A pointless, predatory tax that will do nobody any good

What do you think the fifth most read piece on the personal finance part of the FT website is? The obvious answer is to think that it will relate to some kind of recent news – perhaps platform charging or how to protect your portfolio from tapering turmoil.

It isn’t. It is an article written by Lucy Warwick-Ching back in 2012 on the ten ways in which HMRC can tell if you are cheating on your taxes. And it isn’t just on the most-read list now, it’s been on the list since it was written.

What this tells me is that the people who read the FT think they pay too much tax, and that they are either trying to avoid or evade as much as they can, or they are wondering if they might give it a go. If I was in charge of the country, that in itself would be enough to make me think that I wouldn’t want to raise tax rates at all. Ever.

Better, I would think, to take in as much as I can at lower rates than battle rising evasion/avoidance at higher rates. But I’m not Ed Balls or Ed Miliband, and I am not engaged in an ideological battle against anyone I perceive as rich or over-aspirational.

The idea of returning the top rate to a level that even Labour called ‘temporary’ when it was first introduced smacks, as Lord Myners put it, of “predatory taxation”, and I can’t really see the point of that.

One important thing to note on this argument – and one that appears to be wilfully ignored by everyone – is that no one’s income is static. It might be that at any one moment only 1% of the population are earing £150,000 plus. But over a career, that number is much, much higher. I can’t find figures on this in the UK, but for a hint we can turn to the US.

Some 2% of people are earning $250,000 at any one time. But ten times that number – 20% – earn the equivalent of $250,000 at some point in their career. The point is that the 1% is not actually 1% at all. This kind of penalty affects a huge range of people at the top of their game and on the way to the top of their game.

And let’s not forget that direct tax rates in the UK are already pretty high. There is no such thing as a 45% marginal rate. Everyone pays another 2% in NI at that level, so the minimum you can call our top rate is 47%. You can then argue that employers, National Insurance (a cost which employees effectively end up paying by being forced to accept lower wages) is actually an income tax too. Look at it like that, and the top rate of tax is already far more than 50% already. Not too low, but too high.

It is also worth noting that back in 1979 the top 1% of income earners paid 13% of all our income tax – at a time when the top rate was 83%. Today the top 1% of income earners (not wealth holders but income earners – the difference is important) already pay not far off 30% of all UK income tax despite earning less than 14% of all income.

The arguments about whether higher taxes bring higher revenues will run and run, but my final statistic on this comes from the Sunday Times. In 2012-13, when the 50p rate was in place, HMRC raised £41.6bn from it. This year, with 45p as the top rate, it is to raise £49.3bn.

That should make those who support a rise wonder if demanding it is a good idea – one that will encourage wealth creation, innovation and entrepreneurial energy – or just a sure fire way of raising less tax revenue overall.

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66 Responses

  1. 27/01/2014, mr clyde wrote

    Income earners not wealth holders – a very telling remark. It never ceases to amaze me that allegedly intelligent politicians can get so wound up over what is an utterly trivial tax hike. I am beginning to think that the whole argument is an agreed, stage-managed smoke screen to protect the status quo. In reality, it is quite easy for a wealthy family, with a liquid couple of million, to earn several hundred thousand pounds a year and pay an effective income tax rate of less than 10%. I really don’t think they much care what the ‘top-rate’ is.

    • 28/01/2014, Orb wrote

      “the whole argument is an agreed, stage-managed smoke screen…” – I agree: I don’t believe the top rate matters much to those who might be affected by it. The less well informed voting masses are easily tricked by political spin. When Labour (even the name is a good bit of deceiptful spin!) shout “We’re going to tax the rich more!!”, all they hear is “More money will be taken from the rich to give us better social benefits!!”; a bitter few take the trouble to investigate the math & misappropriation! Otherwise, how else could Labour be ahead of the Conservatives in the polls??

      Merryn, in terms of remuneration, the UK is one of the most unequal societies in the world – now there’s a good topic to report on!

      To get the rich to pay a ‘more fair share’, get rid of IT and raise VAT!

