The 50% rate should be...

[davethemus]

Originally Posted by renault12ts

Absolutely. The higher the top rate of tax, the more tax avoidance measures are taken. So, not only do they reduce the effect of the higher rate, they pay less than they would if the rate was lower.

if they pay less than they would when the rate is lower and they want the top rate to be cut, so they can pay more, that means they want to pay more tax. Can't anyone else see the lack of logic in this arguement?

'Reduce the amount of tax I am meant to pay, then I'll feel it's at a more fair level and I'll pay more tax, because I want to pay more tax but I don't want to be told to pay more tax.'

total nonsense.

[jonthetourist]

Originally Posted by davethemus

if they pay less than they would when the rate is lower and they want the top rate to be cut, so they can pay more, that means they want to pay more tax. Can't anyone else see the lack of logic in this arguement?

'Reduce the amount of tax I am meant to pay, then I'll feel it's at a more fair level and I'll pay more tax, because I want to pay more tax but I don't want to be told to pay more tax.'

total nonsense.

It's not nonsense, though easy to characterise as such.

Tax avoidance is not free. It involves very expensive lawyers and accountants. The argument is that if the system is perceived as "fair" people don't lay out cash on those people to look for ways to avoid it, all of which come with downsides, such as Philip Green putting his entire business in his wife's name, or lots of sad rich folk living on the Isle of Man.

Much more attractive to be within the system, as long as you don't feel the price tag is too high. That, of course, is a very subjective judgement, but it's not nonsense.

Jon

[renault12ts]

Originally Posted by davethemus

if they pay less than they would when the rate is lower and they want the top rate to be cut, so they can pay more, that means they want to pay more tax. Can't anyone else see the lack of logic in this arguement?

'Reduce the amount of tax I am meant to pay, then I'll feel it's at a more fair level and I'll pay more tax, because I want to pay more tax but I don't want to be told to pay more tax.'

total nonsense.

A fact is a fact.

When the rate is higher the tax avoidance measures they use will save tax...not bringing them down to an equivalent of a lower rate but lower again.

So before you cry nonsense, do your own research. Look at the late 70s when this all started and then when the 60% rate was removed.

A fact is a fact. You may, either, not understand it, or choose not to believe it...but that doesn't change the facts.

The higher rate was introduced by Labour at the very end of their tenure, as an appeasement to the masses, and was not, repeat NOT, about raising more money (except in the very short term).

[davethemus]

Originally Posted by renault12ts

A fact is a fact.

When the rate is higher the tax avoidance measures they use will save tax...not bringing them down to an equivalent of a lower rate but lower again.

So before you cry nonsense, do your own research. Look at the late 70s when this all started and then when the 60% rate was removed.

A fact is a fact. You may, either, not understand it, or choose not to believe it...but that doesn't change the facts.

The higher rate was introduced by Labour at the very end of their tenure, as an appeasement to the masses, and was not, repeat NOT, about raising more money (except in the very short term).

Correct me if I'm wrong but according to Gideon, the 50p rate raised an extra £1 billion. Is that a fact fact fact?

[MOCAŠ]

Originally Posted by scottishman2

I thought that over £42500 pa (approx) you paid NI of 2% as an employee... making top rate effectively 52%...

It's not quite that simple, though.

NI is actually 12% between the lower and upper earning limits (the upper limit being aligned with the 40% tax threshold) and 2% beyond that. So, if you earn, say £170,000, the NI take would be £6781.04, or 4% of your salary.

However, at the 50% tax rate, the total income tax take on that salary is actually 39%, because the 50% rate doesn't apply to the whole salary, but to the amount above £150,000. Up to 35,000 it's taxed at 20%, with the remainder being taxed at 40%.

So, on a salary of £170,000 income tax and NI combined account for 43% (39% + 4%), leaving you with 57% take-home.

I've calculated that you'd have to be on a salary of above £20m in order to lose 52% of your salary to income tax and NI, and that percentage doesn't increase once you get beyond that level - even if you happened to earn £1bn each year.

