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Fate of the 50p income tax rate

During the past week or so, the AccountingWEB editors' in-box has been swamped with messages and press statements putting forward arguments for and against the 50% tax rate band.

Is this all an artificial bit of political froth generated to fill the silly season vacuum, or is it a vital debate in which the views of AccountingWEB's members need to be brought to the Chancellor and business secretary's attention?

I'm concerned that in this instance my habitual cynicism may have clouded my news judgement and I've ignored the comments from the likes of Ernst & Young, UK200Group and Richard Murphy to concentrate on other issues. Do many people here feel strongly about the issue and want to go into it in more detail?

As a quick overview, here are some of the points pro & con:

Srap the 50% band

  • "There’s not much point in having taxes that are very economically inefficient." Chancellor George Osborne, Radio 4 Today programme, 16 August. The chancellor has reportedly asked HMRC to evaluate the impact of the rate on Self Assesment takings after its first year. The findings should be ready in time for the Budget.
  • "It punishes wealth creation by imposing on entrepreneurs and business people a marginal tax rate in excess of 50% once national insurance contributions are added in... This is particularly damaging when the UK needs to create new businesses in new industries and promote growth by small companies, which can grow fast. It applies to just 1% of taxpayers, who already pay 24% of all income taxes."
  • "A significant disincentive to doing business in the UK, providing a barrier to new business owners and executives from coming here, whilst also driving existing higher earners to foreign shores." Patrick Stevens, Ernst & Young
  • "If something is not bringing in a profit and it cannot be made to do so, there is no point in continuing... In business and economic terms, if the 50% tax rate is not covering its costs then it should be scrapped but politically that's a totally different question!" Jonathan Russell, UK200Group
  • "With National Insurance, top taxpayers pay over 50 per cent which means they are working more for the taxman than themselves... These high earners are often the creators of businesses and therefore jobs for those who do not have the same talent, management skills or qualifications. Do we really want to punish them for their successes and risk losing this hot-bed of talent?" John Kelly, Square One Financial Planning

Keep the 50% band

  • "By definition most small businesses aren’t going to get in the top 1% of income earners – there are about 4m small businesses in the UK right now, at least (over 1m companies and 3m or so self employed). All small businesses that will grow fast will be limited companies – enjoying effective tax rates of around 20% or so, utterly undermining this argument." Richard Murphy, TaxResearch blog.
  • "According to recent articles, a 1% cut in income tax would cost the Exchequer £4.5bn. So these economists think that putting £10bn into the hands of 300,000 already-very-wealthy people is a better recipe for the well-being of the country than (say) cutting EVERYONE’s income tax rates by 2p…" ChrisM, on Murphy's blog.
  • "The government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden." A Treasury spokesman reaffirming the government's commitment to the 50p tax rate on Tuesday 7 September.

Let me know if you're interested in this topic and what you think. If I've been mistaken about the significance, I'll make amends with a more detailed study of the arguments, and perhaps put it to a community poll. As always, your guidance is appreciated.

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08th Sep 2011 13:43

Hmmm

In times past income tax rates have occasionally exceeded 100% and I remember income tax routinely being charged at 83% - plus an additional 15% if the income was investment income (making 98% in total).

I cannot see why there is any excitement about a 50% rate!

David

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Time will tell

I don't think it's been in long enough to say one way or another but my gut (and it is substantial) feeling is to keep it in, say for 300 years?  As David says, and is true of many things in our money grabbing society, taken in the longer-term this is not a draconian rate of tax.

However, it will be interesting to see how much the country actually makes from it, (or how many use their wealth to avoid it) and, of course let's not forget, the tax-take is one thing, what David/George & chums do with it is another.

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£10k for all.

I think it's more important that we reduce the tax burden of the lower paid and middle earners.

The obvious thing to do would be to simply raise personal allowances to £10,000. 

£10k is roughly the figure below which people are living in poverty as defined by the government, so, there is a clear moral argument that is is wrong to tax people while they are officially living in poverty.

However, hand in hand with that there must also be an argument that it is equally immoral and unacceptable for pensioners, the sick, and the unemployed, to be kept in poverty, so all pensions and benefits should guarantee a minimum £10k per annum income.  This of course would COST a considerable amount.

However, giving these groups greater spending power would boost the economy, and much of the extra would find its way back to central government in the form of extra VAT etc paid by the benefit claimants.

As for the cost of bringing this social justice to the Country - the 50% rate would have to be scrapped - and replaced by a sliding scale of taxes from 50% to, say 75%, for the wealthiest.

Just how I wonder would the highest earners actually justify objecting to additional taxes if by doing so they were directly pushing the poorest into poverty ?

 

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21st Sep 2011 15:37

10k for all

I think it's more important that we reduce the tax burden of the lower paid and middle earners.