  2. 27/01/2014, Boris MacDonut wrote

    I never understand the bleating and wailing of the well off whenever the top rate of tax is raised. They always argue that it raises nothing or even raises less, in which case it must be a good thing for the rich…they pay less…and a good thing for the rest as they have the consolation that at least the system tries to be fair and re-distributive. The rich, whether wealth holders or earners have become much, much richer in the last two or so decades and they can well afford to pay more.
    It is asking someone earning £500,000pa, £10,000 a week (£250 an hour) to take home £21,600 a month instead of £23,000 a month. This is just 6% less.
    Equally to actually hand over 50% of your pay …a half…you would need to be earning £1,800,000pa after pension contributions so about £2million.
    So society,in return for a safe environment to earn such largesses asks millionaires to give £1 million each time they take another £1million. What’s not to like. It is on apr with the lottery where half the money comes back as prizes.
    By the way the working poor and those parents at the margins for chiold benefit face marginal rates of 80% but I don’t see MW moaning on their behalf.

    • 28/01/2014, mr clyde wrote

      Boris – I entirely agree however here is a list of ways to properly tax the wealthy without mucking about with a paltry 5% at the top rate with all the furore it causes:
      Reduce lifetime limit and relief for pensions
      Set lifetime limits to ISAs, VCTs, EISs
      Rationalise IT and CGT rates and reform property CGT exemptions
      Abolish IHT and replace with a capital transfer tax paid by the recipient

      I.E. Reduce the myriad ways people with loot skip round the current system. If everybody paid their share a top rate at 40% would be more than enough and be seen as fair.

  3. 27/01/2014, Mombers wrote

    Good article but I must point out an inconsistency. You include the effect of national insurance to get a true marginal rate 53.5% (employer pays £1.138, you get 53p). A more consistent measure of how much tax is paid by the top 1% would include National Insurance. The government raises about as much in NI as income tax but it not nearly as progressive so the 1%’s contribution taking this into account would be substantially less. As a reference, including NI, the starting marginal tax rate is 40.2%!!!!! Employer pays £1.138, you get 68p (20% + 12% NI).

    • 27/01/2014, Boris MacDonut wrote

      Mombers. IT receipts £153 billion. Nics £99 billion. Hardly the same. Someone on £28,000 pays 8.7% of pay in Nics. Someone on £500,000 pays 2.6%.
      The FTSE execs average pay is now 24 times average pay where it used to be 6 times before the culture of greed took over.

  4. 27/01/2014, Critic Al Rick wrote

    It appears to me that a lot of high ‘earners’ don’t appreciate the reason for them being high ‘earners’ very often is attributable to the rigged playing-field. Not just content with rigged high remunerations they rig the playing-field further so’s to ‘legally’ avoid taxation!

    Incidentally, Boris, I’m halfway through reading the book ‘Treasure Islands’ by Nicholas Shaxson, as per your suggestion.

    The powers-that-be are well and truly in control, taking full advantage of the rigging opportunities afforded them via the Globalisation they drive. Any integrity there once may have been has been replaced by an insatiable greed; the cancer spreading down the echelons.

    In my book anyone on disproportionately high remuneration should be on correspondingly high income tax levels. After all, they’re benefitting a lot more from the (rigged) society, why shouldn’t they contribute correspondingly more to the society. But it’s not likely to happen.

    Greed is clouding the judgement of the powers-that-be. Far better an incentivised and controlled reduction in the human population along with a fairer distribution of the spoils than the holocausts likely to ensue should the status quo continue unabated.

  5. 28/01/2014, Yogi wrote

    I don’t earn £150K a year and I am never likely too, however the big issue is that if you raise the bar on taxation people spend more time trying to avoid paying it as the Sunday times demonstrates. As an FD I have already been asked to investigate tax saving measures if Labour gets in. This is a gross waste of my time as I know I can get more money out investing my time in the business rather than trying to save tax. I just wonder how many Accountants and business people are going to be equally distracted – could be enough to stop the economy in its tracks!

    • 28/01/2014, uncommercial wrote

      The obvious answer is that if people weren’t so grossly overpaid, maybe they’d spend less time worrying over being taxed.

      • 28/01/2014, JT wrote

        Why is this obvious? And why should YOU get to decide, based on entirely subjective criteria, whether someone is ‘grossly overpaid’?

        • 28/01/2014, Rags to riches wrote

          It may not be obvious but it is a fair comment. Wages and hence the cost of living have gone up exponentially since the 1960′s. We are now uncompettitive and hugely in debt and never likely to repay what we owe. On a world basis overpaid for sure.

