[Closed] Are any of the political parties planning to scrap the 60% tax rate at 100-120k?

I love this thread, it starts with some wealthy people complaining that they pay too much tax and then morphs into some wealthy people telling us how we would all be screwed if they didn't pay their taxes.
You can't be Scrooge and Jesus at the same time folks...

I'm with you on this. Get paid over £100k and complaining that you pay too much tax is pretty tasteless. Also before anyone says this is me being jealous I'm the MD of a company across 7 countries.

International stationery division slow today tony? 🙂

Boring conference in Lisbon 🙂 death by PowerPoint

Has anyone really complained about paying too much tax? Just because some of us, myself included, have criticised this particular anomaly in the tax system, it doesn't mean that I think I pay too much tax.

Boring conference in Lisbon death by PowerPoint

Just noticed the International Egg Conference is on in Lisbon today.

The potential for pun related yolks is huge.

Has anyone really complained about paying too much tax?

Yes they have. Many people, at various tax points, think they pay too much tax.

Sounds more fun than Molecular Diagnostics Europe!

[i]I'm with you on this. Get paid over £100k and complaining that you pay too much tax is pretty tasteless.[/i]

Not sure why you'd think this, any of us, irrelevant of earnings, is absolutely entitled to complain about paying too much tax.

Especially when you see how the Govt spends it.

I get over 100k and I happily pay tax, as I like contributing to society.

Junky, on this thread, NOT in general terms.

I get under 40k and I happily pay tax, as I like contributing to society.

😉

The number of people posting here that they earn over £100k explains why I can't afford anything reviewed in the magazine 🙂

The whole thread is about reducing/removing the anomaly between 100-120 which leads to many feeling they pay to much [ marginal] tax at this point. Personally I dont see how you can argue to reduce your tax bill without implicitily stating you are paying too much tax
On your broader point i dont think we have had a the state is too big, lets reduce all tax I pay too much etc style post but I may have missed it.

My post was largely tongue in cheek

How much you earn and how much you're willing to spend on a bike or anything else aren't always linked... ( I don't earn over 100k mind)

Can anyone tell me if Labour are going to reverse the university fee situation? Not a loaded question, I'm genuinely interested.

They're proposing lowering the fee from £9k per year to £6k per year, which will make no difference to the majority of graduates as most won't ever pay off their loans fully regardless of their level

It's shit like this which makes it impossible to trust the labour party with anything to do with money. They just love a soundbite but don't think through the realtities of what the are proposing.

The £9,000 a year figure is a nasty headline but it's not realy what people pay since not everyone pays back their load. And only the top earners will pay back the 27k + interest over their working life. If labour reduce the fees to 6k then these top earners now only have to pay 18k + interest back but the lower earner who would only have paid back 15k anyway still pays the same.

So bascially Labour's progressive and benevolent reduction in the student load just saves the richest a load of cash but doesn't help the people who earn less one little bit.

If they were serious about reducing the cost of being a student they could have scrapped fees entirely, funded via general taxation or even a graduate tax, or changed the thresholds at which you pay back your load.

But no, just a poorly though out headline. Incompetant idiots.

I get under 40k and I happily pay tax, as I like contributing to society.

And the link between the two parts of the sentence? Are any parts exclusive?

Re the bikes and £100k - good point - but equally perhaps some of those people have better uses of their money and/or lack the time to get the full benefit is a fancy bike. 😳

I got a free university education, just like the pricks who brought in fees.

They just love a soundbite but don't think through the realtities of what the are proposing.

your point is a valid one but to make it party political one just shows your bias.

I know your post was partly in jest, I should have put a smiley at the end of mine. I take your point on the reducing of taxable income but my point was to highlight how tax rates do influence behaviour. After all if you were offered an investment opportunity where a £40 initial investment immediately became £100 would you take it?

spot on Jfletch - link [url= http://www.telegraph.co.uk/finance/economics/11534043/Rarely-has-an-election-campaign-seen-so-many-economically-silly-ideas.html ]here[/url] to an interesting article by Allister Heath (whos Cit AM articles i do miss!)

Of course i would take the investment

Its been an interesting debate and it has changed my mind in that we do need to start afresh with the taxation system as there are some strange anomalies within the system both in terms of individual earnings v households and also the marginal rates on high earners.

Child benefit is a good example where they do a mixture of implement something fair but in a cost effective manner so the results is less fair[ sometimes unfair] than intended.

