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Is it time to end the 50% tax rate? Poll discussion
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tommygirl3 wrote: »I think we should have one tax rate of say 30%. That way poor and rich alike pay the same proportion of their income as tax. Encourages people to better themselves and stop ppl misunderstanding the graduated tax system.
Flat tax systems are popular with a fair chunk of economists. They're straightforward and transparent, universal, fair (in the sense that everyone pays the same proportion of their income in income tax) and everyone has the same incentive to earn extra money, irrespective of their salary level.
So why don't we see them very often around the world? Well, I'll put on my Sir Humphrey hat.
1) The system is transparent. Therefore as soon as you change the percentage, people can work out exactly how much its costing them - and there's no room for stealth-tax style approaches. That's not good for Chancellors cut from the Gordon Brown mould.
2) The system is universal. You can't tweak the fringes to give the lower (or better) paid a better deal. Again, politicians don't necessarily like this.
3) The system is fair. For a given value of 'fairness'. Its not an unreasonable argument for low earners to say that high earners paying more tax because they earn more isn't enough. They should pay a higher *proportion* of their income in tax as well, so that lower earners can benefit via income redistribution. Anyone introducing a flat tax would automatically be seen to be raising the tax rates for the 'poor' at the benefit of the 'rich'. Political minefield and therefore not desirable by politicians.
4) Politicians feel there are other ways to incentivise people to earn more money and/or invest in businesses and the economy.0 -
If you can afford to pay it, you can afford to avoid it!0
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Actually, that's not quite right. The thresholds stack on top of each other, so you don't start paying 40% tax until you've earned £7,475 of tax-free income plus £35,000 of 20% taxed income (ie, your annual income is over £42,475).
The 50% band hits people with annual incomes of over £192,475.
Try again, thats not correct, i hope you havent been filling in your own tax returns or you might owe the tax man a few quid.
the first 7475 is tx free, then
7476 - 35000 is taxed at 20%
35001 - 150000 is taxed at 40%
150001 and over is taxed at 50%0 -
I've always accepted that I'm idealistic to the point of naivety but...
I do believe in a higher rate tax for super high earners. I consider myself very comfortable and earn a little over one quarter of the 50% tax threshold.
If I was offered say a £10K increase but taxed at 50% I'd be delighted though I don't really feel like I need a rise.
It has to be said that by the time a person has clocked up £150K they've probably earned enough to cover their needs and a good deal of luxury. A bit of extra tax isn't going to hurt.
I'm suspicious of any study showing the 50% tax rate doesn't generate revenue. I'd guess that today's 'twenty high-profile economists' are all in the 50% bracket and perhaps subconsciously have an axe to grind.
If you're a high earner you should be proud not only of your achievements but also your ability to put more back into society, both in real terms and as a proportion of your income.Apparently I'm 10 years old on MSE. Happy birthday to me...etc0 -
Is there anyone earning over £150,000p.a. who is not able to avoid the tax? Surely 50% is another voluntary tax.
Until the tax system is fair it's no wonder so much is avoided! Those who use the legal loopholes not only avoid tax.., they then have benefits thrust at them too!
The system is a farce.0 -
Try again, thats not correct, i hope you havent been filling in your own tax returns or you might owe the tax man a few quid.
the first 7475 is tx free, then
7476 - 35000 is taxed at 20%
35001 - 150000 is taxed at 40%
150001 and over is taxed at 50%
According to http://www.hmrc.gov.uk/rates/it.htm...
The first 7,475 is tax free, then
7,475 - 42,475 is taxed at 20%
42,476 - 150,000 is taxed at 40%
150,000+ is taxed at 50%
The 35k figure quoted is of taxable income - i.e. you add it to the tax free allowance.
[Interesting that money earned between 42,475 and 42,476 seems to be tax free!]0 -
JimmyTheWig wrote: »That's not true.
According to http://www.hmrc.gov.uk/rates/it.htm...
The first 7,475 is tax free, then
7,475 - 42,475 is taxed at 20%
42,476 - 150,000 is taxed at 40%
150,000+ is taxed at 50%
The 35k figure quoted is of taxable income - i.e. you add it to the tax free allowance.
[Interesting that money earned between 42,475 and 42,476 seems to be tax free!]
Actually, another slight additional adjustment exists - income from c. £100k to around c. £115k has a slightly higher marginal tax rate because the personal allowance disappears by £1 for every £2 over £100k you earn!
http://www.hmrc.gov.uk/rates/it.htm0 -
Minor point re last post, but if you are fortunate enough to earn GBP150k pa then you have zero allowance (so all income is taxable).
At the end of the day 50% tax rates are more about politics than revenue generation, which is why Labour introduced them (perhaps....) and the Government are so concerned about reducing them.
No one likes paying tax especially when one considers that governments/politicians are so bad at spending our cash. Logically, if you aspire (and are able) to improve your lot, then keeping most of your hard earned is a motivation. Would you be less motivated if taxes are 50, 60, 70% on the next promotion/job? It's down to the individual since earning more most likely means sacrifice (not exclusive to true high earners I accept).
It's a balancing act at the end of the day and determining where the tipping point is (could be 60% rather than 50%, for example) should be a decision based on fact (if it can really be determined) rather than fiction/politics. IF raising taxes is likely to end up costing the country net, then all parties should bin politics, acknowledge the fact and endorse a cut; times are tough, why make them tougher?
This will never happen of course. As has been said, taxation is a shambles, which is fine because those of us in work (broad shouldered or otherwise) will pay.
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It's strange really. The Tories say that actually, the 50p rate isn't really raising much money, so scrap it. Well, if it isn't raising that much money then why bother scrapping it, it clearly isn't being paid as people are finding a way around it.....or, the Tories and their chums are having to pay more and don't like subsidising the "oiks".
The fact is that every-time I buy something from the shops I am paying disproportionately more in tax than a top rate tax payer.
How about we scrap VAT, or rather link it to earnings....I wonder what they would think of that.0 -
Flat tax systems are popular with a fair chunk of economists. They're straightforward and transparent, universal, fair (in the sense that everyone pays the same proportion of their income in income tax)
Once you factor in other forms of taxation (mostly VAT) flat-rate taxation starts to look downright unfair, as you pay additional tax on that money on its way out (and lower earners tend to spend out every month just paying for living, whilst the upper echelons have money that tends to go into savings or investments where they earn even more money),
(<edit> It could even be suggested that our tax system is already virtually flat once all taxes - direct and indirect - are taken into account: in 2009-10, households in the bottom income quintile paid 10.2% of their income in direct taxes and 25.3% in indirect taxes, while households in the top quintile paid 24.4% in direct taxes but only 9.3% in indirect taxes:
http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Personal+Income+and+Wealth
(With thanks to theonionmurders for the clipping))and everyone has the same incentive to earn extra money, irrespective of their salary level..
You work an extra hour you get £8 of spending money, I work an extra hour, I get £50 extra spending money.
I'm not saying that taxation can (or even should) correct that particular imbalance, but saying that flat-rate taxation results in a level playing field with regard to incentivising work is patently not true.- GL0
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