        • 28/01/2014, Boris MacDonut wrote

          JT. The number earning over £1million has risen from 3,900 in 2000 to 18,200 last year. I would suggest that over £1 million pa is grossly overpaid with the emphasis on “gross”. It is indefensible. If the snout on trough brigade are so thick skinned they need unsubtle hints like a 50% tax rate to instil a modicum of humility.

  6. 28/01/2014, mr wrote

    The question of fairness is the glaring elephant in the room. It wouldn’t matter if the top tax rate was 35%, 40% or even 50% (except that I subscribe to the principle that everyone should keep more of what they earn than the Government takes).

    But it must be right for everyone’s tax bill to rise in relation to earnings & as long as the effective rate for any higher earners can be brought/kept below that for lower earners then the system cannot possibly be defended as fair.

    I guess that implies a lower, flatter tax regime with a much higher tax-free allowance. Why is this so difficult?

  7. 28/01/2014, steveH wrote

    you say 41Bn at 50p rate 49Bn at 45p

    even the HMRC under Osborne say going back to 50p would increase the tax take (a bit, 300M)

    I do agree that tax is to raise money to finance government spending, and that the rates should be chosen to maximise the tax take, it would be utterly wrong to hike the rate and reduce the take at the same time.

  8. 28/01/2014, r wrote

    Merryn says “let’s not forget that direct tax rates in the UK are already pretty high”; they are excruciatingly high. Why is nobody demanding that the government SPENDS LESS.

    @Boris says “it must be a good thing for the rich…they pay less…” they pay less because they leave or their money leaves and the country loses out.

    @mr has a point; a flatter tax regime will be fairer for everyone with a tax free allowance of considerably more than £10k. Escalating tax rates are inherently unfair, anyway.

    The prime objective should be for government to reduce expenditure, such as avoiding Arab wars, the EU and wasted foreign aid, not for ever try to increase the tax take.

    r.

  9. 28/01/2014, robin wrote

    Exactly this issue was on LBC last night. Someone phoned in and said that they earn over 150k and they don’t feel wealthy.

    I agree with him.

    Your income suggests that you have high equity, but that is it; just a suggestion. I earn a lot, but my equity is not very high at all.

    The rich have a great deal of equity and when they have serious amounts of equity they don’t need to pay themselves very much money at all.

    Talking about income tax just hurts the up-and-coming-but-not-quite-rich-yet rich. Its a political smoke screen, a conjuring trick to distract us from the real deal.

    What we need is a real taxation that addresses wealth disparities in this society. We need LVT and IHT. But the minute we do something in that area, all the rich pack up and disappear to the sunniest country that panders to their every financial wish.

    So we can’t do this kind of thing yet anyway. We have to sort out international law and how it deals with taxation. Tax havens must end. The existence of tax havens should be considered to be something akin to piracy; because that is what it is; financial piracy.

    And once this is settled, transfer pricing and unfair tax avoidance by mega corporations such as amazon and starbucks would end. Then we may not feel the need to tax the rich at all.

  10. 28/01/2014, Greg wrote

    I would lower the 50p tax threshold to £100k until a Land Value Tax can replace income tax and make the distribution of income and wealth much fairer. Greed and selfishness are the main problems with modern society – trouble is many of these people will never be satisfied by whatever money they have, they will always want more and not be willing to give anything back to society.

    Due to the way the markets work those that have been lucky to own land and property over the past 15 years – particularly leveraged property – have become far wealthier without having to hardly any work, at the expense of those who are renting (often sub-standard over-priced accommodation). I have no problem with those generating income and wealth, provided they recognise the disparities and contribute to help those who are less fortunate than themselves, often through no fault of their own (just because they “missed the boat”)…

  11. 28/01/2014, Greg wrote

    Those earning relatively high incomes (i.e. over £100k) have benefitted far more than others due to the historically low interest rates – meaning they have had much more disposable income left over after mortgage payments than those on low incomes after paying their rent. That is why whilst interest rates remain low there should be a 50p tax rate!

  12. 28/01/2014, js wrote

    The idea that the rich should pay more seems to gain wide acceptance, but do people see any limit to this? In 2010-11 the Top 1% of earners accounted for 11.5% of income but contributed 25% of tax. How much higher does it have to go before people think they have shouldered their ‘fair share’?

    Also MSW’s article didn’t mention that the personal allowance is reduced at the rate of £1 for every £2 earned over £100,000pa. If you earn between £100,000 and about £118,000 the marginal rate is nearly 65%.

