What should the maximum Income Tax rate be?

Former_MSE_Penelope

Poll started 26 Mar 2012, click here to vote

If you were in charge of the tax system, what would you set as the HIGHEST Income Tax rate that anyone should pay?

Which is nearest to your view?

0%
5%
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15%
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25%
30%
35%
40%
45%
50%
55%
60%
65%
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85%
90%
95%
100%


click 'post reply' to discuss below. Thanks


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aldredd

If it was me, I'd like to have a set tax-free amount, and then a flat universal % for anything above that, rather than this 'the harder you work / more you earn, the bigger the slice we'll take' setup we have.

Not an economist, so no idea if that would work in the 'real world', but it's how I think would like it to work.

lkate

Im not a high earner, infact i don't earn enough to pay any tax (im a student with a part time job). I don't think anyone, regardless of their income should have 50% of their hard earned cash taken away from them. It would most certainly make me consider moving to a country with cheaper taxes if I were to earn that big bucks! I'm getting very fed up of this whole tax the rich, bleed them dry mentality. Just get rid of the loopholes in the tax system and make avoidance illegal.

WestonDave

aldredd wrote: »

If it was me, I'd like to have a set tax-free amount, and then a flat universal % for anything above that, rather than this 'the harder you work / more you earn, the bigger the slice we'll take' setup we have.

Not an economist, so no idea if that would work in the 'real world', but it's how I think would like it to work.

I agree - having stepped rates encourages behavioural change by those just above the step, which in turn becomes counter productive. If you have tax at 40% up to £150,000 as now, and then 50% beyond it, you might expect that system to generate an extra £1000 from someone on £160k, compared to just charging 40% all the way up. However what is likely to happen is that the tax payer will shove £10k in his pension, get tax relief on the lot and so you don't even get the 40% - instead of getting £1k extra you get £4k less tax revenue.

In terms of this question I think there is a pyschological barrier at 50% which is why the additional rate was a problem - by the time you add 2% NI, people were looking at keeping less than half of what the extra they earned over the threshold - a powerful incentive to changed behaviour.

nickorossa

I too think that the way forward is a higher tax free income and then a flat rate.

Something like £15,000 tax free allowance for anyone. Then 30% as a single flat rate. The numbers can vary to meet whats required, but the principle will work if balanced correctly.


Those who keep complaining that "those earning more, should pay more" simply fail to understand that tax is calculated as a percentage which by definition means that if you earn more, you pay more (until you get to the point you can afford to know where the loop holes are).

HappyMJ

I'd combine national insurance into the tax rate and charge everyone 40% on anything earnt above minimum wages. Minimum wages being tax free. I would then scrap national insurance, contributions based benefits and working tax credits. Someone could then earn minimum wage and get exactly the same amount of money as they do now but instead of paying tax and NI and claiming working tax credits they could just keep it all without all this money being passed back and forward.

I would also set all marginal deduction rates on benefits to 50% to encourage people to at least do some work.

stevemcol

I'd have no problem at all paying 50% tax if I was earning that kind of money. I really can't get into the mindset of (some) super high earners. Just how much money does a person need?

aldredd

stevemcol wrote: »

I'd have no problem at all paying 50% tax if I was earning that kind of money. I really can't get into the mindset of (some) super high earners. Just how much money does a person need?

Whilst I'd love to be earning it, 150k isn't a 'super high earner' wage - we're not talking about millionaires here, but about people who have worked hard and got themselves into a strong position in a well-paid role.

150k will leave you with about 85k after tax, ni & 5% pension contribution.

Say you've got a pretty big home, paying 5k/m mortgage = 60k
That leaves you 2k/month for all your bills, cars, savings etc.

Don't get me wrong, it's a comfortable way to live, but these aren't filthy rich people we're talking about. And this is only on a 40% rate.
What incentive though does this person then have to push himself even further when he'll start getting over 50% of anything else he earns taken off.

Jennifer_Jane

aldredd wrote: »

Whilst I'd love to be earning it, 150k isn't a 'super high earner' wage - we're not talking about millionaires here, but about people who have worked hard and got themselves into a strong position in a well-paid role.

150k will leave you with about 85k after tax, ni & 5% pension contribution.

Say you've got a pretty big home, paying 5k/m mortgage = 60k
That leaves you 2k/month for all your bills, cars, savings etc.

Don't get me wrong, it's a comfortable way to live, but these aren't filthy rich people we're talking about. And this is only on a 40% rate.
What incentive though does this person then have to push himself even further when he'll start getting over 50% of anything else he earns taken off.

But the pension contribution reduces the income to below £150,000.

topher1979

The only thing incremental tax bands and variable allowances and benefits really creates is confusion. People at the top pretty much determine their own salaries, and those of the people further down. So progressive taxes just result in the rich giving themselves bigger pay-rises than everyone else.

I'm not suggesting they wouldn't do this with a flat-rate income tax, but the resulting diffence in salaries would be far more transparent and easy to calculate.

Stephen_Leak

110%, and levied on a decreasing pay scale.

No. Hang on. They're doing that already.