Reduction in top, 50%, rate of tax?

le_loup

Neither balanced or unbalanced, it's a direct quote of someone.
Didn't read about that that in your preferred lavatory paper: The Daily Mail.

zagfles

Pennywise wrote: »

Only if their taxable earnings increase. That's my point. A lot of low earners know this and therefore don't make any attempt to earn any more, therefore don't pay the 73%, i.e. don't work longer hours, or don't go for promotion or a new job. They just sit there, earning the same, to avoid having to pay 73p tax on the extra £1 of income they could have earned. All you have to do is look on the benefits board and tax board here, and you see self employed spending their higher profits on new equipment or other business expenses to get their profits down to keep their benefits up and tax bill down. Same with part time workers - time and time again, they've rightly picked up that it's not worth them doing more hours, or getting a slightly better job.

This is exactly what happens at the £100k earnings trap and the £150k earnings trap. It's all the same. Soon, we'll have the ~£42k earnings trap re family allowance - already plenty of threads where people have rightly realised that they'll suffer a marginal tax rate of far in excess of 100% if an hour's overtime or minor promotion puts them slightly into the h/r tax bracket. So, any sane person takes preventative action - most will increase their pension contributions to avoid it.

This is the problem with penal rates of tax, whether you're earning £10k p.a. or £100k p.a. It's common sense that you'll take action to optimise your own position. If there was a steady marginal rate, people would be far more incentivised to work harder and improve their lot. The 73% is just as bad as the 50% and all the other tax traps. Look at stamp duty. 3% on a house for £251k or 1% on a house for £249k - no sane person would pay £251k, so govt lose out. We need to scrap the 50% AND scrap the £100k threshold, AND scrap the family allowance loss for h/r AND scrap the 73% for relatively low earners. Two (or more) wrongs don't make a right. The tax system needs major reform so that at whatever level of earnings, there is a legal cap of tax or benefit loss at a marginal rate of 50% so everyone will always keep at least 50p of every extra £1 they earn.

Absolutely. The problem is, however, politics. The way things seem to the typical thick voter, not the way things actually are. Any radical reduction in marginal withdrawal rates would likely require an increase in the headline tax rate, eg basic rate tax up to 35-40%.

Successive governments have been obsessed with lowering the basic rate of tax, not increasing it, because it seems to win votes. So we have a low basic rate of tax, but when personal allowance/ benefit/ tax credit withdrawal are thrown in the mix plus other stealth taxes, people can end up with very high marginal withdrawal rates. But the typical thick voter is happy because the basic rate of tax is low...

zagfles

zygurat789 wrote: »

Surely any fairly low paid person earning over £7475 pays tax at a marginal rate of 73%?

No. Some will pay far more if you include CTB/LHA/HB withdrawal. Some will pay far less (eg those not entitled to tax credits for whatever reason, or those who'll only earn the extra for one year).

Randvegeta

le_loup wrote: »

Whoops! Now someone has resurrected the dead.
More care needed.

I swear, all you do is troll the forums. This is called, after all, a cutting tax forum. Why come here to tell people to pay the maximum amount of tax possible when clearly, the purpose of the forum is the opposite?

Why say anything at all if it doesn't answer the questions of the OP or the people actively participating in this thread/forum? It's not like people are asking how to evade taxes here.

Do you pay the most tax possible? If not, why? If yes, why?

And please stop moaning. It's perpetuates the British stereotype.

le_loup

Tweek, tweek!

Randvegeta

le_loup wrote: »

Tweek, tweek!

I am absolutely convinced Le Loup is living off the state. Be it working for the government, or living off benefits

Why else would a person be so bitter about other's reducing their tax liability.

Le Loup's upset because the less people pay tax, the less he gets.

Yep, figure this one out.

le_loup

Can't resist, can you?

Randvegeta

le_loup wrote: »

Can't resist, can you?

Likewise

Soubrette

ben.bayliss wrote: »

This is exactly what I meant. If I won't be the primary benefactor of my extra work, then I probably won't bother to do it.

And this isn't a good thing? - someone else can be employed to do the extra work that you don't want to and pay their taxes on it plus get someone off the dole.

Unless your extra work isn't actually important enough to be done - in which case you shouldn't be paid for it in the first instance.

zagfles

Soubrette wrote: »

And this isn't a good thing? - someone else can be employed to do the extra work that you don't want to and pay their taxes on it plus get someone off the dole.

Or they might go and do the same job in another country where tax rates are lower, pay tax to a foreign govt, not to mention VAT, and spend their money supporting their economy instead of ours. I could do my job anywhere in the world.

Besides which the marginal withdrawal rates to an unemployed person getting a job is far higher than 50%, so the same applies to the unemployed person being incentivised to do the work.