[SPX]

Originally Posted by MOCAŠ

I've calculated that you'd have to be on a salary of above £20m in order to lose 52% of your salary to income tax and NI

I'm thinking of leaving for the Caymans because I only take home 48%, it's down right proposterous.

[removed]

Originally Posted by davethemus

if they pay less than they would when the rate is lower and they want the top rate to be cut, so they can pay more, that means they want to pay more tax. Can't anyone else see the lack of logic in this arguement?

'Reduce the amount of tax I am meant to pay, then I'll feel it's at a more fair level and I'll pay more tax, because I want to pay more tax but I don't want to be told to pay more tax.'

total nonsense.

Tax avoidance measures are expensive and often inconvenient. Once the perception that one is being robbed by the state is no longer there, only a small percentage will still be willing to go through the process, majority will pay what they would consider a fair tax. Net result - significantly higher tax income for the state, but no bougie-man figure to serve the political purpose for the inept, intellectually challenged politicians. We all know what option they have repeatedly opted for, don't we?

[MOCAŠ]

Originally Posted by renault12ts

As has been shown even by this thread...most people believe it should be reduced. Those that don't, don't because somehow they believe the "rich" should pay...it's pure jealousy. And yet it will not add one iota to the Govt. coffers.

a) I believe those that can afford to pay more should do so.
b) I'm not jealous (or envious) or those that are richer than I am, nor am I derisive of those that are poorer.

Ergo, your argument is flawed. People on mega-salaries will always arrange their affairs to minimise the tax take, but most people earning less than £250,000 simply wouldn't bother.

[SPX]

Originally Posted by davethemus

if they pay less than they would when the rate is lower and they want the top rate to be cut, so they can pay more, that means they want to pay more tax. Can't anyone else see the lack of logic in this arguement?

'Reduce the amount of tax I am meant to pay, then I'll feel it's at a more fair level and I'll pay more tax, because I want to pay more tax but I don't want to be told to pay more tax.'

total nonsense.

Essentially what this government is saying that it can't/won't enforce a tax rate, because it hasn't got the teeth to close loopholes.

Does anyone genuinely believe that those that avoid paying tax are going to suddenly say "Well, old boy Osbourne has reduced the burden by 5% let's all pay our way from now on"?

No, they won't.

I haven't got many solutions for taxation, but believing that a 5% tax CUT is going to mean people paying MORE tax because they think it's fair shows up how naive Osbourne is.

If he came out and said "Look, I like to look after all of our key donators by reducing their tax bill and putting more money in their pockets in the same way that Labour tried putting more money in the pockets of the great unwashed" I would respect him a lot more.

It'd be political suicide though...

[markjay]

Originally Posted by davethemus

i don't understand the arguement that there will be 'less avoidance' or it 'will increase the tax take'.

so wealthier people want the 50p rate abolished so they can pay more tax?

Originally Posted by renault12ts

Absolutely. The higher the top rate of tax, the more tax avoidance measures are taken. So, not only do they reduce the effect of the higher rate, they pay less than they would if the rate was lower.

Originally Posted by MOCAŠ

a) I believe those that can afford to pay more should do so.
b) I'm not jealous (or envious) or those that are richer than I am, nor am I derisive of those that are poorer.

Ergo, your argument is flawed. People on mega-salaries will always arrange their affairs to minimise the tax take, but most people earning less than £250,000 simply wouldn't bother.

Avoiding tax cost money, as in employing solicitors and accountants, setting up holding companies and trusts, etc.

So when the tax is high it actually makes economical sense to do all these things - as long as what you will pay for the tax-avoidance 'infrastructure' is considerably less than what you would have paid in tax.

And vice-versa - if the tax rate is low then the point at which the amount of tax you are supposed to pay in order to financially justify the use of expensive tax avoiding schemes, is moved further away.

The above is also true to some extent to tax evading - obviously for anyone who just don't pay taxes and ignores HMRC (until they come knocking, that is), it is cheap to evade tax - but for those who actually try and cover their tracks and secretly 'launder' their income, there's again a price tag.