An overhaul is warranted but I cannot see it happening

Yes, Heath is accurate on many points. A surprisingly lacklustre campaign to date - headlines not perspective or insight

Big rich - did you thank the half of the population who helped pay for your education but didn't enjoys it's benefits too? Very generous of them - an a wonderfully regressive policy !?!

Flat rate, with high minimum threshold (higher the better) - simple, cheap, effective, progressive, morally fair if not completely perfect, but what version is? Stop Chancellors screwing about with hidden changes.

Fair 😯 Well that you and UKIP arguing for it - though Nigel did describe the manifesto as drivel so I have no idea if they still support it

The millionaire to pay exactly the same tax rate as the young nurse, the home help, the worker on the minimum wage"

Almost no one thinks its fair and surveys consistently show the overwhelming majority [ 85% + iirc] think the rich should pay more [%] tax than the poor.
A flat rate has no support in this country, nor even in america.
Its unfair and everyone knows it.

Big rich - did you thank the half of the population who helped pay for your education but didn't enjoys it's benefits too? Very generous of them - an a wonderfully regressive policy !?!

Do we not all benefit from living in a country with more well-educated people?

I was lucky enough to go to university before tuition fees were introduced, though I missed out on the grants. I did manage to get a funded Masters degree, by virtue of the area I live being designated as deprived by the EU.

My education was funded by the tax payers of the time, and I hoped that my children would get theirs funded in the same way through my taxes, but sadly that seems like it probably won't happen.

There's an interesting line in that [url= http://www.telegraph.co.uk/finance/economics/11534043/Rarely-has-an-election-campaign-seen-so-many-economically-silly-ideas.html ]Heath article[/url]:

Of course, rail commuters, who tend to earn much more than average, will benefit, and the idea will therefore be very popular in some quarters, but that’s not the point.

I wonder why it is that rail commuters tend to earn more than average?

Those with degrees earn more and therefore pay higher taxes over their lifetime as a result of the education. One can even make an argument for it based only money raised by it.

I very much doubt THM objects to education/ degrees so I am not sure why he made that point tbh.

This graph shows the % of salary paid in income tax vs total salary and also total income tax paid vs salary.

[img] [/img]

It shows that the % paid ramps up sharply after each threshold but the absolute value is probably closer to the curve we'd like it to be where the total amount rises more quickly than the salary. You can see the 100-120k anomaly where tax rises faster than before or after this blip. It's highlights why it's frustrating when you just move over a threshold as the % paid surely starts to ramp up more sharply. A flat rate would avoid this but probably isn't progressive enough for most people's tastes, more thresholds would create a smoother curves so eliminating the pinch points but may be hard to implement (a thought it would be a damn sight easier than removing the personal allowance as today)

Of course this only shows income tax and doesn't include national insurance, council tax and VAT. And since council tax and VAT aren't linked to income but instead closer linked to consumption choices you couldn't add these anyway.

I'd be interested what mechanisms other countries use and what this means their progressive curves look like. As I understand the U.S. system is insanely complicated, the French rely much more heavily on payroll taxes etc.

Nice graph. I'd like to see a version with the tax paid and salary scales are equal, and with a third line for take-home pay.

It shows that the % paid ramps up sharply after each threshold

The steepest part of the percentage line is for people working full time on minimum wage...

I wonder why it is that rail commuters tend to earn more than average

Correlation not causation. Probably because rail disproportionately favours central London. Also people are willing to travel further and pay more to get to higher paid jobs. People don't tend to rail commute to low paid jobs in retail, manufacturing or service industries as the jobs are either local to them or out of town.

Transport and town planning policy is actually one way social mobility can be enhanced and total tax made much more progressive. Through the use of subsidised public transport, cycling and walking people can be saved for the "need a car" tax threshold as driving is one of the key reasons lower earners end up paying a much higher % of their salary in tax (VAT on car purchase/maintenance and fuel VAT/duty are not progressive)

I wonder why it is that rail commuters tend to earn more than average?

Okay, I'll be less glib. There are many reasons why. Apart from anything else, there are probably quite a few people who wouldn't be able to afford to commute by train if they didn't commute by train (esp if it's a longer commute into London). There are plenty of people who are paid not very well paid by London standards but still above the UK average, and commute by train. Outside the SE, it's harder to commute by train, so workers there don't, and they get paid less. And there are plenty of people who would be better off getting paid less and working locally instead of going into London, once they account for the cost of their commuter pass (let alone lost time!).

True that, I've known a couple of peple who do the London commute and when they did the sums would be better off working locally, or only a couple of grand worse off in return for two hours plus at home daily

Nice graph. I'd like to see a version with the tax paid and salary scales are equal, and with a third line for take-home pay.

