A Taxing Question

gk172

Ok wasnt going to add my 2p in but after seeing poll results and tax them 50% i have to share - why should those who genuinley work extra hours and graft to get extra money have to pay 50% taxes? My hubby works 7 days a week and extra hours most nights in order to have enough money to keep his family and to allow me to stay home for the kids 10 & 6, now sometimes he doesnt see his kids for a few days by the time he gets in and what does he get 40% taken off him when all hes trying to do is bring in extra money which then makes him work even harder knowing what the taxman will take, why isnt the tax calculated on the basic salary and a lesser amount for overtime? Let the grafters gain a little extra and let the fat cats on starting salary of 50k and above get taxed 50%.

Little off subject but why does the goverment pay for child care but wont pay/tax relief for stay home mums? And im stay home as i dont have grandparents who can watch the kids through the school holidays - they work.

zcaprd7

Here's the Laffer curve:

http://www.people.virginia.edu/~sns5r/classes/undergrad/econ415stf/supply.fig7.gif

Also one of my favourite 'stories' (sorry its in dollars and wrong tax %, couldn't find the english version).



Tax Cuts - A Simple Lesson In Economics


This is how the cookie crumbles. Please read it carefully. Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way Canadians pay their 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 $7.
The eighth $12.
The ninth $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men ate dinner in the restaurant 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 meal by $20."

So, now dinner for the ten only cost $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 eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his 'fair share'?

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being 'PAID' to eat their dinner.

So, the restaurant 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 paid $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 eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only $2? 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 dinner (having moved to Chicago the day before), so the nine sat down and ate 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 at the table anymore. There are lots of good restaurants in the United States, Europe and the Caribbean.

spacenase

deemy2004 wrote:

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 ???

Yes you're right. I didn't spot that the taxable bands table started from £0.

If you mean government spending on the government, I agree with that too!

K.

deemy2004

zcaprd7 wrote:

Here's the Laffer curve:

http://www.people.virginia.edu/~sns5r/classes/undergrad/econ415stf/supply.fig7.gif

Also one of my favourite 'stories' (sorry its in dollars and wrong tax %, couldn't find the english version).



Tax Cuts - A Simple Lesson In Economics

Yes Labout learned this in the 70's when the crazy nutters put up the top rate of tax to .... wait of it........ 83% ! Yes thats right 83% !!! And then the crazy fools were sat there scratching their heads wondering why the brightest and smartest are emigrating the the USA, where the top rate was lower, well okay not much since this was in the crazy 70's and the USA tax rate was 70%.

For a history lesson .......

UK top tax rates
1975 to 1980 = 83% .... Brain drain era
1981 to 1989 = 60%... Yes thats 60% ! and were here complaining about a 50% tax.
1990 to the present - 40%

40% has been around for a while ... but don't take it for granted that it will still be around 10 years from now....


If its happened once it can happen AGAIN ! Be warned !!!! 40%

zcaprd7

Do_Gooder wrote:

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.

Given the amount of money successful entrepreneurs generate in tax revenue I think they contribute more to public service - they pay the government to do their 'good' work for them.


In any case nearly everybody is a civil servant. You didn't stop 'working' for the government until May 30th last year - see tax freedom day:

http://www.politics.co.uk/the-economy/30th-may-tax-freedom-day-$2711312.htm

fairenoughclough

Midas wrote:

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!

All taxpayers pay the 11% on earnings between £4,100 and £31,720 and 1% on any earnings above this.

The £31,400 + your own tax allowances determine the point at which you start to pay 40% tax.

I'm partially with you when you want to apply NI to all earnings, but why not go the whole hog and abolish NI.

Make the tax system straightforward and streamlined, so everyone can easily understand it and accountants can't find fancy tricks to let their clients avoid paying it.

Seems easy to me, but then I don't need to employ an accountant to do my sums for me!


:eek: :eek:

zcaprd7

Firstly the tax bandings haven't moved for a while and certainly not in relation to earnings - this is catching more and more people in the top rate.

Secondly, I think if you want a fairer (progressive) system you'll need to remove all the indirect consumtion (stealth?) taxation and bump up income tax - if your on £100k a year you're not bothered about duty on fags, booze, petrol or even VAT but it impacts the poor to a greater extent.


Would the electorate stomach income tax rises in exchange for a cut in VAT/duties?

I think at least talking about a tax cut would be nice!

IvanOpinion

Just another thought for the discussion.

Many moons ago I remember somebody saying that they should totally and utterly do away with the enire social security system. No more dole, housing benefit, child allowance, incapacity and even no more pension. This along with the massive cost of running the system would go into a large pot and be shared equally among everybody over the age of 18. Thereafter the only way of getting any additional money was to earn it. The tax system would then be used to balance the pot.

While I could see several flaws in the plan I thought it did have some merits.


As per another poster I would like to see a system were a spouse could claim their partners tax free allowance. This might be enough to encourage some people to stay at home thereby freeing up jobs ... and maybe then we might even end up with a generation that understands respect, honesty and moral values

Ivan

IvanOpinion

oh, one other thing ... it would be interesting to see how many people that are voting to raise the higher rate of income tax would be paying the new upper rate. I would guess that none to very few would be the answer.

It is very easy for us to all agree that the upper rate of tax should be raised as long as it does not affect us. Maybe we should ask upper earners if they would prefer to see the lower rate of tax increased so that everybody is then contributing a little bit more.

Besides that, it has always been my ambition to pay the highest rate of tax ... and I am still working to fulfill that ambition.


Ivan

deemy2004

IvanOpinion wrote:

Just another thought for the discussion.

This along with the massive cost of running the system would go into a large pot and be shared equally among everybody over the age of 18. Thereafter the only way of getting any additional money was to earn it. The tax system would then be used to balance the pot.

Ivan

They already do this to a degree with child benefit and it works ! - Its a good idea, but unfortunately would never come to pass........