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[MSE Lawrence]

Poll between 27 April - 5 May 2009:

Should high earners pay 50% tax?

Last week in the budget, the Chancellor announced from next April there’s a new 50p per pound rate for those earning over £150,000. Plus high earners will lose the tax-free personal allowance and higher rate pension tax relief.

Arguments for include. The govt needs the money. Those who can afford it should pay.
Arguments against include. Worries it won’t raise revenue due to avoidance, a brain drain, or discouraging enterprise.

Which of these is nearest your view?

A.I’m NOT a high earner. It should be more than 50%. - 10% (1192 votes)
B.I’m NOT a high earner. 50% is fine. - 40% (4960 votes)
C.I’m NOT a high earner. 50% is too high. - 46% (5713 votes)
D.I’m a high earner. It should be more than 50% - 1% (77 votes)
E.I’m a high earner. 50% is fine.- 1% (143 votes)
F.I’m a high earner. 50% is too high. - 2% (298 votes)


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[I'm With Stupid]

50% is about right to me.

If tax avoidance is an issue, then that should be dealt with seperately. Why should the fact that some people try to find loopholes ever be a reason to lower taxes? Why do we have any taxes at all then?

As for a brain drain, aside from the fact that most people with brains (scientists, academics, etc) don't earn that sort of money anyway, America is the only developed country in the world that doesn't have a similar tax on the top earners anyway, and I don't think anyone wants to replicate their public services. And discouraging enterprise might be an issue if we were talking about corporate tax, but we're not, so it isn't.

The alternative is to sack a bunch of public sector workers, creating more jobless, meaning what you'd save on salaries, you have to fork out in benefits anyway.

[pebblestones]

someones got to pay more, people on a low income cant afford to pay any more, so those with higher income will have to sooner or later

[Mozette]

I don't see 50% on anything over £150,000 is unreasonable.
If I earned that much I'd happily pay it!

[spunko2010]

Originally Posted by pebblestones

someones got to pay more, people on a low income cant afford to pay any more, so those with higher income will have to sooner or later

People who earn more do pay more in terms of actual tax amounts anyway. Why should someone on more money than you pay a higher RATE (not amount) of tax?

Make the tax rate the same across the board, don't punish the rich with higher tax rates because they have more often than not earned it through hard work, risk taking and perseverance. This country already discourages enterprise by having some of the highest corporation taxes in the world. We need to encourage lots more enterprising people to come here, that's one of the ways out of this recession - not put them all on to the next flight to Zurich just so we can bail out some greedy bankers, MPs and so on. Not everyone who earns £150k is on the fiddle!

[Stinkybell]

Although I am in favour of the 50% tax rate, I do not agree the withdrawal of a high earner's tax free allowance and pension relief - everybody should be safe in the knowledge that they have something tax free every year!

[prowla]

If I earned £150k and wasn't using "alternative" accounting, then the new tax hike would encourage me to.
The end result would be a reduction in the tax take.
Seems to me like a lot of government policy has the opposite effect to its stated intentions.

[I'm With Stupid]

Originally Posted by spunko2010

This country already discourages enterprise by having some of the highest corporation taxes in the world.

Err, no it doesn't. Let's compare it to some of the worlds leading and emerging countries, shall we?

UK - 21-28%

Australia - 30%
Brazil - 34%
Canada - 29.5-35.5%
China - 25%
Denmark - 25%
Finland - 26%
France - 33.33%
Germany - 29.8% average
Holland - 20-25.5%
India - 30-40%
Ireland - 12.5%
Italy - 31.4%
Japan - 30%
Norway - 28%
Russia - 20%
Saudi Arabia - 20%-85%
Spain - 25-30%
South Korea - 13-25%
Sweden - 26.3%
Switzerland 13-25%
Thailand - 30%
USA - 15-39% federal, plus 0-12% state

Looks like the UK has one of the cheaper tax rates in fact.