Like this?

[img] [/img]

The take home numbers are wrong as NI isn't included, and very few people don't have other deductions like pension anyway so it's a bit meaningless.

Also IMO the % line is also misleading as it appears to be very unfair on lower earners. at first glance I suspect most people would want the curve the other way up but then it very quickly reaches 100% which I think we can all agree is obscured. The area chart is much more useful.

Oh, so there has been some editing, so can't respond to the specific point.

The Uni fees has many elements to it, but the point I was making, was that under free Uni fees (yes I benefitted) others were forced to pay for me to benefit. Why is that fair? In those days only @30% (guesstimate) school leavers went on to tertiary education versus Bliar's 50% target. Even then, the other 50% are subsidising those who are lucky (privileged 😉 ) enough to have a Uni education. Odd logic.

Do we not all benefit from living in a country with more well-educated people?

Yes but be careful, that starts to sound like trickle down type arguments!!

call it an investment.
they funded your uni course (and mine).
you and me are going to be funding their state pension, NHS requirements and nursing home.

Now we won't, the government spent all that already. It's our children's generation that will (inheritance tax aside), poor guys!!!

But would love to hear the politician who propose that. I am going to ask you to help pays for those guys to get better paid jobs so that in 30 years time they will be providing for your old age. Please form an orderly queue....

So we are all in agreement then the whole tax system needs simplifying and not one party is going to do it. In fact pretty much every party wants to make it worse 😥 Stupid really as the other advantage of a simpler tax system is that it would be harder to use clever techniques to avoid paying your share. And all parties are telling us they want to increase tax take.

Career advice to anyone who wants to make money, go into accountancy.

The problem with a flat rate of tax is that it would have to be in the mid/high 30's - eg 37%. There would be uproar that this was a tax cut for the rich and a tax rise for "hard working families" so its never going to happen. Singapore and HK which have top rates of tax at 15% and 20% don;t have flat rates, even there it's progressive.

On the tax graphs you could indeed add VAT in with assumptions based upon spending habits as your income rises and taking into account the zero/low rated VAT elements like food and heating, then including things like air duty paid more by middle class who take more flights. What I am certain you would see is that the low paid really pay relatively little as a percentage. Of course as you get to very high earnings where substantial amounts are saved and not spent it becomes a bit more tricky but that £150k car has £30k of VAT on it. Plus the impact of high earners not tending to use NHS (private medical) or state schools.

Rail Commuters: Highly skewed by those that commute into London for well paid jobs? BTW even if commute costs look expensive today many people will take a view their prospects are better in the medium/long term so commute cost is worth paying. It used to cost me circa £7k to commute in to work include car parking, although I could save £40 a week in the summer by walking to the station. As a person with a family that was pretty much the only choice as housing costs and schooling where very restricted.

jambalaya - Member
The problem with a flat rate of tax is that it would have to be in the mid/high 30's - eg 37%. There would be uproar that this was a tax cut for the rich and a tax rise for "hard working families" so its never going to happen. Singapore and HK which have top rates of tax at 15% and 20% don;t have flat rates, even there it's progressive.

True up until the last bit. A flat rate tax with a threshold is a progressive tax. The higher the threshold, the greater the level of progressiveness. It's a simple spreadsheet and if you don't trust your maths, read the Mirlees Report,

Its not progressive its a flat rate with a threshold which is why you have to describe it as that

http://www.investopedia.com/terms/p/progressivetax.asp

Progressive Tax
|
DEFINITION OF 'PROGRESSIVE TAX'
[1]A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. [2]The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

The threshold enables one to claim differences in the tax paid as a % of Total income [ hence the spreadsheet appeal] ie 1 in the definition above. However, clearly, the very word flat rate means everyone pays the EXACT same amount from the moment they pay tax irrespective of whether it is £1 above threshold or £1 billion. Its clearly not true that the flat rate really means progressive/ increasing as you earn more. Its the same for each point above threshold. So its not true for type 2

We can all do the maths and you can argue flat rate with threshold is progressive but the marginal tax rate is identical for all earners at all points on the system . That is not progressive its flat hence why we call it flat and not progressive
Essentially the average tax rate [ % of total income] is progressive and marginal tax is flat.
Given we all agree its a flat rate tax it seems better to call the spade a spade.

Either way its irrelevant as only UKIP proposed a flat rate tax though Farage has subsequently described the manifesto as drivel. No else thinks its fair and it wont happen here for the reasons Jam notes. It will pass the burden from the richer to the poorer.