The obvious thing to do would be to simply raise personal allowances to £10,000. 

£10k is roughly the figure below which people are living in poverty as defined by the government, so, there is a clear moral argument that is is wrong to tax people while they are officially living in poverty.

However, hand in hand with that there must also be an argument that it is equally immoral and unacceptable for pensioners, the sick, and the unemployed, to be kept in poverty, so all pensions and benefits should guarantee a minimum £10k per annum income.  This of course would COST a considerable amount.

However, giving these groups greater spending power would boost the economy, and much of the extra would find its way back to central government in the form of extra VAT etc paid by the benefit claimants.

As for the cost of bringing this social justice to the Country - the 50% rate would have to be scrapped - and replaced by a sliding scale of taxes from 50% to, say 75%, for the wealthiest.

Just how I wonder would the highest earners actually justify objecting to additional taxes if by doing so they were directly pushing the poorest into poverty ?

 

[/quote]

do i detect marxist socialism in this idea?

nevertheless inequality has spiralled since the advent of thatcherism and erosion of our manufacturing base/industrial policy(if ever ther has been one since harold wilson) 

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21st Sep 2011 16:32

I didn't enjoy 1974 the first time around, rather not repeat it.

david5541 wrote:

As for the cost of bringing this social justice to the Country - the 50% rate would have to be scrapped - and replaced by a sliding scale of taxes from 50% to, say 75%, for the wealthiest.

Just how I wonder would the highest earners actually justify objecting to additional taxes if by doing so they were directly pushing the poorest into poverty ?

As someone who indeed remembers 1974 when rates peaked at 83% for earned income and 98% for unearned income, we already know exactly how the highest earners would justify this - they wouldn't. They would take the same paths as before and either:

avoid the taxevade the taxleave the UK

It is highly unlikely those subject to the highest rates would actually stick around and pay them.

None of the above options makes it easier to pay down the deficit, in fact it would almost certainly reduce the overall amount of tax collected as per the theoretical Laffer Curve.

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21st Sep 2011 16:29

Poverty

I suppose it depends on your interpretation of "poverty"

"Poverty" in the UK cannot be compared in any way to the "real poverty" experienced by huge swathes of the population in Zimbabwe for example. "Poverty", generally is an emotive term and is used to confuse the issue when talking about "expectations" of certain sections of the populace living in the UK.

For example, my son was invited to visit a friend's home for tea. His home is a council house which is very tastefully decorated with trendy wooden flooring (at least downstairs), the ubiquitous modern 56" TV in the corner of the living room and a 2 year old Vauxhall (not sure which but beside the point) on the drive. Mother is living on benefits and has 4 children; father no longer around. 

As a full-time working basic rate taxpayer with 2 children, I have to ask myself "am I an idiot for working when I could be sat at home all day living in such 'poverty'"? I suppose I choose to work because my upbringing emphasised the importance of working and earning your own living rather than expecting the "state" (ie the working taxpayer) to support you.

I am also pretty sure that the cost of this one household far exceeds £10k per annum!

Soaking the "rich" to pay for the feckless is not an option for any truly "fair-minded" person!

 

 

 

 

 

 

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Political suicide just now!

I don't think it would matter one jot if they 'proved' that it cost £50m or £500m .... to remove the burden on the 'greedy bankers' would be the final straw for a lot or lower paid people. Personally I am abivilent. I don't earn £150k and nor do many of my clients (if they do they don't draw it at any rate). Do I care whether bankers clear off abroad .... not a jot. Do I think entrepreneurs will move elsewhere because of tax rates ... I suspect they already would have gone if they were of that mid-set. Even entrepreneurs have spouses and kids in schools. 

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08th Sep 2011 14:29

?? I never understand the logic

"It punishes wealth creation by imposing on entrepreneurs and business people a marginal tax rate in excess of 50% once national insurance contributions are added in... This is particularly damaging when the UK needs to create new businesses in new industries and promote growth by small companies, which can grow fast. It applies to just 1% of taxpayers, who already pay 24% of all income taxes." 

I am sorry if I appear thick, or naive, but I just don't understand the logic. What does 'wealth creation' mean? Does it mean creating more wealth for yourself, creating wealth for others? or Both? I just don't see what difference the tax rate will make.

A lot of high rate tax payers are employed. So how will reducing the 50% tax encourage 'wealth creation'?

If the high rate taxpayers are self employed, then they can employ someone else, thereby reducing their taxable profits, but providing an income for someone else. Would this be classed as 'wealth creation'? Surely the higher rate tax will encourage spending on things that will reduce the tax liability ie. new business and new employees.

