infrastructure they rely on.

A key problem is that tax is a dirty word. Everybody wants it all but nobody has found a way to pay for it.

On a personal level your earnings may be low but the impact of what you do very high – nurses for example. On paper you may not be a financial contributor but the work done provides the basis for a productive society. Bankers as many like to hate generate a tax revenue that will be sorely missed if they leave the UK shores. That revenue goes into education and roads.

One way to address that wealth disparity is for all rich people to leave the country. Then remaining wealth is more evenly distributed.

Luckily they’re staying out of the goodness of their hearts, just to help us all out.

What about an individual or company’s income derived from the spending of people you’d term “takers” (income <£38k for an individual, <£80-90k for a family, to use jambalaya’s numbers). However high their income, can that individual or company really be regarded as a “maker”, or are they not just a “taker” once removed?
And what about their employees paid below the “maker” threshold? Isn’t the difference between those employee’s incomes and the threshold effectively a subsidy?

Maybe attempting to label people makers and takers is just simplistic and divisive.

interesting question. Are you a burden on the health service or the justice system if trough our actions or lack of actions you don’t need them? ie staying out of trouble and staying healthy saves uk plc an enormous amount of money.

In purely fiscal terms my road is swept/maintained, bins collected and streets largely free of crime but also I have 2 children in school so I am sure I am a net ‘gainer’ by quite some £££.

airtragic – Member

Earn more than that but I’m a public servant, so all debit from me I’m afraid!

Not necessarily: as above, what is harder to measure is the contribution to the economy that you make through your work rather than the taxes you pay. Whether you are a public servant or someone that builds infrastructure or brings other (tax-paying!) business in -the stuff you do or make also attracts tax in the form of VAT or business rates so you don’t pay it but you create the conditions where someone else does. Conversely if you are a criminal you may pay lots of tax but the cnsequences of your criminal acts may cost many many times more in terms of the victims of your crimes as well as the cost of justice to you personally.

I also work for the state in a service that keeps people out of hospital and makes probably-huge-but-very-hard-to-measure improvments on what my patients and their families will ‘cost’ society in later years. There is some quite extraordinary figures bandied about how the successful treatment of Conduct Disorder, Oppositional Defiance Disorder and ADHD will save the country many many times more in later years (in sick pay, benefits, criminal justice, healthcare etc etc) than is spent today on addressing it in children. I forget the exct ‘return on investment’ numbers but they are massive, but it’s also a tough calculation to make and evidence though. What is easier to measure is the cost savings to health system made by my special little niche (Anorexia) and it is quite possible that over the course of my career i will just about be worth my actual weight in gold even if the money inveted in my salary and tax i pay will be nothing like that much.

When I refer to 50% I wasn’t talking about the tax rate, but about the tax take (so tax and NI).

The tax rates are now too high, you’ve people working pretty standard jobs who’ve income that puts them into 40% tax.

To put it into perspective, my parents bought their first house in the late 60’s when only my Dad worked and they had two young children and my Dad didn’t earn enough to pay income tax (in those days you got a tax deduction for both mortgage relief and children). Impossible now.

But in the late 60’s people died younger, had less expensive medical care, we sent fewer people to university etc. After personal contributions we are off to business and all the implications of that and we still don’t take enough tax to fund the lifestyle people want. Next stop? More tax or less services.

I’m doing my tax return here in Oz and I pay less tax but there are other things that are not free – like healthcare.

Can’t put a fiscal value on what I do really. The side of the “business” I work in doesn’t make much money but it adds great value. It also makes it possible for the money-making side to make money. So if you look at me in terms of taxes paid and revenues directly generated I probably don’t, especially as I’m a burden to the NHS 😆 but if you look at contribution to society, and indirect fiscal benefits, then yep, massively.

Income tax paid is a worthless measurement of contribution. Worse than worthless- intentionally misleading.

b r – Member

The tax rates are now too high, you’ve people working pretty standard jobs who’ve income that puts them into 40% tax.

You start paying 40% at £43000, putting you into the top 15% of earners. The UK average full time salary is £27195. TBH your idea of “pretty standard jobs” is skewed.

I pay in and don’t get out.

Other than you get to live in a nice country with clean air, clean water, a free health service, relatively low crime, maintained roads, lowish levels of corruption, law and order, etc etc

I’d say we get good value for money and if you ever need reminding of that go and live in Nigeria for a few weeks!

I pay in and don’t get out.

Not to mention, being born, looked after, educated etc. so enabled to contribute. Why should people take out?

Don’t use the roads that much really, never use the NHS, private dental insurance, don’t take any benefits at all.

Can’t see how I’d be a net taker.

Born in a hospital?
Vaccinated?
Been to a school?
Used Eurotunnel?
Railways
How do you avoid using roads?
Who pays your wages? What do they get from the taxpayer? More educated employees?
Get your rubbish collected?
Live free of serious crime and corruption?
Have a greater life expectancy then a lot of the world?

Most of my vaccines recently have been private, as I’m too lazy to book appointments. Private train operating companies are net recipients of public subsidy while distributing nearly all their operating profits as dividends to the shareholders of their parent companies, it’s not my freaking fault that the government can’t get their acts together and make a profit from them. Private schools get away with not paying enough tax by claiming that they are charities etc etc. Rubbish collection is covered by council tax, so not based on earnings. Don’t have any kids, so I’m not as much of a carbon burden.

Whilst I like the banking industry and the pay, to claim that the industry is wealth creating is ludicrous – how much wealth do they actually create versus how much did they manage to wipe out during the recession? Not to mention that jobs that drive growth and create wealth are often low paid and thus don’t net the government as much tax revenue – if the sciences and engineering pay levels were more like the States then there would be a huge boon in tax revenue.

The point being a lot comes from your tax income, you may be one of those net contributors on income tax and direct things but in general the government has put a lot of the stuff there for people to prosper.

he point being a lot comes from your tax income, you may be one of those net contributors on income tax and direct things but in general the government has put a lot of the stuff there for people to prosper.

+1

Whilst I like the banking industry and the pay, to claim that the industry is wealth creating is ludicrous

😯

if the sciences and engineering pay levels were more like the States then there would be a huge boon in tax revenue.

So why are they not?

There’s alot more to contributing to society than simply paying taxes and not drawing benefits…

True, but the question was a fiscal one.

Whilst I like the banking industry and the pay, to claim that the industry is wealth creating is ludicrous

Massive net contributer in terms of personal and business taxation plus huge user of services (lawyers, technology etc) raising further amounts of VAT. Provision of loans to business creating and supporting jobs and individuals for houses, cars etc. Quite simply you cannot have a healthy economy without an effective banking system

Other than you get to live in a nice country with clean air, clean water, a free health service, relatively low crime, maintained roads, lowish levels of corruption, law and order, etc etc

I’d say we get good value for money and if you ever need reminding of that go and live in Nigeria for a few weeks!

Wise words, Nigeria being a classic example of a society that collapses into lawlessness when the little man is forgotten.

Quite simply you cannot have a healthy economy without an effective banking system

Agreed, however you must concede that the bankers could not juggle their beans without a safe, clean environment and sufficient serfs to maintain the society around them.

But the economy could benefit from a better banking system too…

…and considerably lower levels of debt.

Savers held hostage but the over-indebted 🙁

Northwind – you’ll find that is ‘income, and includes pensioners – actual is almost £30k and if you take out p/t then there are a far greater than 15% on higher rate tax, and higher number in the public sector than many realise.