A Taxing Question

Former_MSE_Andrea

Poll Title: Should there be a top rate of income tax? Currently if someone earns above roughly £37,000 a year, all earnings above that amount are taxed at 40% (the basic rate of tax is 22%). The Lib Dems have a proposal to add in another band for those earning over £100,000. What do you think? Which of these is closest to your view?

Tax them at 50%, but introduce even higher taxes at even higher levels
No higher rate band. People are overtaxed as it is.
No. It's a nice idea, but it'll disincentive people from working harder.
No. They'll just leave the country anyway and it'll damage the economy
Tax them at 100%. No one should earn more than £100,000
Tax them at 50%. Half their earnings is fair
Tax them at 60%. It's a huge amount of money
Tax them at 80%. We need to redistribute the cash

Click reply to discuss this poll or vote here.

zcaprd7

Looks like its time to get the Laffer curve out...

Oh and by the way, as income tax is a percentage you pay more as you earn more so a flat rate is 'fairest'.


(That should get the socialists out!)

WelshConsumer

I suppose that technically speaking there will always be a top rate unless you are a non tax payer. Although removing my pedantic hat, my own view is that there should be a uniform tax level across all salary bands. Why? Because everyone will then pay the same rate which is fair!
As an illustration suppose there was a uniform tax rate of 30% - for simplicity I am removing the effect of tax allowances. Someone earning £20k would pay £6k in tax (ie 30% of their earnings). Someone earning £100k would pay £30k (ie still 30% of their earnings but substantially more than the little guy.

If there was a tiered tax regime then (in our simplified example 25% for the first £40k and 40% for all earnings thereafter) the big earner would now be paying £34k some £4k more than he used to pay and the little guy would end up paying just £5k some £1k less than he previously would have paid.

Obviously you can fiddle the rates to get different results but the payment of a flat percentage of all earnings is fairer and does not penalise success.

sharpy123

Of course there should be a higher tax band. People who earn more should pay more. if your earning enough to be in the higher tax band then your earning enough to live very comfortably. For example top footballers who earn on average about £5 million a year would only pay £1,100,000 in tax so theyd be taking £3.9 milllion home with them which is way to much too spend sensibly. And anyway most rich people get accountants to get them out of paying tax anyway. I wish they would introduce another higher tax band hopefully then they could scrap tuition fees then everybody would have a fair (real fair) chance of going to university and choosing the one thats best for them and not the cheapest.

sharpy123

Oh and by the way its not that Im a socialist its because im not controlled by human greed as much as others are.

chocmonster

In the interests of wealth generation, etc, why not turn the system upside down - tax the poor, not the rich?

Would this encourage harder work? Encourage people to achive more? Put a fire under people's spirit of entrepreneurism?

Would it be all bad?

Discuss....

Galstonian

I believe that analysis of previous taxing regimes shows that simply increasing the higher rates did not actually generate additional revenue. I understand this is partly because increased tax rates force more people to avoid (not evade) paying tax and partly because high earners simply move (or move their wealth) elsewhere. Its very easy to say you will target ultra high earners (like the footballers mentioned above) but in reality there is a certain level of income above which you can decide for yourself how much (or how little) to give to the Chancellor. It might not do many accountants and lawyers much good but I'd like to see if a simple cap on income tax would raise more money. It could easily be cheaper to stump up and pay a larger tax bill rather than have to hire a team of professional to work out how to avoid paying.

Would it be all bad?

Discuss....

spacenase

Just a small point about the details in the poll, according to the Inland Revenue website, the 40% tax rate starts at £31,400.

http://www.inlandrevenue.gov.uk/rates/it.htm

This surprised me when I investigated it a couple of months ago. I always thought it began around the £38k to £40k mark. Has it been lowered at some stage?

K.

Do_Gooder_2

chocmonster wrote:

In the interests of wealth generation, etc, why not turn the system upside down - tax the poor, not the rich?

Would this encourage harder work? Encourage people to achive more? Put a fire under people's spirit of entrepreneurism?

Would it be all bad?

Discuss....

This would not work because some people are just not natural entrepreneurs. Those that are already are running their own business.

The problem is that the successful entrepreneurs (measured by how much money is made) want to keep 'their' money because they feel thay have worked hard for it. Unfortunately those who have a natural bent towards helping others or public service also work hard but do not get the rewards of their equally hard work because the methods of finance of their work is at odds with our capitalist system. That is partly why we have taxes to redistribute some of the wealth from the entrepreneurs to others working in non-entrepreneural activities.

Although I recognise that there is a limit to which people can be taxed before they emigrate I feel that a top band of 50% is not unreasonable and is certainly not unbearable.

Midas

The current system seems rather unfair, in that you pay 33% on most of your income (ie 22% basic rate plus 11% National Insurance); but if you are fortunate enough to be earning enough to pay 'top rate' tax (ie as spacenase says, over £31.4k) you pay only an extra 8% on this additional income (you pay 41% on it as the income tax is 40% plus 1% NI that is levied all the way up the income scale).

Wouldn't it be fairer to apply NI to all earnings (ie abolish the current 'cap') and use the revenue raised to cut the basic rate. That way the 'jump' from basic to higher rate tax would be more effective, rather than be largely countered by the lower NI...

just a thought!

deemy2004

spacenase wrote:

Just a small point about the details in the poll, according to the Inland Revenue website, the 40% tax rate starts at £31,400.

http://www.inlandrevenue.gov.uk/rates/it.htm

This surprised me when I investigated it a couple of months ago. I always thought it began around the £38k to £40k mark. Has it been lowered at some stage?

K.

Your forgetting about the tax free allowance ! i.e. 4.8k so it starts at 4.8+31.4 = So for most people they can earn 36.2k gross before they start paying 40% on additional earnings.

Personally, I think they should cut government spending rather than increase taxes.... I mean what the hell are they doing promising additional pensions of £700 billion that they don't have to public sector workers ???