[funguy]

The higher rate of tax doesnt affect me but surely they should be trying to encourage people to earn more so they spend more and invest more!!

I assume people who fall into the higher bracket will simply work less and earn below the threshold, find a loophole or move abroad....i really doubt this will actually gain the government any money! In the long run, i suspect it will lose the government and country money and investment!!

If the country had a set rate of say 25% on all income then it would encourage people to work more, earn more and pay more tax in general (amount as opposed to percentage)....

[Mum_of_3]

Originally Posted by spunko2010

People who earn more do pay more in terms of actual tax amounts anyway.

This country already discourages enterprise by having some of the highest corporation taxes in the world

National Insurance contributions on any earnings over £44k drop from 11% to 1% so in effect even though people earning more than this amount may pay a higher rate of income tax, it's those of us who are low paid workers who pay more PAYE when you go by percentage of wages.

Also as I'm with stupid has proved we don't have a very high CT rate in this country & anyone I know who owns a limited company pays themselves a minimum amount for NI reasons & gets the majority of their money from the company via dividends which are taxed at a far lower rate then PAYE (32.5% over £37,400 compared to 40%)!

This means that anyone with their own company taking enough to take them over the supposed 50% tax band will only pay 32.5% anyway. How is that paying more tax??

M_o_3

[spunko2010]

Originally Posted by I'm With Stupid

Err, no it doesn't. Let's compare it to some of the worlds leading and emerging countries, shall we?

UK - 28% (50%)

Australia - 30% (45%)
Brazil - 34% (27.5%)
Canada - 29.5-35.5% (29%)
China - 25% (45%)
Denmark - 25% (63% HOLY COW)
Finland - 26% (32%)
France - 33.33% (21%)
Germany - 29.8% average (45%)
Holland - 20-25.5% (52%)
India - 30-40% (30%)
Ireland - 12.5% (41%)
Italy - 31.4% (43%)
Japan - 30%
Norway - 28%
Russia - 20%
Saudi Arabia - 20%-85%
Spain - 25-30%
South Korea - 13-25%
Sweden - 26.3%
Switzerland 13-25%
Thailand - 30%
USA - 15-39% federal, plus 0-12% state

Looks like the UK has one of the cheaper tax rates in fact.

Cheaper corporation tax rates you mean - although not wholly accurate in itself as a statement. Tax laws around the world are subjective and any comparisons are usually crass. But for the sake of getting my point across I've added in the income tax rate (top band) to your list above, taken from the same source that you used (Wikipedia).

Perhaps we need to factor both into the equation to deduce whether Britain is an expensive place to live for the rich. Alas, since it's 1am and I don't have the brainpower to do that myself, I'll look to the ONS and other qualified sources who have done research into this extensively. Britain is the third/fourth most expensive country in the world to live in:

http://news.bbc.co.uk/1/hi/talking_point/1136184.stm

That's working on, presumably, an average wage. There are only six countries in the OECD with a higher tax rate than the UK – places like Denmark, Sweden and Finland. Go figure.

I think you're all missing the point though. It isn't really all about how much money is being taken by the government. The cash is not always of immediate concern to entrepreneurs, the types of people we need in the UK. What is important is a sense that entrepreneurs are operating in an environment that values what they are doing. Free businesses and individuals to use their initiative and retain the rewards of their efforts and we will all benefit as a society.

It's driving people away, I tell ye.

[spunko2010]

Originally Posted by Mum_of_3

This means that anyone with their own company taking enough to take them over the supposed 50% tax band will only pay 32.5% anyway. How is that paying more tax??

M_o_3

Do you have any figures as to how many people on >£150k a year run their own company then? See what you're saying though.

[brizey47]

Some people forget that the tiny minority earning these sums still get the same allowance as the rest of us for income below £150,000 so £50% for any amount above is fine with me, maybe it should have been 55%.