    • 30/01/2014, Boris MacDonut wrote

      js. By extension you suggest the poorest 505 should pay 50% of taxes. The whole point of a progressive system is to be re-distributive. The reason the 1% pay so much income tax is that they have so much income, above and beyond not just basic necessities but even the most luxurious living standards. Some even pay £100,000 to have 2 days shooting up north or maybe £400,000 to rent a yacht for the weekend only to sit in Antibes and look at the harbour.
      Remember the 1% contribute a lot of Income tax but not other taxes. The poor are disproportionately hit by Council tax, Excise duties on petrol, cigs and beer, VAT, Nics, Stamp Duty…

  13. 28/01/2014, JT wrote

    As Merryn points out, the top 1% of earners currently contribute 30% of total tax receipts.

    Since it’s clear that upping the tax rate on that 1% either makes no meaningful difference, or may actually reduce tax revenues, the question we should be asking is this: what sort of government do we want?

    A government which considers it not just fair, but morally necessary, to confiscate more than half of a proportion of some people’s income in order to appeal to just enough voters to win a majority (Ed’s current ’36%’ strategy), or a government which is prepared to try to shrink the public sector in an effort to make it more affordable.

    • 28/01/2014, Critic Al Rick wrote

      @ JT

      Unfortunately, what we would like and what seems inevitable are at variance.

      The inevitable for the majority in the West is a gradual decline in living standards. Globalisation is levelling the standards of living of the World’s masses to that of the Lowest Common Denominator. Whilst the Rich and Very Rich Parasites evade taxation even more.

      • 28/01/2014, JT wrote

        Yes. But upping tax rates on the rich and very rich at best makes no difference, at worst exacerbates the problem. And Labour throwing around nebulous arguments about ‘fairness’ (whatever the hell that means) is just populist nonsense.

    • 28/01/2014, js wrote

      Minor point but that 30% figure was a projection by HMRC in an April-13 document, updated in September. The last confirmed figure that I can see is 25% for 2010-11.
      The rapid increase from 25% to the projected 29.8% in 2013-14 is partly due to people taking income which was deferred from earlier years to avoid the 50% rate.

      • 28/01/2014, JT wrote

        js,

        The precise figures are irrelevant. The point is that the government is hugely reliant on a tiny minority to bankroll the state. Without the 1% the public sector cannot exist in anything like its current form.

        I do not want a state which demands that we confiscate more than half of a proportion of some people’s income.

        • 28/01/2014, js wrote

          Couldn’t agree more. A huge chunk of the Great British public seems to think the state has equal, if not greater, rights to the money that I earn than I do.

          Just like getting the right figures and in the right context.

          • 28/01/2014, Critic Al Rick wrote

            @ js

            Not forgetting, for example, the Very Rich Parasites and their associated pseudo respectable corporations who deny HM Treasury a huge chunk of revenue. Such chunk requiring that others are squeezed in an attempt to extract the Deficit.

            On the other hand it is most likely the actions of the Very Rich Parasites (VRPs) which have, inadvertently or not, exacerbated the extent of Benefit Street. They, the VRPs, have no loyalty, except unto their utterly selfish selves.

            • 28/01/2014, JT wrote

              CAR,

              As I’ve said on here before, if you want companies or individuals to pay more tax, then oblige them to do so by law, in ways they cannot avoid.

              Criticizing anyone for avoiding tax is nothing more than asking them to make voluntary donations to the exchequer. That is not the stuff of serious debate.

              Better still, increase tax receipts as a product of economic growth. Growth, combined with a reduction in tax rates for everyone, is the most effective way to increase government revenues.

              • 28/01/2014, Critic Al Rick wrote

                @ JT

                It is those that ‘legitimately’ avoid tax the most that effectively make the tax laws.

                I don’t consider Growth to necessarily be the best factor to incentivise; growth of UK self-sufficiency to reduce imports – yes.

                • 28/01/2014, JT wrote

                  I agree with the point about grown and imports, but not your first point.

                  Tinkering with the tax rules to close ‘loopholes’ is a waste of time. The only effective method is simplification and wholesale reform.

                  The enormously complex system we have now actually forces companies and individuals to employ accountants, and if you’re paying an accountant you will naturally wish to minimize your tax liability!