IMHO most people will struggle to see that as fairer system even if THM does.

What is it 85% that support redistributive/ true progressive [ type 2] taxes.

.

I think many people prefer a progressive tax as it means other people pay more than they do on an absolute basis and as a percentage. Its simple human behaviour/politics. Where our system breaks down is that the richer you are, especially if you are in businesses rather than an employee, you can pay materially less tax than someone on an upper middle income. What is happening now is that it's becoming very unattractive to be in a well paid PAYE job.

Junkyard, the very fact that you have had to use the term "marginal" in you justification destroys your argument. The very fact that a different rate is paid over a threshold (i.e. The marginal rate) shows that the tax is progressive. Maybe not very sharply but progressive none the less.

Imagine a 10k threshold to start paying a flat rate of 20%. Someone earning £9,900 pays 0 tax, someone earning £10,100 pays £20 tax <1% tax, someone earring 210k pays 40k tax ~ 19%.

The only way for a tax on earning not to be progressive is to have zero tax free allowance.

What you are arguing is the a tax free allowance + a flat rate isn't progressive enough and I think most people would agree with that but their views on where they think the thresholds should be is just a political view, there is no technical right or wrong answer.

What is happening now is that it's becoming very unattractive to be in a well paid PAYE job.

Although still much more attractive than being in a low paid PAYE job.

What is happening now is that it's becoming very unattractive to be in a well paid PAYE job.

It's statements like this that rub people up the wrong way.

It's still very attractive to be in a well paid PAYE job compared to a less well paid PAYE job or even a less well paid non PAYE job. There is no point in the income scale where getting paid more means you take home less, there are just diminishing returns.

These diminishing returns are the fundamental result of a progressive tax system. Your argument that the returns diminish rather faster for someone on PAYE vs someone with more flexible tax affairs is probably valid, and there is a debate to be had about the merits of pushing people out of PAYE vs lowing taxes to minimise avoidance but doing so from the premise that being highly paid is "unattractive" is ridiculous.

@MSP and @jfletch - you are missing my point. What happens is that those jobs either move abroad or they get converted into a different form, eg a service company so that they attract lower levels of tax. Being highly paid is of course attractive but understand that those sort of people have geographic flexibility and influence to change their style of employment. There is a behavioral tipping point somewhere around 40% tax, why do you think the high paid French and German bankers work in London rather than in Paris or Frankfurt ? There is / was a tax advantage to be in London

Just to be clear you won't get every high paid job moving/changing but you will get enough such that the overall tax take falls and you lose all the associated job creation and spending.

As I posted before and no one commented in the rest of Europe you have VAT on food of 5.5% to 8%, we'll not see that here due to the uproar we'd undoubtedly see but my point is our tax system is very progressive already and supports the less well paid quite substantially.

The only way for a tax on earning not to be progressive is to have zero tax free allowance.

Indeed - unfortunately facts and an argument are often poor bedfellows!!! The maths is really very simple and has been explained before. And again, google Mirlees.

The VAT is a Tory thing is another funny one. VAT is used extensively across parties and across countries. Why because it has the least direct impact on investment etc. Still much better to wrap and confuse it as a regressive tax on income rather than a tax on consumption!!!

I think many people prefer a progressive tax as it means other people pay more than they do on an absolute basis and as a percentage

The very fact that a different rate is paid over a threshold (i.e. The marginal rate) shows that the tax is progressive.

The only way for a tax on earning not to be progressive is to have zero tax free allowance.

IMHO no one who proposes this does so because they believe in progressive taxes they do so to shift the tax burden from the richer to the poorer. To do this whilst a arguing its progressive is sophist and I dont think you would convince many folk that its either a good idea or truly progressive [ though I can do the maths].

To do this whilst a arguing its progressive

You are clouding your argument by arguing that black is white. If there is a threshold its progressive (or regressive if you want to be a pedant), that is a fact that can't be disputed.

Whether you think it's a moral way to tax is another thing entirely and depends very much on a your political philosophy and ideals. Ia tax can be both progressive and "unfair", "progressive" is not a synonym for "fair".

You are clouding your argument by arguing that black is white

Are you new jfeltch?!?

that is a fact that can't be disputed.

Unless.....!!!

Whether you think it's a moral way to tax is another thing entirely and depends very much on a your political philosophy and ideals. Ia tax can be both progressive and "unfair", "progressive" is not a synonym for "fair".

Indeed, well put.