Does punishing wealth creation mean someone doesn't bother earning another £100K because they will only actually benefit from £50K. What difference will this make overall, as it is likely that the extra £100K business will go to someone else, ie. there is no loss overall.

Will someone please explain it to me.

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By chatman
08th Sep 2011 17:41

Wealth "Creation"

ShirleyM wrote:
What does 'wealth creation' mean? 

The term became popular with the Thatcher government and was often used to imply that anyone rich had created wealth for themselves and others. Clearly this implication is incorrect; just look at the "trustafarians" running the country for example. Your comments regarding taking wealth from others also show how meaningless the term is.

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08th Sep 2011 14:54

Not a tax rate, just a political iceberg.

As David says, tax rates have been higher in the past. Indeed during most of the Thatcherite Revolution (1979 - 1988) the highest rate of tax was 60% and it has also been higher in the past prior to that.

However, it is also the case that for any tax that there is a sweet spot at which the maximum amount of revenue is earned, raising rates above this sweet spot leads to overall revenue being reduced. This is essentially the theory behind the "Laffer curve".

http://en.wikipedia.org/wiki/Laffer_curve

Jean-Baptiste Colbert (1619 - 1683) stated it most plainly when he said "The art of taxation  consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing".

I personally believe that the introduction of the 50% tax rate in an economy as open as the UK's and at the level of earnings it was introduced at was not a revenue raising activity, but rather a political iceberg left by the Labour Government when they knew they were going to lose office.

The 50% rate appeals to Labour's core vote and you can be assured that Ed Miliband and Ed Balls will extract the maximum amount of political capital over it's repeal.

My biggest concern is that the 50% rate puts our headline tax rates well above our close competitors and acts as a barrier to inward investment and the movement of highly paid, highly skilled workers. This in turn limits GDP growth which is the only way we will get out of this crisis.

For this reason alone, it should be repealed. If Vince Cable and others feel the need to punish the bankers through their wallets then there are better ways of doing it.

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09th Sep 2011 12:02

Highly Paid = Highly Skilled?

frustratedwithhmrc wrote:

My biggest concern is that the 50% rate puts our headline tax rates well above our close competitors and acts as a barrier to inward investment and the movement of highly paid, highly skilled workers. This in turn limits GDP growth which is the only way we will get out of this crisis.

I think I would have been more inclined to agree with the above had the assertion not been made that highly paid individuals are highly skilled. Based on experience, there seems to be a rather large number of highly paid people with very little skills. This seems to be borne out by current trend to give out large payments to people who have driven the companies they work for to the edge of failure, and sometimes beyond.  

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21st Sep 2011 15:47

political iceberg?

My biggest concern is that the 50% rate puts our headline tax rates well above our close competitors

by the way our main competitors-assuming you mean europe- have ridiculous rates of social security- unless you think we have singapore and malaysia whose students freeboot our eduction system as our competitors?

and acts as a barrier to inward investment- is it not for the government to stimulate this? by encouraging industrial investment?   industrial expansion by uk companies  

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Close competitors ....

Have you seen the tax (or more pertinently) the social charges in France and Germany? The are astronomical compared with the combined package in the UK. It is also far more expensive to have employees in most of europe. So, I am with Shirley on this. We are talking about the top 1% and I suspect that the majority of those are not entrepreneurs but employed in financial services. All the wealth they ever created was pi***** up against the wall 3 years ago. 

Surely inward investment is much more affected by CT rates anyway? I am in agreement that these have been reduced as I can see the point of that.

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08th Sep 2011 15:44

Ultimately we come down to economics 101

This still goes back to the basics of economics, specifically "tax incidence" and "elasticity". For corporation taxes, regardless of the % rates applied, the corporation does not bare the cost of the tax. The incidence lies with the employees (in reduced wages) and the shareholders (in reduced dividends), but I take your point.

It is likely that a rate of income tax of 50% (moving to 62% + when Employees NI is included) will lead to those reaching such rates taking avoiding strategies. This could be leaving the UK, increasing their leisure time or restructuring their activities so as to reclassify income as capital gains or corporate revenue.

Regardless of the method of avoidance (evasion aside), the 50% rate ends up not meeting HM Treasury's requirement of raising overall revenue and may indeed cause a substantial reduction in revenue.

It may very well be that the "bankers" are stuck in pure PAYE jobs where they just have to pay the 50% rate and "suck it up", however we seem to have moved from the sphere of pure taxation into the socio-political sphere.

Once the primary motives become political then economics and taxation become passengers on a journey into the unknown.

I didn't particularly enjoy this back in the 1970's when we last ventured into these dark and murky waters. I'd rather liquidate the capital and go and find a nice beach somewhere with a decent bar and I don't think I would be alone in that reaction.

I can't see that helping UK growth much...