Sorry Martin you're probably one of that tiny minority

[tuggy12]

Originally Posted by Mum_of_3

anyone I know who owns a limited company pays themselves a minimum amount for NI reasons & gets the majority of their money from the company via dividends which are taxed at a far lower rate then PAYE (32.5% over £37,400 compared to 40%)!

M_o_3

Not true !!

Dividends are paid net of 10% tax, so the marginal rate of 32.5% tax effectively increases the total tax to 40% of the gross dividend amount.

[I'm With Stupid]

Originally Posted by spunko2010

Britain is the third/fourth most expensive country in the world to live in:

http://news.bbc.co.uk/1/hi/talking_point/1136184.stm

That's working on, presumably, an average wage. There are only six countries in the OECD with a higher tax rate than the UK – places like Denmark, Sweden and Finland. Go figure.

It's also working on figures from 2001. Besides, it wasn't the cost of living that I was talking about, it was the cost of running a business. You said we have one of the highest rates of corporation tax. That simply isn't true. Now if you want to demonstrate how we have higher costs of running a business, go ahead. But income tax isn't part of that. VAT is. And we've got one of the lowest rates of that in Europe too.

[ivorbeck]

All the vote proves to me is that no one likes paying taxes and those that are about to be "bounced" like it less.
A fact of life I'm afraid.

[ceridwen]

Hmmm....all this bleating about "soak the rich and they'll only run" (as in heading for another country) just sounds like good cause for concerted international action to me - so theres nowhere they can run TO.

Maybe they have got rich through hard work/enterprise/etc - that may be true for some of them. But then - on the other hand - its rather more likely they have got rich through underpaying their workers and/or overcharging for their products or cheating a supplier out of a fair price for their goods.

Guess I'm too fairminded ever to be rich then - sigh..

[bermudasniper]

I think the following tale sums up the situation:

HOW THE TAX SYSTEM WORKS

Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
The tenth man (the richest) would pay £59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by £20.' Drinks for the ten now cost just £80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the £20 windfall so that everyone would get his 'fair share?'

They realized that £20 divided by six is £3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid £2 instead of £3 (33%savings).
The seventh now pay £5 instead of £7 (28%savings).
The eighth now paid £9 instead of £12 (25% savings).
The ninth now paid £14 instead of £18 (22% savings).
The tenth now paid £49 instead of £59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. 'I only got a pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!' 'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did' 'That's true!!' shouted the seventh man. 'Why should he get £10 back when I got only two? The wealthy get all the breaks' 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor' The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill.

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

[lamp]

I think the tax rise is wholly unfair. There are far more people who have 'creative' methods for having their salary paid, which completely averts the majority of taxes people have to pay. Something like this is only likely to encourage this kind of behaviour.

Increasing taxes is likely to cause a heavy reduction in spending from the 150K club. This may have knock-on effect on unemployment, social well-being, etc.

Yes there is a big deficit of funds in this country. I'm not entirely convinced raising taxes of those who are probably now seeing no increases in salary, potential redundancies, etc improving the situation. There are many inefficient government systems operating in this country that could potentially offer far greater savings.

I can point out a few MPs with creative expense claiming who could probably spare a few pennies to help the economy they so woefully let down....

[squidworth]

Originally Posted by I'm With Stupid

Err, no it doesn't. Let's compare it to some of the worlds leading and emerging countries, shall we?

UK - 21-28%
Looks like the UK has one of the cheaper tax rates in fact.

lols no!!!

add in national insurance (which goes in the same pot as income tax and is just income tax under a different name)

so if your employer decides to "pay you" £100 extra for sake of simplicity then the employer has to pay 12.8% of that as NI leaving you with £87.20 taxable income

then take off that your 11% NI and 20% tax (31% of 87.20 is 26.16) then that leaves you with 61.04, or in other words the standard uk rate of tax is more like 39%

And then there's always VAT... spend the 61.04 and 15% (£9.16) leaves you with 51.88, so the equivalent of 48% of your £100 can go in tax