Would you support a 50% tax rate – even if it didn’t raise extra cash?
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We have a higher rate of tax than 50%. You effectively pay 60% tax on any amount over £100k up to £100k plus twice your personal allowance, because for every £2 earned over £100k you lose £1 of your personal allowance. I've recently had to start paying a lot into pensions to keep my taxable income below £100k.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0
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gadgetmind wrote: »Really?
Such raises rarely come without strings attached, strings of the more work, more responsibility, more reports, more hassle, more conference calls late into every evening, more working on presentations and projections at weekends, and generally less fun type.
I've had many a person turn down promotion because the extra pay would be taxed in 45/50/60% bracket. A few have even turned up their noses in the 40% band, but not so many. As soon as people see close to (or more than) half of their extra work being for HMG rather than their themselves and their loved ones, it really does disincentivise.
You'll probably find they're actually turning down the promotion because they're afraid of being 'Peter Principled' and just using the tax bill as an excuse. Can't believe anyone with ambition would turn down promotion becuase they'll have to pay a lrger proportion of tax on the increased income.Apparently I'm 10 years old on MSE. Happy birthday to me...etc0 -
Can't believe anyone with ambition would turn down promotion
A lot of people don't have any great ambition to be a manager. For most people, it's a lot of extra hassle, stress and responsibility and too far removed from the work that they actually enjoy.becuase they'll have to pay a lrger proportion of tax on the increased income.
I run a multi-national team across four continents, and I have to understand and motivate people from many cultures, who have to enjoy./endure many different taxation systems, and the UK system is the one that demotivates people the most.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I'm with ChuckNorris in being just over the threshold for paying 62%. I'll be damned if I'm going to pay that in tax so for the last 4 years have kept my earnings under 100k by paying more pension and taking unpaid holidays. An example of the Laffer curve in action.0
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The question is probably based on a false hypothetical, but even assuming its validity, i.e. that in current terms a 50% top tax rate would raise no more tax in comparison to a 45% rate, there are long-term reasons for raising rates.
Why does raising rates not necessarily increase tax take? One reason for this is very bad - higher taxes can undermine the wider economy, reducing demand and causing / prolonging a recession. But this is unlikely to be a problem with tax on people who, on any measure, have a great deal of disposable income - it was far more of an issue when VAT went up.
The other reason, which is more likely with the well off, is that tax take doesn't increase because tax is avoided. Simple maths suggests that if £1 in £10 of income over the threshold is taken out of income tax, the tax take won't increase when rates go up from 45% to 50%. If this is done by criminals lying to the Revenue, that is clearly bad and should be properly dealt with by resourcing prosecutions and HMRC investigations. However legal tax avoidance per se is not necessarily a bad outcome for the economy - most legal tax avoidance is through doing things that the Government wants to encourage because it is good for the economy in the long run - so people increase their pension contributions, which are invested in companies now and provide for them in old age - people give to charity, which improves the country, sometimes reduces the strain on the state, or sometimes helps the third world - people invest in start up companies and claim tax relief through venture capital trusts or the enterprise investment scheme - lots of people lose their money on this but the government encourages it through tax relief in the hope the successful ones will provide jobs (and so tax income) in the future. That £1 in £10 is therefore probably going to the good of the economy, while the £9 remaining as income over the threshold suffers a higher tax rate.
Philosophically it's hard to explain why risk-taking capital (dividends and capital gains going to owners of companies) is generally taxed at lower rates than wages and savings income, but pragmatically a lot of business owners will still see the UK as a low tax country and stay.
There is also the fact that employers may look at the value of incentives differently - maybe a modest bonus to the whole of a well-performing team (who may be paying lower rates of tax) is more effective than a big bonus to the big boss (where half is swallowed up in tax) - we can but hope! Certainly New Labour's longstanding policy under Blair's leadership of sticking to the 40% rate to encourage all the big bonus bankers to be in London didn't look so clever with the crash being in part put down to focus on sales rather than risk.
That is not to say that 50% is the optimal tax rate, just that the question of where to land is harder than just a question of how much money it brings in the short term.0 -
But this is unlikely to be a problem with tax on people who, on any measure, have a great deal of disposable income
How are you measuring how much disposable income they have?The other reason, which is more likely with the well off, is that tax take doesn't increase because tax is avoided.However legal tax avoidance per se is not necessarily a bad outcome for the economyPhilosophically it's hard to explain why risk-taking capital (dividends and capital gains going to owners of companies) is generally taxed at lower rates than wagesThat is not to say that 50% is the optimal tax rate, just that the question of where to land is harder than just a question of how much money it brings in the short term.
That we still have a tax that was introduced as part of this "scorched earth" policy show how poisonous the pill was.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
If government expenditure was completely efficient and free from corruption would you be OK with the 50% tax rate?
If we are talking ideal worlds I would prefer to slash the role of govt to be much smaller and ideally turn Blighty into a tax haven.
But that will never happen so I will just have to lump whatever tax rate I am assigned, and make some very strategic career decisions in the future.0 -
If we are talking ideal worlds I would prefer to slash the role of govt to be much smaller and ideally turn Blighty into a tax haven.
But that will never happen so I will just have to lump whatever tax rate I am assigned, and make some very strategic career decisions in the future.
Only a small fraction of taxation is spent on government itself. The majority goes on welfare, health, defence and education. Needs to be paid for from somewhere.Apparently I'm 10 years old on MSE. Happy birthday to me...etc0
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