 

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08th Sep 2011 15:47

How can we decide when we don't know the 50% tax take

In answer to the question, how can we possibly make an informed decision until we know how much tax take the 50% rate generates.  Jonathan Russell of UK200Group is absolutely right when he says it needs to turn in more income than it costs.  If the tax take is good, then keep it - sod the whingers, we've got debt to pay.

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All taxes are political surely?

The USA and Germany have had divergent tax policies for decades but up until recently were probably the strongest performing economies. If a tax system was purely economic then surely the best economies would share similar strategies. Germany has decided on a cradle to grave welfare system and the US prefers sink or swim low taxes. The UK tries to do both!!! All of that is politics though.

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@ Thisistibi

We do lots of things to make us feel better. Prison doesn't work but damned if I want to scrap it .... same with the 50% rate for many people I suspect.

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08th Sep 2011 16:09

Then let us go back to Adam Smith's The Wealth of Nations (1776)

"Every tax ought to be so contrived as both to take out and to keep out
of the pockets of the people as little as possible, over and above what
it brings into the public treasury of the state. A tax may either take
out or keep out of the pockets of the people a great deal more than it
brings into the public treasury in the four following ways.

First, the levying of it may require a great number of officers, whose
salaries may eat up the greater part of the produce of the tax, and
whose perquisites may impose another additional tax upon the people.

Secondly, it may obstruct the industry of the people, and discourage
them from applying to certain branches of business which might give
maintenance and employment to great multitudes. While it obliges the
people to pay, it may thus diminish, or perhaps destroy, some of the
funds which might enable them to do so.

Thirdly, by the forfeitures and other penalties which these unfortunate
individuals incur who attempt unsuccessfully to evade the tax, it
may frequently ruin them, and thereby put an end to the benefit which
the community might have received from the employment of their
capitals.

An injudicious tax offers a great temptation to smuggling (see *). But
the penalties of smuggling must rise in proportion to the temptation.
The law, contrary to all the ordinary principles of justice, first creates
the temptation, and then punishes those who yield to it; and it commonly
enhances the punishment too in proportion to the very circumstances
which ought certainly to alleviate it, the temptation to commit
the crime.

Fourthly, by subjecting the people to the frequent visits and odious
examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not,
strictly speaking, expense, it is certainly equivalent to the expense at
which every man would be willing to redeem himself from it."

Adam Smith - The Wealth of Nations (1776)

* For smuggling we should replace both avoidance and evasion (having the same material effect to HM Treasury), as Adam Smith was writing in an age prior to the introduction of modern income taxes.

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08th Sep 2011 16:30

Different cultures

Interesting how many are pushing for a tax cut. In France, a group of the wealthiest people wrote an open letter to the government saying they were willing to pay extra and effectively offering a blank cheque.

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08th Sep 2011 16:54

A blank cheque from the undertaxed elite? Don't make me laugh.

colinhigginson wrote:

Interesting how many are pushing for a tax cut. In France, a group of the wealthiest people wrote an open letter to the government saying they were willing to pay extra and effectively offering a blank cheque.

If you scratch the surface on the PR piece put out by the representatives of the French elite (L’Oréal heiress Liliane Bettencourt  et al) you will find that their offer was hardly a blank cheque. They were just putting down an offer to pay a certain amount of additional tax before someone forced them through legislation to pay a lot more.

Equally, we all know that public pronouncements are as nothing. If Mme Bettencourt feels so strongly about it she can write a cheque to the French Government.

The facility to make gifts to HM Treasury exists in the UK law as well.

http://www.dailymail.co.uk/news/article-1318975/Britons-donated-7m-help-pay-national-debt.html

* Edited to remove factual inaccuracy.

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08th Sep 2011 17:06

Ahhh - that factual Oracle

That is The Daily Mail :-)

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08th Sep 2011 17:13

At the risk of being contentious - Flat rate

Why should we all not pay the same rate - wealth creators and high earners will still pay more in quantum. The need for additional rates of tax has always escaped me. If i earn £30K and pay say 25% tax then I'll contribute £7.5K to the national coffers, if i am lucky to earn £300K then I'll contribute £75K.

Have a decent tax free rate for those in society who are at the bottom, they shouldn't need to struggle in the UK, we should be able to afford that. (ignoring a self imposed underclass and all the arguments that go with that). Then a flat rate on all sources on income, gain or otherwise.

It'll never happen in my lifetime though.

 

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08th Sep 2011 20:06

There is a reason for progressive taxation you know...

Democratus wrote:

Why should we all not pay the same rate - wealth creators and high earners will still pay more in quantum. The need for additional rates of tax has always escaped me. If i earn £30K and pay say 25% tax then I'll contribute £7.5K to the national coffers, if i am lucky to earn £300K then I'll contribute £75K.