                  • 28/01/2014, Critic Al Rick wrote

                    Following on from:
                    “It is those who ‘legitimately’ avoid tax the most that effectively make the tax laws”:

                    As I understand it, anyone else who significantly benefits is an unintentional beneficiary. They are largely the ones who employ tax avoidance experts at great expense to find the loopholes.

                    Society is rotten to the core. It’s not just the tax rules which need wholesale reform.

          • 30/01/2014, Boris MacDonut wrote

            js.They do have the right. It is part of the contract one has with the state. The cost of civilisation.
            It is the same reason why they can tell you which side of the road to drive on and how slowly.

        • 28/01/2014, Boris MacDonut wrote

          Jt the state is also cluless about how many rich there are . HMRc’s new tax on property over £2 million was expected to hit 1,100 houses and raise £20 million. But in the first year it caught 4,000 homes and raised £110 million. The fact is there are far more rich and with far more money snaffled away than we are ever told about.

    • 28/01/2014, Boris MacDonut wrote

      JT there are only 125,000 people earning over £200,000 and only 4,000 earning over £2 million. The latetr is the point at which half your income is handed over in tax. I don’t think those 4,000 are a significant voting demographic,thought eir sense of entitlement may suggest otherwise.

      • 29/01/2014, JT wrote

        Odd, isn’t it, how some people feel entitled to keep at least half of everything they earn.

    • 30/01/2014, Boris MacDonut wrote

      JT. No Merryn tells us the richest 1% contribute close to 30% of Income Tax, not ALL taxation. It is a function of the vast amounts they now pay themselves. Up 12 fold in 30 years. Try as they might the rich do not pay for 30% of all petrol, or cigarette sales or VAT and they definitely contribute very little to Council Tax.

      • 31/01/2014, JT wrote

        Er, yes, but petrol, cigarettes, VAT and the rest are irrelevant in this particular debate, which is about whether there’s any economic merit to raising income tax on the top 1% of earners.

        The answer, which no-one seriously disputes, is ‘no’. For the simple reason that even under the most optimistic case published by the IFS, it would raise enough money to cover precisely 70 minutes (yes, minutes) of government spending.

        Let’s be clear. The only reason Labour are pledging this is to pander to refusenik LibDems who they hope will drag them over the line in 2015. As an economic policy, it’s laughable.

  14. 28/01/2014, Ron D wrote

    Polarisation / Inequality are bad for the economy. Check out ‘The Cost of Inequality’ by Stewart Lansley or ‘The Spirit Level’ by Wilkinson and Pickett. We need fairer tax system, therefore more from the people who can afford it. (This includes me.)
    When the top rate was reduced, the impact to tax revenue was seriously underestimated. Messrs. Cameron and Osborne with all their focus on the deficit, will actually double it over the course of the 5 years of their government, from £700B when they took over, fast heading for £1.4T. So far they have only looked at spend. They need to look at tax. Austerity is not working.

    • 28/01/2014, JT wrote

      Why is the tax system so unfair when 1% of earners already pay 30% of all tax?

      And who are all these people you say “can afford it”? Of the 320,000 who’re expected to exceed the £150k threshold, less than 7% will earn £1m or more.

      • 28/01/2014, Critic Al Rick wrote

        @ JT

        In answer to your question – please refer to my uppermost post on this thread. It’s to do with rigging – the playing-field of society is as much rigged as it is riddled with Parasites (rich, poor and intermediate).

        From what I can gather every so-called ‘organised’ civilisation throughout the millenia has been so…with the emphasis on ‘has been’…

  15. 28/01/2014, GFL wrote

    This whole 50p tax policy is purely a cheap political gimmick.

    The real topic here is why the government feel they own people’s labour (earnings and assets representing that labour). The tax freedom date in the UK is around 01/06 – if you’re even slightly above average approximately 50% of your labour/money goes to the state. That is beyond insane! How in god’s name did this become acceptable?

    We will never get rid of inequality with the currently monetary system – it is designed for those at the top to leverage and those at the bottom to lose purchasing power every year. In a funny way, the rich is borrowing from the middle/poor – no change in the tax system can address this!

  16. 28/01/2014, 4caster wrote

    Has it occurred to no-one to ask why the FT Article “the ten ways in which HMRC can tell if you are cheating on your taxes” is so popular?
    Those readers are not just “wondering whether to give it a go”. They are already on the fiddle, and they are checking on whether they are likely to be caught.

