Property price crash if Tories win

HAMISH_MCTAVISH

kennyboy66 wrote: »

The disincentives are real for people who can actually to the same job but reduce their workload. Self employed or a NHS surgeon doing private work on a friday afternoon. Or they are tempted to get paid cash.

I think this applies to lots of people who are not self employed though, as the self employed can find loopholes more easily anyway.

As an example, I'm currently a 40% taxpayer, plus NI, so the govt already takes half of what I earn above a threshold. Changing tax rates is not going to make me work any less hard for my basic salary, but in terms of logging extra hours and working harder to earn bonus, it might.

There comes a point at which earning 15K or 20K extra as a bonus, is already hardly worth it when the take home is only 7.5K to 10K. If that reduced significantly, why bother?

Better off negotiating extra holidays, better company car, increasing pension contributions with salary sacrifice, etc etc etc, which also generates far less revenue for the state.

Higher taxes are often counter productive.

ukcarper

HAMISH_MCTAVISH wrote: »

I think this applies to lots of people who are not self employed though, as the self employed can find loopholes more easily anyway.

As an example, I'm currently a 40% taxpayer, plus NI, so the govt already takes half of what I earn above a threshold. Changing tax rates is not going to make me work any less hard for my basic salary, but in terms of logging extra hours and working harder to earn bonus, it might.

There comes a point at which earning 15K or 20K extra as a bonus, is already hardly worth it when the take home is only 7.5K to 10K. If that reduced significantly, why bother?

Better off negotiating extra holidays, better company car, increasing pension contributions with salary sacrifice, etc etc etc, which also generates far less revenue for the state.

Higher taxes are often counter productive.

Isn’t the only money you pay 51% on between £37,400 and £43,888 then it’s 41% above that?

undetterred

carolt wrote: »

http://www.guardian.co.uk/business/2010/apr/19/conservative-victory-property-price-crash

And of course, big crash if they lose, as interest rates would go up under Labour.

Last roll of the dice eh,whats next on the horizon should this not happen.

Generali

ninky wrote: »

and are you saying those jobs will just stay empty? or will it just make way for those who are more motivated?

statistically employees on more than 2 hundred k are a pretty small percentage. surely a more important thing to consider is those on low wages who are taxed to a position that they are worse off than when they are on benefits. a bigger number of people and a cost to the taxpayer as well.

I'm saying that if you increase taxes on something, less of it will happen. If you put a tax on work, less work is done; if you put a tax on cigarettes, less smoking is done. It's a pretty fundamental tenet of economics.

If you increase taxes on people earning more than say £200,000 then those people will on average work a little less hard and so the extra tax raised will be less than expected and GDP will be a little lower than otherwise. As you say, few people earn more than £200,000 so the effect will be marginal although very real for those impacted.

It doesn't really matter where you set the bar but to pretend that doing this doesn't have any impact is to fail to understand why marginality is central to how the economy works in many ways.

Wookster

Generali wrote: »

If you increase taxes on people earning more than say £200,000 then those people will on average work a little less hard and so the extra tax raised will be less than expected and GDP will be a little lower than otherwise. As you say, few people earn more than £200,000 so the effect will be marginal although very real for those impacted.

Really?

Do you ever think "I'm getting taxed a bit more so I'm going to work a bit less?"

LydiaJ

Wookster wrote: »

Really?

Do you ever think "I'm getting taxed a bit more so I'm going to work a bit less?"

Well, I think...

If I work harder, 20% of what I earn will disappear in income tax, 11% in NI, and 38% in lost CTC/WTC. So doing extra hours only makes me very slightly better off, and it's really not worth all the extra hassle.

However, whenever they offer me overtime, I always end up taking it anyway, because I don't want to let my department down. I wouldn't do it just for the money, though.

Generali

Wookster wrote: »

Really?

Do you ever think "I'm getting taxed a bit more so I'm going to work a bit less?"

No because clearly it doesn't work like that.

What happens in reality? You take 1,000 people and ask them whether they'd give up their Sunday morning for £1,000 and perhaps 900 would say yes. If you ask the same people if they'd give up Sunday morning for £950 then perhaps 897 would say yes. The small change in pay has led to a small change in outcome.

I remember my Dad's colleagues having a discussion about whether they were going to go into work on the weekend to do some testing when I was a kid. One of them said, "It's not worth it - once you pay 60% tax on what you make you don't notice the difference".

To take an exemplum, I am going to work Anzac Day on Monday because I get double time so if I work 4 hours, I get a days pay. If they were offering a normal rate of pay I wouldn't bother. Therefore there is some undefined point between me earning double time and me earning my normal wage for a days work at which I would rather take the day off.

The impact of taxes on the amount of work people do has been pretty extensively studied and there is a clear correlation, AIUI, between tax rates and the amount of overtime and general hard work people will do.

kennyboy66_2

HAMISH_MCTAVISH wrote: »

I think this applies to lots of people who are not self employed though, as the self employed can find loopholes more easily anyway.

As an example, I'm currently a 40% taxpayer, plus NI, so the govt already takes half of what I earn above a threshold. Changing tax rates is not going to make me work any less hard for my basic salary, but in terms of logging extra hours and working harder to earn bonus, it might.

No it doesn't. It takes 41% unless you earn more than £100k

HAMISH_MCTAVISH wrote: »

Better off negotiating extra holidays, better company car, increasing pension contributions with salary sacrifice, etc etc etc, which also generates far less revenue for the state.

Higher taxes are often counter productive.

1) A company car would cost you more in tax, unless you chose a particulary low emission model - which don't tend to be the cars high earners go for.

2) Not sure why you would go for salary sacrifice - it would save you 1% NI compared with paying into a SIPP for example.

ajharris

phil_b wrote: »

You'll have to forgive me if I only beleive it when I see it. I think we must have hit double figures for 'house prices will crash when X happens' theories.. they just keep getting knocked out of the park.

Last year forty six thousand houses were repossesed this is much lower than the forecasted seventy five thousand. In this case the saving grace was interest rates. Two hundred thousand households are in mortgage arrears, that is alarming considering the unrealistically low and totally unsustainable interest rates which we have had for so long.

After the next election we are going to be exposed to reality. Interest rates will later this year and they will continue to rise. To further add to the woes of many there will be tax rises too. The low interest rates in conjunction with QE have merely served to delay the inevitable housing market crash which is staring us in the face.

To make matters worse our triple 'A' credit rating is under threat. If that goes then interest rates will soar very quickly. What happened in the early nineties is about to be repeated.

Cleaver

ajharris wrote: »

Last year forty six thousand houses were repossesed this is much lower than the forecasted seventy five thousand. In this case the saving grace was interest rates. Two hundred thousand households are in mortgage arrears, that is alarming considering the unrealistically low and totally unsustainable interest rates which we have had for so long.

I know I keep saying this, but have mortgage rates changed that much? Most people were probably on 4% to 6% before the lowering of interest rates, and most are probably on between 3% and 5% now. It's only a small amount on trackers isn't it?

Also, isn't there about 14 million homeowners in the UK? If 200,000 are in mortgage arrears, that's about 1.4% who are in trouble with their mortgage. Which means that 98.6% either own their home outright or are 'fine' with their mortgage repyaments. That sounds alright to me. If I lent out a massive load of cash to millions of people I would probably expect a small percentage to have trouble paying it back at any one time. I'm sure someone can tell me just how wrong I am with this pretty soon.