This comes back to the heart of the matter regarding the redistributive policies of so called 'liberal' governments (i.e. Labour, Lib Dems and the majority of current Conservatives).

If each person was to pay tax at the same rate then there would be no effective penalty for becoming filthy rich through your own efforts. By instituting a mechanism of progressive taxation whereby the rates of taxation ramp up to excessive levels across the income distribution then this provides a balance against people earning excessive salaries through PAYE and therefore makes it more equitable.

Obviously this world-view is entirely dependent upon you actually believing the idiocies espoused by the vast majority of this countries politicians.

The reality is that as rates get higher, there is more incentive to take tax avoidance strategies and given that Employers NI is an equal penalty to the employer for paying high salaries, they are effectively provided with an incentive to collaborate with their employee in tax avoidance. For evidence of this look at the actions of large corporates with high earning employees since the introduction of PAYE (footballers image rights, never-never loans, EBT's, etc).

The UK has been living beyond it's means for so many years that it would take a very radical set of politicians to change course. Those that are attached to the public teat (local government employees, central government employees, QUANGO staff, welfare recipients, etc.) would be storming the grounds of Parliament at the very mention of their precious state subsidies being removed.

The only hope that we have (strangely enough) is for those who purchase UK bonds to refuse them except at relatively high levels of interest payments. This is the ONLY thing that will force the UK government to put it's house in order and stop charging vast amounts to the national credit card. All the garbage espoused by parliament about austerity is exactly that - stuff for the 24-hour news channels and nothing more.

George Osborne may push his line about balancing the books and bringing the deficit under control, but until the figures actually show income matching expenditure, they are just meaningless phrases.

"It is a tale told by an idiot, full of sound and fury, signifying nothing." William Shakespeare's Macbeth (Act V, Scene V).

 

 

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By Old Greying Accountant
08th Sep 2011 20:53

Personally ...

... I don't have a problem per se with the 50% band, or if they brought back the 60% that was there when I started out in accountantcy if, and it is a big IF, the tax collected is spent responsibly and efficiently.

As things stand neither apply and for that resaon I am totally against the 50% rate at present. 

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08th Sep 2011 21:40

All governments have used fiscal drag to squeeze the vice...

Old Greying Accountant wrote:

... I don't have a problem per se with the 50% band, or if they brought back the 60% that was there when I started out in accountantcy if, and it is a big IF, the tax collected is spent responsibly and efficiently.

As things stand neither apply and for that resaon I am totally against the 50% rate at present. 

Exactly. Since the vast majority of spending at all levels of government (local, central, QUANGO's, agencies, etc.) is far beyond all reasonable limits, I would argue that they have lost the moral and democratic arguments for taxation at these levels.

This not only applies to taxation at 50% + NI, etc, but also taxation at 40% + NI. My rationale for this is that the vast majority of taxpayers who pay the 40% rate only do so because fiscal drag has meant that rates have not kept up with rising incomes.

If tax rates had been increased in line with real earnings (real incomes rather than RPI or CPI), then the level at which taxpayers would be paying tax at 40% would be significantly higher than the current rates. In fact the 40% rate should probably kick in around £60,000 - £80,000 rather than the £35,001 for the present tax year. 

http://www.hmrc.gov.uk/stats/tax_structure/incometaxrates_1974to1990.pdf

The UK might be a much richer place than back in the 1970's, but it is also (for the most part) a more expensive place.

The government should be forced to cut it's suit according to it's cloth, but unfortunately all of the levers by which the economy is controlled (interest rates, issuance of government bonds, currency dilution, etc.) lie with politicians and their appointees, such as the Governor of the Bank of England. As such there is no mechanism by which they may be constrained by democratic means.

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Seriously ?

50p tax rate damages people who pay 50p tax rate, say people who pay 50p tax rate 

A campaign being promoted through a PR company to highlight the injustice of very wealthy people paying more tax than not very wealthy people has insisted that the 50p tax rate is unpopular amongst people who pay the 50p tax rate.

Twenty leading economists, who pay the 50p tax rate, have written to the Financial Times saying the 50p tax rate paid by high earners is doing “lasting damage” to high earners who pay the 50p tax rate.

Middle income and low income families have been sympathetic to the plight of those earning in excess of £150k a year.

“It must become harder and harder to find loopholes that allow them to avoid paying tax,” said Lorry driver Graham Hennessey.

“I’m sure George Osborne will be the first to tell you that the tax advisers and accountants that helped him avoid £1.5m in tax didn’t come cheap.”

“Maybe the government could increase fuel duty or cut some more benefits for the disabled instead.?

“I’m sure I speak for everyone when I say we’d be happy to help improve the lives of people struggling by on barely more than £150k.”