Some people think conflate the different definitions of the word 'progressive'. Progressive thinking is modern, new, and aiming for somethign better. Progressive in taxation is a more strict mathematical sense, meaning that the rate gets higher as income increases.

So taxing everyone 100% over £35k wouldn't be really fair, nor would it be a very good idea, but it would still be progressive.

others were forced to pay for me to benefit. Why is that fair?

It's for the good of the nation. In the same way that someone's taxes from Edinburgh might end up paying for Crossrail, or the M3 variable speed limit, or flood defences in Carlisle etc.

molgrips - Member
Some people think conflate the different definitions of the word 'progressive'. Progressive thinking is modern, new, and aiming for somethign better. Progressive in taxation is a more strict mathematical sense, meaning that the rate gets higher as income increases.

So taxing everyone 100% over £35k wouldn't be really fair, nor would it be a very good idea, but it would still be progressive.

Leaving the extreme example aside, imagine threshold of £12k, and flat tax rate above this is 40%

Joe earns £12k, what percentage if his income does he pay in tax?
Bill earns £20k, " "?
Harry earns £50k, " " ?
Tarquin earns £100k, " " ?

Is this progressive or not?

Great mol, please can you pay for my PHD and I promise I will pay all the tax on my higher income so that everyone can benefit form greater spending. It's lies an extreme version of trickle down!!!

please can you pay for my PHD

Sure - I'll pay my share of it 🙂

That's provided you generate some business with it that leads to growth, rather than just pocketing some extra cash for yourself.

I'll also chip in for the M3 speed limits, even though I don't drive on it at rush hour. Cos, you know.. I'm nice.

My uncle will send the invoicing details, I am putting it though my bank in [s]Lagos[/s] Nicosia *! Cheers.... 😉

* don't want any racist accusations!!!!

Do these 60% tax payers get to buy thier council house now. 😉

If there is a threshold its progressive (or regressive if you want to be a pedant), that is a fact that can't be disputed.

Deary me THM at least have the courage to engage directly rather than just gently ad hom from the sidelines 😆

Progressive in taxation is a more strict mathematical sense, meaning that the rate gets higher as income increases.

If we do a £10 threshold its still technically progressive [ sense 1] yet every person who worked would basically pay the same tax - if we went to enough decimal places we could still show the "progressive nature" of the tax. I dont think that is really progressive [ though it would be technically] but you and THM can argue as you wish.
If this is calling black white then so be it.

Is this progressive or not?

Cos, you know.. I'm nice.

One of those there are plenty of things in society I pay for that I will never use but we do so , as you note, for the collective good of society.
Some of them I personally gain from some of them i dont but as long as the total utility* is maxmised

*John Stuart Mill sense

That you are fella

xxxxx

From one of the most authoritative reports on tax design in the UK

A tax is said to be progressive when the average tax rate rises as the tax base rises.......The simplest way to achieve progressivity in an income tax is to have a tax-free allowance before tax starts being payable. To see this, suppose the first £10,000 of income is free of tax and all further income is taxed at 20%. Someone earning £20,000 has a marginal tax rate of 20%. Their average tax rate is 10%.a Someone earning £100,000 would still face a marginal rate of 20%, but their average rate would be 18%. Thus a flat tax—an income tax charged at a single constant rate above a tax- free allowance—is progressive, as long as there is a tax-free allowance. This income tax can be made more progressive by (i) increasing the tax-free allowance, (ii) increasing the single rate of tax, or (iii) introducing one or more higher marginal tax rates on higher incomes. [b]Progressivity does not, however, require that the marginal tax rate keeps on increasing as incomes rise.[/b]

Mirlees Report

It really is very simple.

Yep.

and still disingenuous for the reasons mentioned.
I think you can [ happy to be corrected on this one] make a regressive tax [ with threshold] appear progressive?

ie 10 K tax free
10-20k@15 10 k = 7.5%
20-30k@14.95- = 9.98
30-40k @14.9 = 10.99
I have assume the top rate ie 10k, 20k, 30k 40k
I am sure this can be done though my figures may need tweaking to achieve this contradiction of a regressive tax that is progressive. May need some fiddling with numbers but I assume , with enough tweaking it can be done indefinitely.
IMHO its not actually simple [ though the maths does not lie] hence we need to state what it is which is a flat rate tax with a threshold.

Either way most folk still think taxation should be truly progressive* rather than just technically progressive. Whilst I am in danger of inventing [ meaningless] terms here that is probably the easiest way to explain my position.

*marginal tax rate increase as income rises rather than average tax.