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The Budget, Lib Dem nonsense and the 50% rate

I've been reading with great interest the latest publication from the Institute for Fiscal Studies, which gives lots of food for thought:

[quote]In 2011–12, out of an adult population in the UK of around 49 million, an estimated 29.9 million individuals will be liable for income tax. This is a reminder that attempts to use income tax reductions to help the poorest in the country are likely to fail, since less than two-thirds of the adult population have high enough incomes to pay income tax at all.[/quote]

Based on this evidence, how can the Lib Dems possibly justify increasing the personal allowance to £10,000 - thereby removing even more people from the charge to income tax?  Is that really the objective - to get remove half of the UK from the income tax net?  Can someone please remind me what exactly is "fair" in all this?
[quote]Table 15 shows that the top 10% of income taxpayers now pay over half of all the income tax paid, and the top 1% (most of whom face the additional 50% marginal tax rate) pay 28% of all that is paid.[/quote]

Based on this evidence, is the 50% income tax rate really "fair"?  It seems that the top 1% of income tax payers already make a disproportionate contribution to the country.
I kind of knew that the statistics were skewed in this direction, but I find the actual numbers pretty astounding.  Why should so few support so many?

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Abolish the welfare state!

What a good idea.  Can't think why nobody else has thought of it before.

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Nice but

George Attazder wrote:

What a good idea.  Can't think why nobody else has thought of it before.

I was actually thinking reform rather than abolition....

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"Why should so few support so

"Why should so few support so many?"

Because we live in a modern, multi-cultural, sophisticated and fair society that accepts all in need irrespective of their credentials, history and requirements. 

Something we should be proud of?

Sorry, I was just repeating what every politician has been saying for the past 15 years..  It is now part of our culture.

 

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Fairness and equality

In everything in life we are expected to be treated equally whether male, female, black  or white, etc and rightly so.

So then why are there differing levels of equality when it comes to paying tax? Whilst the UK has "professional" politicians this will always continue as they need to fleece the populace to ensure a) they get elected and b) there is money to pay them a salary when they do get elected.

On a personal note i find it distasteful that these politicians and House of Lords are wrangling over "limiting" benefits to £26,000 per annum whilst a squadie who has to endure the hell that is Afghanistan only get paid £13,895 to risk their lives to protect or right to sit on our @rses and do nothing and expect society to take responsibility for us.

I believe as a civilised society we need to take care of the vulnerable but there needs to be some sort of common sense when doing so!

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You can't just focus on one tax...

... think about all the VAT poor people pay on booze and fags.  They should legalise heroine to increase the VAT take too!

Seriously though, whilst income tax is the biggest single contributor to the tax take, it isn't the only contributor.  So when you take the 28% that the top 1% pay, it's 28% of 28%.  The poor do pay a higher proportion of the income that they have as VAT, and some of them fought in the war.

You can please some of the people...

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I agree with George

People pay other taxes besides income tax. I also agree that welfare is being used a substitute for working by some people, but is absolutely essential for those who fall on hard times, suffer ill health, or the thousand and one other difficulties that have to be faced through no fault of ones own.

Before anyone knocks anything ... just try and put yourself in the position of the other person and then you may see things differenly. If I were earning under £10,000 I would prefer not to pay income tax, rather than pay tax and then mess about claiming tax credits.

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Unfortunately this is the price we pay

for a country which is generally free from real poverty, has a health service available to all, and allows everybody to walk around in freedom.  Perhaps go to Saudi (the tax rates are probably favourable)....just don't go snogging your girlfirend in public.

 

@exceljockey - As for the poor old squaddie....what pay do you think is worthy for a person who is putting their life at risk for yours....20k, 30k, maybe 50k....maybe more? perhaps 100k....afterall this person may die defending your country/rights etc....any plans on how you fund that....kick out anybody who wasn't born here perhaps?.....give no benefits out so they end up on the streets (see how many beggers there are then in your local town) - these are not easy decisions. 

 

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Fair or Not?

In terms of is it fair I think the Michael Sandel lectures can put it very well, it doesn't try to tell you the answer but does make you think of the argument from the other side of the fence.

http://www.justiceharvard.org/2011/02/episode-three/#watch 

It is 55mins long but worth watching.

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Legalising heroin or other drugs does have its supporters (reduces crime, makes it easier to monitor etc).  Yes high tax on a few can be controversial but if you have a view that large income differentials are bad for society then they serve a purpose.  Personally I think that raising tax on income and increasing that on expenditure is a good thing.

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Hmmmmm

@justsotax - my objection is not the soldiers salary but the maximum level of benefits being so high. I just think that priorities need to be re-assessed - old people going cold because their pension that they have is inadequate despite having worked for 45 years in some cases. 