The letter, that includes two former members of the Bank of England’s Monetary Policy Committee amongst its 20 signatories, has called for the coalition to drop the 50p tax at the earliest opportunity as part of a package of measures to ensure they have more money than they can actually spend.

“The 50p tax is disastrous for people who can definitely afford to pay it,” said Bridget Rosewell, chairwoman of Volterra Consulting.

“It sends a message to entrepreneurs that if you can afford to pay more tax, then you will be expected to pay more tax.”

“And people wonder why they put all their money offshore.” 

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By MBK
09th Sep 2011 08:36

I'm with frustratedwithhmrc

Having been in the profession long enough to remember the 60% rate I recall clearly that the overall tax take actually increased for several years after the top rate was cut to 40%.

There is a reason why the "tax mitigation products" industry is larger than ever at the moment. Pretty much all of our client base paying the 50p rate are interested in "tax mitigation". There is a level at which people will accept their tax obligations and a level at which they won't.

Whether that is "right" or "fair" for the country as a whole is irrelevant. The country's tax take is, after all, ultimately a collection of what all of the taxpayers pay. In the small sample we see through our practice the evidence is overwhelmingly that the 50p rate is counter productive for the overall tax take.

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09th Sep 2011 08:56

Whether that is "right" or "fair"

There is a level at which people will accept their tax obligations and a level at which they won't. 

I don't have any fundamental problem with a specific tax rate, be it 40%, 50% or 60%. What I do have a problem with is progressive as opposed to flat tax rates.

My argument for this is that it is easy for the majority of the electorate to support high tax rates at the upper levels of the income distribution as they are unlikely to ever have to pay tax at those rates. It is the equivelent of saying "I vote for other people to pay more taxes". Since the majority have "no skin in the game" the strategy of tax the rich is appealing.

I suspect that if we had a flat tax regime this would create downward rather than upward pressure on rates and have a consequential effect on spending and the ever increasing expansion of government.

For this reason alone it will never happen.

 

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09th Sep 2011 11:38

This makes me laugh

Anyone who is actually suffering the 50% tax rate has a rubbish accountant.

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09th Sep 2011 11:45

I shall never pay 50% tax

but I do belive that it is wrong.  Mentioned earlier bankers etc that are on PAYE.  Since the tax was announced some of the highly paid have left the city and gone abroad.  That means we have lost their tax contribution for next year and and every year until they return.  Some where I read if one person earning a million pounds leaves the uk.  A further 100 earning £100k are needed to replace the tax lost.

If we talk about fairness then those earning at £150k + use very few of the "free services".  They have private medical and dental insurance.  Their children go to independent schools.  Generally they pay the highest level of Council Tax.  So that argument does not work.

Real job creators are needed in the UK always and if they leave they create the jobs in another country whom we are in competion with...

The real villians are politicans who seem to spend the Uks wealth  poorly and on projects that make them look good.and therefore need high levels of tax to sustain the spending.  But to be an MP you dont need any qualifications nor do you have to obtain CPD so there is little chance of a change..

 

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By chatman
09th Sep 2011 13:00

No lost tax contribution

pauljohnston wrote:
some of the highly paid have left the city and gone abroad.  That means we have lost their tax contribution for next year and and every year until they return

As ShirleyM pointed out, if we lose their tax take, we gain that of the person who takes their job. Or is there a shortage of people willing to work for extortionate salaries in the City?

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By Exector
09th Sep 2011 12:26

Redistribution

I personally don't have a problem with taxation in part being a social engineering mechanism transferring resources from those who have a lot ( certainly more than enough in very high income cases) to those who have little or nothing. Obviously other people do have a problem with that! I wonder why?

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09th Sep 2011 13:08

50% Tax Rate

Like some of the comments previously made, of the small number of clients that we have that are affected by the 50% rate, an increasing number are more interested in 'tax mitigation products'. The end result is very little going to the treasury. As I see it, there are two main reasons. The first being that having earned your cash, you should be entitled to the lion share. Why should you want to give away half? I believe this is a psychological barrier, which I must admit I do not want to give half of my earnings to anyone who hasn't put in equal effort.

Secondly, it is the way in which government spends our taxes. The inefficency and waste would definitely appear to be more visible to those clients and they really don't want to see their taxes wasted. We are all quite capable of wasting our own cash after all! Again as mentioned in a previous posting many of these taxpayers pay for their childrens education privately, private medical cover, pensions etc.

And just really to throw the cat amongst the pigeons - should the fattest child at the birthday party be given the biggest piece of cake? Surely the cake should be divided equally amongst all in attendance.

