The 50% Tax Rate

Le_Chuck

tillycat123 wrote: »

I think it's better to look at peoples take home rather than the headline figure, people on £100k or slightly over are not super rich. Take us, OH pay packet £4500 this month take home, that's our total household income and 1 earner earns that, does that make us super rich?

I think 2 lower earners + their benefits may come pretty close to that figure.

So from leaving school with nothing and working damn hard for 20 odd years to finally get a decent job and working every hour god sends we have to hand 60% to the tax man now, is that fair?

Aye 2 people on £40k each are low earners?

Average wage is mid £20k's isn't it? monthly take home £1,500 - £1,600

Unless you mean someone with 12 kids & doesn't work etc

chucknorris

Le_Chuck wrote: »

you do realise there is an upper limit on NI? No one pays more than 50% tax (tax & NI) on their total income

Although this is true for almost everyone, at some point the 50% tax band will mean a very high earner will pay (slightly) more than 50% overall because of the NI.

According to my online tax calculator anyone earning £1m will have a take home pay of £498,618.69, therefore paying slightly over 50%. It doesn't really climb much further though, even when you enter outrageously high salaries, for example someone earning £1B would pay marginally less than 52%.

pqrdef

chucknorris wrote: »

Although this is true for almost everyone, at some point the 60% tax band will mean a very high earner will pay (slightly) more than 50% overall.

The 60% band only cancels out the 0% band (aka personal allowance), the net effect being as if both those bands were taxed at 40%. So total income tax converges to 50% but can never exceed 50%.

However, NI no longer has a limit, it's 12% (10.4% contracted-out) up to £42600 and then 2% all the way up. So income tax + NI together converges to 52%.

chucknorris

pqrdef wrote: »

The 50% band only cancels out the 0% band (aka personal allowance), the net effect being as if both those bands were taxed at 40%. So total income tax converges to 50% but can never exceed 50%.

However, NI no longer has a limit, it's 12% (10.4% contracted-out) up to £42600 and then 2% all the way up. So income tax + NI together converges to 52%.

I know that it only cancels out the 0% band, but when you add in the NI it will exceed 50% which was my point! The post I answered was about total tax i.e. including NI. So the combination of a very high earner paying a high proportion of 50% tax, plus the loss of their personal allowance and payment of NI means they will pay over 50%. As I said about 52% because at very high levels of earnings it approximates to 50% tax + 2% NI = total 52%.

EDIT: I can see where the confusion is coming from in my previous post I typed 60% instead of 50% which I have now edited, I did of course mean the 50% band because a very high earner stops paying 60% (loss of personal allowance) at earnings of £114,950 and then reverts back to 50%, so only a very small amount (£14,950) would be marginally taxed at 60%

lostinrates

chucknorris wrote: »

Although this is true for almost everyone, at some point the 50% tax band will mean a very high earner will pay (slightly) more than 50% overall because of the NI.

According to my online tax calculator anyone earning £1m will have a take home pay of £498,618.69, therefore paying slightly over 50%. It doesn't really climb much further though, even when you enter outrageously high salaries, for example someone earning £1B would pay marginally less than 52%.

Isn't there some awkward ness at between £100k-£110 k region of income too? Can't remember what though....

chucknorris

lostinrates wrote: »

Isn't there some awkward ness at between £100k-£110 k region of income too? Can't remember what though....

Yes, for every £2 you earn over £100k you lose £1 of your personal allowance so it eqautes to a 60% marginal tax band between £100k and £114.95k (if your personal allowance is the normal 7.45k)

michaels

Due to a change in circumstances my effective tax rate has gone from 42% to 73% - is it because I earn much more? No it is because I earn much less.

Those compaining about paying a 52% (or even 62%) rate should realise that if you earn less than 35k with 3 kids you face an effective marginal tax rate of a minimum of 73% and probably more if you don't have any savings in which case you would also lose housing benefit, council tax benefits and other freebies such as free school meals. A quick google suggests that just adding in housing benefit and council tax benefit can take the rate to 95%.

So where a pay rise of 10k for 60k earner will give then an extra £5800, for a 15k earner they may only get £500 :eek: for the same 10k pay rise and if this also stops free school meals for 2 kids they will actually be worse off.

tomterm8

dtsazza wrote: »

Is it, though?

One of the most fundamental principles of fairness would be that you pay for what you use. .

No, that is neither a principal of fairness, nor is it workable.

We all pay for services we don't use. For example, we pay for doctors and hospitals that, god willing, we are not using. We pay for armies and police forces that, god willing, we will never need.

The basic principal of such services are not that we pay at the point of use, it is that they are public goods which, as a society, we have agreed to pay for.

The reason for this is that in the event of, say, getting cancer the average person can't afford to pay for the hundreds of thousands of pounds of medical costs associated with health care.

We all benefit from the reduction in risk associated with knowing that we will get such care if we need it. But, with any luck, most of us will contribute more than we use such services.

At a fundamental level, rich people benefit hugely from what the state provides. Educated workers, public transport, communications infrastructure, courts and the rule of law are the bedrocks in allowing capitalists to generate profit and make money.

cepheus

As usual asking whether the 50% tax is fair, is the wrong question. You should be asking is it fair that people could be earning enough to pay 50% in the first place.

How could anyone work so hard as to deserve that much? Surely it is physically and mentally impossible without a breakdown? The bottom line is that wages are rarely fair, but market driven so if you are fortunate enough to be in high demand, or in a monopoly business, you can steal a greater slice of the cake.

Liberally applid progressive taxes (without the tax avoidance schemes of course) prevent the rich hogging wealth, and introducing large disparities which are highly damaging to society as a whole. Unfortunately the threat of taking business elsewhere holds a gun to societies head. It's a case of pay me or else!

It's essential to ask do we really need these people, can we not pass legislation to ensure they pay their dues back to society wherever they move to, and let's invest enough in people to ensure we have the correct mix of skills to avoid this blackmail.

pqrdef

About to start on BBC4, a series about the Regency. That orgy of conspicuous consumption was followed by the Peterloo massacre and the Chartist riots, not by coincidence. The country was lumbered with the crippling cost of the Napoleonic wars, but a certain section of society didn't seem to notice.

And we can't now face years of austerity while the top 20% just carry on regardless.

We urgently need some social engineering. The uncomprehending Cameron has called in Mary Portas to revitalise the High Street - just when we need Woolies and Netto, not Harvey Nicks. But he could turn it round. I propose 50% VAT on anything Mary Portas would buy.