As for kicking out foreigners out I am not sure what you were insinuating by that but I am an immigrant myself and had to start from scratch in the UK (well i had saved £1,000 prior to coming here- but thats all I had) , pay my taxes, employ people who in turn pay tax and have never claimed a single benefit ever. Maybe one day I may have to but it wont be because I haven't tried to make the most of opportunities here in the UK. I am constantly shouting at my countrymen who have managed to come here and get on benefits without ever having paid any tax whatsoever let alone worked. And I know many guys in HM forces who do a great job and I dont think its fair that some one who has never bothered to do anything with their lives is better off than them. I know there are many people deserving of benefits and if some one has great need due to disability etc then its also not fair that they have limited benefits because of those who are taking before doing.

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Flat rate taxes, territorial taxation, large personal allowances

One could write a series of essays on the comments above but in combination:

1. Flate rate taxes. Apart from "old" (and one could say tired) Europe along with the rich anglosphere (USA, Canada Oz etc), the world is moving to flat rate taxes or at least low maximum tax rates (between 10 & 20% for individuals typically).  This includes the world's fast growing economies (Singapore's top rate is 20% - above c.£160,000, Hong Kongs' maximum personal tax rate is 17%).as well as most of Eastern Europe (typically 10-17% flat). 

... In my humble opine, creating a 20:20:20 system (20% Corporate tax, 20% Personal tax & 20% VAT) with no allowances, except for a single personal allowance - see below, would be cheap to collect, and probably raise similar amounts to the current system.  What's more it would encourage inward investment in droves!  (Might see VW or BMW moving their "seat" to the UK! not to mention service industries).

2. Territorial Taxation.  Not as common (but with some surprising adherents including, in part, France), but again applied by both Singapore & Hong Kong – Simply if earned “abroad” it is not subject to local tax. 

IMHO, eminently fair – why should HMG “collect” on income not earned in the UK?

3.  Substantial Personal Allowances.  The LibDems are arguing for £10k … I would go further and make the starting point at least £15,000 (Cyprus as an example has a personal allowance of €19,500 (c. £16,500) below which only NI is paid – at a single rate, no threshold, which seems fair).   The current UK system ensures the continuation of the benefit culture where those on low incomes still pay tax, yet also claim benefits. 

Yes, all of the above would have a headline effect on government revenues (but almost certainly offset in part by far higher collection ratios).  For the rest (of any deficit), a bit of zero budgeting seems to be needed.  – For those not familiar with the term, one starts with a clean sheet and (apart from the necessities eg defence, police, health (perhaps to be ring-fenced within NI contributions), education, local services), all government expenditure, or rather income re-distribution, should start from the presumption that each person is responsible for his/her own life and should not rely on the general tax-paying population to subsidise them.  All current “benefits”, which are not contribution based, should be abolished with a single “National Assistance” replacing them set at a level to provide enough for food, shelter, heat & light … and little more.  This universal “benefit” could be for all ... Young, old, disabled etc etc as it would be purely needs based.

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This

What's shocking is not the high rates of tax of the wealthy but the staggeringly low incomes of the 19million not paying tax. I don't see how reducing the taxes of the wealthy will help that so why not focus on the real problem.

 

 

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19m not paying income tax

J Lessels wrote:

What's shocking is not the high rates of tax of the wealthy but the staggeringly low incomes of the 19million not paying tax. I don't see how reducing the taxes of the wealthy will help that so why not focus on the real problem.

 

I haven't seen the breakdown of the 19m not paying tax and so this reply is "off the cuff"

1. At minimum pay, one's income is over £11,500 - certainly within tax.  So it may also be said that none of the 19m are working (legally) full time. 

2. Students are included in the 19m

3. Pensioners at, or on little more than, state pension are included

4. Non-working spouses likewise

5. The lazy & the feckless and claiming handouts are included (but some probably shouldn't be if they have undeclared income)

6. Part-timers (for whatever reason) are included although they may be receiving "benefits" topping up their income to way above the tax threshold.

So, I wonder where this "real problem" actually lies?  ... Not from those working full time even at the most miserable salaries.

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Children

The tax credit system is a shambles. Why do we impose tax only to refund it with tax credits and all the other benefits? It seems a very expensive way to administrate the distribution of taxes. Also, there are some proud families out there (on fairly low incomes) who do not claim all these tax credits as they want to demonstrate to their growing children that they should go out and earn what they need. We are educating people into expecting hand-outs just for being normal (ie. having a family), and the state will provide for whatever number of children people want to have! Wouldn't it be better to let them keep more of what they earn in the first place?

I have nothing against children but the government seems to throw money at people with children. It has been said before, but if you don't have children you get about £50 per wk if you are out of work, but we mustn't let little Jimmy be raised in poverty. In extreme cases we just give unemployedpeople with large families a £1M house with umpteen bedrooms and pay them to stay at home and look after all the kids!

Why do we do this???? Isn't our little island crowded enough and jobs hard to come by?

Rant over! Maybe I should move to China ;)

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