 

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By chatman
09th Sep 2011 13:27

Earned or Unearned

alancow.harveysmith.co.uk wrote:
having earned your cash, you should be entitled to the lion share

If you have earned it then maybe yes, but who has earned more of their money, a guy who spends 8 hours a day hundreds of feet underground in a mine or a guy who sits in an air-conditioned office all day? And who ends up with most money?

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09th Sep 2011 13:12

It's not working out that way...

if we lose their tax take, we gain that of the person who takes their job.

For some, perhaps. However, in a lot of circumstances the jobs themselves are going overseas to places like Geneva, Zurich, Hong Kong, Singapore, etc.

There is no replacement PAYE income as both the person and the job are gone taking their taxes to another jurisdiction. Equally, once the jobs themselves go all of the ancillary jobs go, the secretaries, the security guards, etc.

So it is not just the loss of a single high earner that is the problem, once they have gone a lot of other jobs are eroded. There are consequences to this sort of thing as we saw in the 1960's and 1970's with the original 'brain drain', the most highly skilled scientists and engineers simply left the UK, mostly for America.

 

 

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By chatman
09th Sep 2011 13:30

Does the job really disappear?

frustratedwithhmrc wrote:
both the person and the job are gone taking their taxes to another jurisdiction. Equally, once the jobs themselves go all of the ancillary jobs go, the secretaries, the security guards, etc.

I can't think this would apply to any significant section of the economy, but am willing to be educated. Can you explain how it would?

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09th Sep 2011 14:03

Greed

frustratedwithhmrc wrote:

There is no replacement PAYE income as both the person and the job are gone taking their taxes to another jurisdiction. Equally, once the jobs themselves go all of the ancillary jobs go, the secretaries, the security guards, etc.

So it is not just the loss of a single high earner that is the problem, once they have gone a lot of other jobs are eroded. There are consequences to this sort of thing as we saw in the 1960's and 1970's with the original 'brain drain', the most highly skilled scientists and engineers simply left the UK, mostly for America.

 

They are takers. This country has too many takers. If anyone wants to go abroad to avoid british taxes then they should be refused re-entry. A bit of digression here, but I am sure they will want to come flocking back if they discover they need a massive heart operation costing the British taxpayers £100K. Of course, they won't have any earning potential by then, so the high tax rate won't be a problem for them personally.

The arguments used by big business and high rate taxpayers all stink of greed. So .. a big business employs 2k workers, therefore they contribute to the economy ... but those same workers also make massive profits for the company that doesn't want to pay the same tax as everyone else so they put pressure on the government by saying they will take their business overseas. It is nothing but selfish greed and blackmail.

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09th Sep 2011 13:13

Wealth creation

So far, nobody has come up with an understandable, or logical, explanation.

I guess 'wealth creation' actually means those on high rate tax think they can make better use of the money than the government, and that the 'better use' they put it to will somehow magically result in better wealth, but for whom?

I can understand that some individuals may move abroad to avoid high rate tax. We already have the situation where large companies apply pressure to get special tax breaks so they will stay in this country and employ British people.

Eventually, the only people paying any tax at all will be the low paid!  OK, a bit of an exaggeration, but I get fed up of the people who just want to have everything (or as much as possible ... all for themselves no matter what the cost to others), and give back as little as possible.

The money has to come from somewhere, and someone has to decide how we collect that money. Whatever decision the policymakers make, someone, somewhere won't be happy, but it does seem fairer to me, for the well off to pay a higher % (on some of their earnings) than those less well off.

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By chatman
09th Sep 2011 13:31

@ShirleyM re "Wealth Creation"

I thought my post answered the question, and it doesn't seem far off your interpretation.

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09th Sep 2011 13:38

NI rates

Thanks Chatman ... I thought it was 'tongue in cheek' but maybe it is closer to the truth than anything else said here.

National insurance .. I don't hear any high rate taxpayers complaining that they save 10% on the NI Contributions when they earn above £40k. I wonder why???

Maybe they should just put a lot of money into pensions ..... but then they will complain when they have to pay tax on the massive pension, so we will be back to square one :(

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09th Sep 2011 13:46

The very size of the deficit illustrates the problem.

Spending is way out of line with income, with the difference being put on the national debt at the cost of future interest payments, which in turn will reduce our future earnings. This is not sustainable.

If we are raising taxes, but overall tax revenues are static or even falling then we have a problem which cannot be solved by raising taxes.

The only way to reduce the deficit is by cutting central and local government spending to match the amount raised in revenue. This is not an argument about funding tax cuts through closing "Skools n' Ozpitals".

We all know that there is massive public sector waste in the forms of unnecessary bureaucracy, overpaid civil servants shuffling paper that is neither needed nor required. Probably 30 - 40% of all central and local government expenditure could be cut without making a single teacher, policeman, nurse or doctor redundant. The difficulty is that the civil servants and local government officers have no incentive to support or deliver any reductions and are implicitly supported by the unions in this regard.