    • 29/01/2014, Boris MacDonut wrote

      4caster.Agrred. It never ceases to amaze me just how deceitful and dishonest the vast majority of people are.

      • 30/01/2014, Critic Al Rick wrote

        @ Boris

        Especially when it comes to the Parasites claiming ‘entitlement’ benefit.

  17. 28/01/2014, Texas Pete wrote

    As others have said Labour’s plan to revert to a “temporary” 50% top IT rate is a naked electioneering gimic no doubt intended to appeal to its core supporters warped sense of “fairness”. Problem is GO played right into their hands by only cutting the top rate to 45% – why not also cut the higher rate to say, 38% and the basic rate to, say 18% (as a starting point)? Would Labour have proposed a temporary increase to these rates back to their original levels? Doubt it. The problem is that in order to fund cuts to the HR and BR the Cons would have to make meaningful cuts in govt spending, instead its also been guilty of its own naked electioneering gimics, such as the triple lock pensions pledge. While this and other sacred cows such as overseas aid, public sector pensions and NHS are left untouched we won’t be seeing any tax cuts which are meaningful to the majority of the working population.

    • 29/01/2014, Boris MacDonut wrote

      Texas Pete. You must have been in Texas too long.
      Since 2010 the Tories have cut our overseas aid budget by 12% and made most public sector pensioners contribute 5% more of their salary to their pensions. Not sure how this constitutes “untouched”.
      When a Governemtn is having to borrow an extra £115 billion pa just to make ends meet,why would they reduce income taxes by 6%?

  18. 01/02/2014, Vince wrote

    I doubt any extra tax would be raised as people earning those sums probably have clever accountants who’d get round it. What the government should focus on is making the tax system simpler and fairer for all. It won’t be popular, but business owners seem to have very easy. My friend pays himself and his wife minimum wage through the business. Then they can claim working tax credits, child benefit and free school meals. But they eat out twice a week, have several holidays a year and drive new cars all through director’s loans and expenses. Apparently this is all within HMRC rules. It seems only middle income PAYE pay any tax in this country….that’s just not fair.

    • 01/02/2014, js wrote

      Agree the system should be simpler. Fairness just seems to be a matter of perspective.

      But I don’t fully understand the example of your friend. Yes he can take money out of the business as a director’s loan but if the loan is not full repaid within 9 months & 1 day then he would have to pay interest on the loan and the company would be charged corporation tax. Similarly with cars – the benefit in kind rules make it quite expensive to run a company car and your friends will be paying tax on that benefit.
      Running your business through a limited company can certainly be tax efficient, mainly by taking income through dividends and avoiding NI contributions, but there are limits to what HMRC will accept.

      • 01/02/2014, Vince wrote

        That’s interesting. Are dividends not treated as income then for overall earnings assessment?

        • 01/02/2014, js wrote

          Well they are treated as income for tax purposes but no NI is due on the earnings any more than it would be for income from property etc.

          Broadly:
          - a company employee (basic rate tax payer) pays 32% tax on earnings above personal allowance. The employer must also pay 13.8% employers national insurance.

          - a self-employed person would pay about 29% with their Class 4NICs;

          - a limited company owner paying themselves entirely in dividends pays income tax and corporation tax, for a basic rate tax payer this is 0% income tax (due to the dividend tax credit) and 20% corporation tax on company profits. Effectively tax of 20% is paid on earnings.

          So long as the savings aren’t offset by the extra cost for a limited company it’s a pretty clear cut advantage.

  19. 02/02/2014, Boris MacDonut wrote

    It has been proven by psychologists that once an individual earns more than £66,000pa their happiness does not increase.
    In keeping with Cameron’s desire to increase general happiness would it not make sense to introduce an income tax rate of say 75% on incomes over £75,000pa?
    That way the greedy get to keep a bit from their extra work and society is morte likely to be happy overall.

    • 06/02/2014, js wrote

      One can’t argue with killer facts proven by psychologists. I withdraw all my objections to higher tax rates.

      However, the ‘society is morte’ comment makes me wonder how happy you are BM. Are you earning too much?

      • 06/02/2014, Critic Al Rick wrote

        @ js

        I do wonder, reading your comments, if you’re employed by the Cartel, etc Sector; the Quasi (as opposed to the Truly) Private Sector.