(the only exception is perhaps illegally gained money - from criminal activity - where, for obvious reasons, the perpetrators have no choice really but to pay for the money being laundered)

The other issue is to do with the fact that some tax avoidance schemes requires a change to the way individuals run their lives - for example spending time outside the UK etc. If the amount of tax is small, many will not bother, but when there is a considerable tax saving in drastically changing the way you live, some will take this option.

The last issue is related to the black economy - though not necessarily just to high earners as such. Some people are honest and will always pay their taxes in full, others are crooks and will always evade them, but many are somewhere in between - i.e. they would rather pay the correct amount of tax and not be criminals, but when the tax is very high then the temptation is there to work for cash. A fair and reasonable tax system will see more of these in-betweeners paying their taxes in full.

[markjay]

Originally Posted by SPX

Essentially what this government is saying that it can't/won't enforce a tax rate, because it hasn't got the teeth to close loopholes.

Does anyone genuinely believe that those that avoid paying tax are going to suddenly say "Well, old boy Osbourne has reduced the burden by 5% let's all pay our way from now on"?

No, they won't.

I haven't got many solutions for taxation, but believing that a 5% tax CUT is going to mean people paying MORE tax because they think it's fair shows up how naive Osbourne is.

If he came out and said "Look, I like to look after all of our key donators by reducing their tax bill and putting more money in their pockets in the same way that Labour tried putting more money in the pockets of the great unwashed" I would respect him a lot more.

It'd be political suicide though...

It actually does work... read this:

Why Cameron should ditch the 50p tax rate | The Spectator

[markjay]

And this:

A Laughable Laffer Curve from the WSJ : Good Math, Bad Math

[markjay]

The problem is not the maths - these are quite easy to model - and economists (and politicians) know (roughly) where the point that maximise tax income lies.

However, it is down to the black art of political survival. Governments tend to believe that any measure that will not target the rich will not be acceptable to the poor, and is therefore political suicide - most societies (with the exception of Brunei and the gulf, perhaps) have more 'poor' voters than 'rich' voters - even if in reality it would have increased the overall tax collection and as such (indirectly) the well being of the poor.

[markjay]

And my last point... what are the 'poor' complaining about? The measure of poverty have been pushed up over the years.

The poverty line - i.e. our definition of what is considered 'poor' - has rightfully moved up over generations - and therefore showing figures that seem to demonstrate that 'more' or 'less' people are in poverty now is just not maths.

The bottom line is that in general the population is becoming better-off as time goes by. Poor people now are nowhere near as poor as poor people were say fifty years ago, and definitely nowhere as poor as they were in Victorian times. Which is fine, because standards go up, and this is what we want to see as a society.

The real disadvantage of poor people today is not that they are poor as such, but that they do not improve as much as rich people do.

But this is not economy, this is psychology, which is no less a powerful factor.

It would be inserting to conduct the following experiment:

Offer subjects:

(a) to increase their pay by 20%, while their colleagues - doing the same work - have their pay increased by 80%

or

(b) to equally increase everyone's pay by 10%

I think the results may prove to be rather fascinating.... and will defy both mathematical and commercial logic.


More to the point - you would probably be able to get away with say 15% / 25%, but not with 20% / 80%... in other words, when it comes to being dependant on voters, the gap is more important than the overall improvement.

[SPX]

Markjay,
You know as well as I do that figures can be massaged to say whatever you want them to i.e. the gap between the 'rich' and the 'poor' is wider now that's it's ever been in history.

The reality is that up to the last 100-150 years the 'poor' were kept 'poor' by the 'rich' establishment. That was until the 'poor' got together and created unions, because the 'rich' were very unlikely to help them out of the poverty they were in. This has evolved over the ages into different things, but do you genuinely believe that the 'rich' would help out the 'poor' unless there was only political gain?

With regards taxation percentages, this will rage on forever IMO.