Why do you think that the first thing on the 'cuts' agenda at most local councils was not the administration, but the front line services (e.g. libraries). It is because the council executive knows full well that the easiest way to block cuts is to start at the front line and let the politicians hear the people shouting. It is both a cynical and effective method of blocking the cuts. How many chief executives have take a pay cut to 'share the pain'? Pretty much none - in fact they've increased their salaries as delivering service reform is a big and costly item.

I don't have a problem with paying taxes to fund the services that make this country what it is (NHS, Schools, Police, etc.). What I do have a problem is where 52% of a persons earnings (40% + NI) are siezed by the state through PAYE and then at least half of that is wasted.

The 50% rate is just a distraction.

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By chatman
09th Sep 2011 13:43

"Brain Drain"

Can we stop using the term "brain drain" unless someone can show that rich people are really more intelligent than poor people.

I would have thought the fact that the UK has the lowest social mobility in Europe is some evidence that rich people are usually born rich. http://www.guardian.co.uk/society/2009/apr/14/social-mobility-internships

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By chatman
09th Sep 2011 13:47

Should we allow people to be rich at all?

Rich and poor are relative terms. The richest man in a prehistoric village (biggest cave, fattest  spouses etc) would not be considered poor by today's standards. By making someone richer, you automatically make the rest poorer. In fact, you could even make someone richer simply by making everyone else poorer.

Inequality is a major cause of social ills. http://www.equalitytrust.org.uk/why explains it better than I could.

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09th Sep 2011 13:50

"Brain Drain"

Sorry, but the context in which it was used in the 1960's and 1970's was nothing to do with wealth and everything to do with skills, primarily very well educated engineers and scientists.

I will however accept that the argument that something similar happening today would probably better be described using economics.

Lets call it "tax flight" (similar to capital flight). I cannot argue the merits of those considering this path (self included), but it is happening and it's not just the rich.

I am from a solid working class background and I have frankly had enough.

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By chatman
09th Sep 2011 14:24

@frustratedwithhmrc "Brain Drain"

frustratedwithhmrc wrote:
Sorry, but the context in which it was used in the 1960's and 1970's was nothing to do with wealth and everything to do with skills, primarily very well educated engineers and scientists.

I will however accept that the argument that something similar happening today would probably better be described using economics.

Lets call it "tax flight" (similar to capital flight). I cannot argue the merits of those considering this path (self included), but it is happening and it's not just the rich.

Ah yes, I see your point. We should definitely look at ways of encouraging such people to stay here. I would prefer non-remuneration methods such as top class research resources and facilities, greater prestige given to engineers and scientists by the media, etc.

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Look at it the other way.

Isn't the real problem not the level of tax, but the level of government spending ?

No one I suspect objects to paying taxes for the NHS, defence, pensions, and social security. However, we have had a succesion of governments of all hues who seem to think that we should singlehandedly bail out every third world country that has a problem, that wastes vast fortunes of failed IT projects, and that hand out huge sums to families who manage to breed. We invite the world to come and settle here milking of NHS dry and using services they have never paid towards. We hand millions of pounds a day to europe to be squandered by unelected eurocratts.

With less foreign aid, closed borders, no EU to bankroll, and the state sticking to what it's supposed to do and no more, we could be arguing over the 25% tax rate instead of the 50% rate.

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By chatman
09th Sep 2011 14:33

Defence Spending

Owain_Glyndwr wrote:
No one I suspect objects to paying taxes for the NHS, defence, pensions, and social security.

It depends what you call defence. if it is the name you give to invading other countries at the behest of our government's US paymasters then I would say maillions do object.

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By chatman
09th Sep 2011 14:36

Foreigners and state services

Owain_Glyndwr wrote:
We invite the world to come and settle here milking of NHS dry and using services they have never paid towards.

I agree. Let's send the royal family back to Germany where they came from.

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chatman

chatman wrote:

Owain_Glyndwr wrote:
We invite the world to come and settle here milking of NHS dry and using services they have never paid towards.

I agree. Let's send the royal family back to Germany where they came from.

 

 

Why bother with one small family ? First let's start by sending the English back to where they came from, handing the British Isles back to the Celtic peoples who first lived here.  

 

 

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By chatman
09th Sep 2011 14:52

.

Owain_Glyndwr wrote:

chatman wrote:

Owain_Glyndwr wrote:
We invite the world to come and settle here milking of NHS dry and using services they have never paid towards.

I agree. Let's send the royal family back to Germany where they came from.

 

 

Why bother with one small family ? First let's start by sending the English back to where they came from, handing the British Isles back to the Celtic peoples who first lived here.  

 

 

 

Good point. Where would we start?

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