        If someone can’t be content on the present net proceeds of a gross income of £150K then that someone has a problem, whether they realize it or not.

        Also, the fact that some can command such remuneration is largely down to rigging of the ‘playing-field’; such distortion making life a lot harder for a lot of those individuals at and towards the adverse end of such field; i.e. life compared to what it could be on a level or near level field.

        One man’s substantial ill-gotten gain is many other men’s significant hardship.

        • 08/02/2014, js wrote

          Mellow out AR – It was only a light-hearted riff on Mr MacDonut’s “society is death” typo.

          On a more serious point, regarding your later response to Anonymous. Let’s say you get your globalised revolution and the playing field is levelled to your satisfaction. Do you:
          (1) Accept that there will still be a wide distribution of income levels, with high earners benefiting from some combination of harder work / better life choices / better luck than others?
          (2) Favour the principle of flat rate taxation?

          I’d be really interested to know.

          • 08/02/2014, Critic Al Rick wrote

            OK js

            To answer your queries:

            (1)
            a) I was self-employed for the whole of my working life and, believe me, full well know the meaning of ‘hard work’ and ‘very long hours’.

            b) Having also made the choice to change business type mid ‘career’, I have first-hand experience of at least one example of having made a ‘better life choice’.

            c) But as for ‘luck’ – ‘luck’ with regard to remuneration, I am told, is something one makes for oneself! I never managed to make any, but then I have never been associated with the CeS(pit), other than being disadvantaged by ‘antiluck’!

            Of course there should be a distribution of income levels, but a fair one, and an uncorrupted by corroborated ‘luck’ one. Credit given where credit due, not effectively stolen.

            (2) Yes, in the confines of a Utopian playing-field I would be in total favour of the principle of flat-rate taxation.

            • 08/02/2014, js wrote

              Thanks for the interesting response. It sounds as though in a utopian world we would be pretty much in agreement on tax principles. But as we move along the spectrum from utopia to reality we would probably disagree about the extent and the manner in which the tax system should be targeted at inequalities of opportunity.

              BTW by ‘luck’ (good or bad) I meant everything from the luck of being born with a particular skill or attribute, to the luck of being born in this society at this time.

              I am also self-employed and I think that has been a significant influence on my views on taxation. I’ve been lucky enough to earn a good living – though not in the >£150k bracket so my objections to a 50p tax rate are not from self-interest.

              Like you I have to work long hours. I often work at weekends as I’m sure you did. I consider it worth it to earn an extra £300-500. It feels less worth it when that extra effort puts me in the 40% tax bracket and if I had to pay 50% I really don’t think I would bother. If that makes me greedy then so be it.

              Maybe if I thought the country really needed the money and would spend it wisely then I would feel differently, but there are just so many examples of excessive and wasteful state spending that I would resent further tax demands. There’s a million and one examples (and yes they would include gov’t letting corporations and individuals evade tax – something that I would argue could be at least partly addressed by a far simpler and flatter tax system) but let me give you just one, which I hope will resonate with you as formerly self-employed:

              - a friend of ours is a midwife; she earns a decent enough salary and so she should for doing a valuable and worthwhile job. However, I was astonished when she announced that having notched up 10 years service, her holiday entitlement went up to 8 weeks per year. 8 weeks! Is that as alien concept for you as it is for me? It’s one tiny example but multiply it up across the public sector and for me the extent of state excess is plain.

              • 08/02/2014, Critic Al Rick wrote

                Thank you, too, for your interesting response. I was half expecting to have to defend myself against a barrage of accusations! Not really.

                Any increase in turnover I experienced over the period from commencement of NMW to 2007 was swallowed up in increased staff costs; effectively, my income in real terms declined. Over the same period House Prices rocketed and so too, almost in sympathy in some cases, did the remunerations of professionals, etc and certain others in the CeS(pit), I include Public Sector workers (and, incidentally, entitlement benefitters – ex TPS pensioners) as part of the CeS(pit); ahem, including your midwife friend. Whereas, in general, it seems to me remunerations in the Truly Private Sector (TPS) over the same period have stagnated at best.

                Over the same period UKplc has continued to make a substantial year-on-year loss, shows no sign of doing otherwise, whilst the CeS(pit) effectively gorges off the declining wealth of the Truly Private Sector and off increasing debt of UKplc.

                Utter madness don’t you think?

  20. 06/02/2014, Anonymous wrote

    The arguments are all interesting but, the gorilla in the room is, we need a regime of low tax & small government, such as Hong Kong, Jersey & the UK once had, where government take of GDP was 10% now it is 50% + ( anything above 30% is wast). We seem to be working so the liberal elite can keep there snout in the trough by imposing punitive taxes.
    We need a transparent tax rate of say 18% across the board, a lowering of Vat reducing exponentially as the economy picks up & massive slashing of the public sector & there gilt edge pensions which by the way we in the private sector pay for, ( or as i think of it a state sponsored ponzi scheme) as well as our own.
    Reward people for working & encourage the wealthy to settle & invest in this country, instead of sniping at them & trying to steel or tax (same thing) it out of them, that way wealth would percolate right down the income scale benefiting every one who is prepared to work.
    There are some very hard choices that have to be made by politicians right now as they seem to want to build more road in which to kick the can down instead of dealing with the real issues.
    It has been proved that higher tax rates drive wealth & investment away, so therefore i question the intelligence of people who think higher taxes are the way forward, there argument just does not hold water.

    • 06/02/2014, Critic Al Rick wrote

      I, too, am in favour of lower taxes and smaller government. But in an environment consisting of a much rigged playing-field I still favour progressively increased taxation levels. Those that benefit the most from a corrupted playing-field should, in all remaining fairness, be commensurately taxed the most.

      I realise that at the present stage of Economy Globalisation it would be financially suicidal of the UK to rigorously enact such a tax regime unless such regime in itself was Global.

      However, I disagree with your statement concerning the percolation of wealth right down the income scale by virtue of encouraging the wealthy to settle and invest in this country. The very wealthy seem to me to have an agenda; and that agenda is to steal as much wealth as possible from all of those ‘lesser’ mortals having any wealth.

      Perhaps the only way to thwart said agenda is via Globalised Revolution.

  21. 09/02/2014, Boris MacDonut wrote

    As I understand it Public Servants qualify for 30 days leave after 10 years service and another 9 or 10 public holidays.
    Most of the Public sector has been on pay freezes or 1% pay rises since 2008 with commensurately large increases in pension cintributions. Civil Servants and Teachers seeing take home pay fall by 3.7% in 5 years.

    • 10/02/2014, Critic Al Rick wrote

      Boris, you fail to mention what happened with Public Sector remunerations throughout the earlier years of the Noughties.

      I would suggest that, along with House Prices, Quasi Public Sector (incorporating the Public Sector) salaries increased out of all proportion with the stagnating state of the real economy.

      The tail is wagging the dog. The Parasites are ‘killing’ their Host (the Truly Private Sector); a cancer on the backbone of the West.

    • 10/02/2014, js wrote

      So even using your figures, 39 or 40 days – i.e 8 working weeks. I think a system that pays people for a week’s holiday every 6.5 weeks is being too generous when it’s being funded by people who typically don’t enjoy anything like that level of entitlement.

      Just for reference the NHS recruitment webpage states:
      “- – -harmonised holiday entitlements of 27 days per year, plus eight general and public holidays, rising to 33 days after ten years’ service”

      So that’s 41 days. And the PCS (Public & commercial Services Union) describing the Prison Service (NOMS) group states:

      “In NOMS, PCS grades are entitled to 25 days annual leave on entry, rising to 30 days after 10 years service. On top of the annual leave entitlement we also get 8 paid days bank holidays plus 2.5 paid privilege days. The total paid leave entitlement for our grades is therefore 35.5 days (over 7 weeks) on entry, and 40.5 days (over 8 weeks) after 10 years service.”

      As for pay freezes etc. My responses would be: (1) Join the club. (2) Many people will still have benefited from annual pay increments linked to length of service. (3) How many employees in line for a public sector pension will look at their increased contributions and say “No thanks, I’ll take out a Sipp”?

      Lest this sound like some sort of Tea Party diatribe I should say that I don’t think this country’s problems can be blamed on public sector workers, nor solved by some arbitrary cutting of their current pay and conditions – other than some like local council leaders whose pay seems to have spiralled like a FTSE-100 CEO’s.

      I am all in favour of tackling the income side of the fiscal equation, by targeting evaders and avoiders; but we also need to control the spending side, particularly in view of the rising demand for healthcare in prospect.

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