We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
MSE News: Savers lose nearly £18 billion a year
Comments
-
Glen_Clark wrote: »aren't we going round in circles back to post 23?
My point is that in order to have a very light tax on inherited wealth, we have a very heavy tax on jobs, which doesn't appear to be doing the economy any good.
Based on recent budgets and forecasts, Government tax receipts from salaries and IHT receipts on estates are roughly:
NI on salaries: £100 billion
Income tax on salaries: £150 billion
IHT: £3 billion
Before the introduction of the transferable nil rate band, and the fall in house prices/value of estates on death, IHT receipts were around £4 billion. So even a very substantial change to IHT has a limited effect, say £1 billion which is only equivalent to around 1% of the tax receipts on salaries. So I cannot see how IHT can be used to reduce the tax burden on jobs or improve the economy.
What IHT changes do you suggest that will have a meaningful impact?
JamesU0 -
IHT is a tax on wealth, not income. As are proposals for an annual mansion tax etc.
Just for a moment suppose everyone had the same income, and paid the same tax. That would be fair, wouldn't it? As a variation to allow for the real world, allow some people to earn a higher than average income, but tax them more heavily - again fair? That's the sort of progressive income tax system we have now.
Either way some people would save (more than others) and might accumulate wealth.
Conclusion: a system which taxes income permits people to become rich.
Skew the system the other way, and raise most taxes on wealth, instead of income. There'd be a huge incentive for the wealthy to splurge on spending (might be good for the economy in the short run), or else they conserve what they can but the likelihood is most of their wealth is gradually year by year taxed out of existence. Equally there is a disincentive for the poor to aspire to wealth and saving.
In this scenario extremes of wealth are mostly eliminated - everyone is levelled down. And as the very wealthy disappear, those who were previously considered poor now have their meagre wealth taxed more heavily to support the state.
Conclusion: a system which taxes wealth tends to make everybody poor.
Such extremes illustrate that there is a choice between taxation systems which tend to allow some (but not all) people to be wealthy, or those which tend to reduce everyone towards poverty.
Which is the fairest sytem? - that will depend on who you ask.0 -
Glen_Clark wrote: »aren't we going round in circles back to post 23?
My point is that in order to have a very light tax on inherited wealth, we have a very heavy tax on jobs, which doesn't appear to be doing the economy any good.
I don't think I'm going round in circles because #23 does not hold really good. This argument, as others have indicated, overlooks the distinction between wealth (assets) and income (the product of wealth creation). If someone leaves someone £350,000 it is a transfer of wealth/assets and no new wealth is created per se. If someone earns £350,000 it will be in recognition of wealth created according to whatever product or service they are involved in producing/providing. Because the taxation principle in this, and most, countries is to avoid double taxation as far as possible the emphasis is on taxing income and spending, not the possession of, or transfer of, assets/wealth. Income tax is not really a tax on jobs because employers do not pay it nor have to worry unduly about it (other than acting as unpaid tax collectors re PAYE). Only employers portion of Nat Ins can be called a job tax.
The point being made here appears to be a political one, not an economic or financial one -- ie that from a moral standpoint wealth should be taxed heavily absolutely and/or at the point of transfer as a matter of redistribution from the haves to the have nots. If a major political party were to stand on that ticket I doubt that it would be a vote winner overall. Most people, even those of relatively modest means seem to like the idea of leaving property and money to their offspring very much, and resent any portion of it being taxed. The inheritance tax threshold was recently effectively increased because they were encroaching too much on those of relatively modest means and that was extremely unpopular. The rate of inheritance tax could be increased but it would probably have the effect of stimulating even more avoidance manoeuvres on the part of the wealthy (cf what we have recently seen re income tax), cause some of the wealthy to relinquish UK residence (and some of them do actually contribute), and cause disquiet among many of the ordinary population as possibly the thin end of the wedge to their legacies being taxed sometime in the future.
In the simplistic world of the hard left taxing "the rich" heavily on every front is seen as a panacea for almost all social and economics ills. In the real world it is not apparently seen as viable or desirable by the majority. Otherwise surely the Labour Party and Lib Dems would adopt is as a policy in order to make an electoral killing.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
When some people's own vested interest is at stake they can tell you chalk is cheese and sound like they really believe it“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
-
Based on recent budgets and forecasts, Government tax receipts from salaries and IHT receipts on estates are roughly:
NI on salaries: £100 billion
Income tax on salaries: £150 billion
IHT: £3 billion
Before the introduction of the transferable nil rate band, and the fall in house prices/value of estates on death, IHT receipts were around £4 billion. So even a very substantial change to IHT has a limited effect, say £1 billion which is only equivalent to around 1% of the tax receipts on salaries. So I cannot see how IHT can be used to reduce the tax burden on jobs or improve the economy.
What IHT changes do you suggest that will have a meaningful impact?
JamesU
And how much would unearned income/inheritance tax raise if it was taxed the at same rate as earned income?“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
..... and a system which taxes jobs instead?Conclusion: a system which taxes wealth tends to make everybody poor.
As for avoidance, thats an easy one. If the tax is on land and property it cannot be hidden like earnings. If the owner is hiding in an offshore trust the land and property can simply be seized to pay the tax. Then the owner would soon appear
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »When some people's own vested interest is at stake they can tell you chalk is cheese and sound like they really believe it
I can tell that you believe it. But I am not taken in
Glen_Clark wrote: »And how much would unearned income/inheritance tax raise if it was taxed the at same rate as earned income?
A little bit less than it does now. The unearned income rate is exactly the same as the earned income rate. IHT at 40% is on average higher than the earned income rate.Glen_Clark wrote: »..... and a system which taxes jobs instead?
As for avoidance, thats an easy one. If the tax is on land and property it cannot be hidden like earnings. If the owner is hiding in an offshore trust the land and property can simply be seized to pay the tax. Then the owner would soon appear
A system which taxes jobs ... it would either make the serfs work harder or turn us in to a land of entrepreneurs where we don't work in jobs for other people but run our own small businesses.0 -
Your capacity for ignoring inconvenient facts (like the starting rate threshold) knows no bounds.:DA little bit less than it does now. The unearned income rate is exactly the same as the earned income rate. IHT at 40% is on average higher than the earned income rate.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »Your capacity for ignoring inconvenient facts (like the starting rate threshold) knows no bounds.:D
OK you win. There is a 10% starting rate for unearned income above the basic tax free allowance, but it's only on a narrow band (just over £2K) of income, so worth just over £200 p.a. at best. Interestingly it was created by a Labour Chancellor (Gordon Brown) when he messed up the abolition of the 10% income tax band. It mainly applies to a small number of (generally wealthy) non-working people.0 -
There is a 10% starting rate for unearned income above the basic tax free allowance
This is the starting rate for savings income.
The definition of "unearned income" is best left to those who like to argue about such things as it has no relevance to modern taxation in the UK.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.4K Banking & Borrowing
- 253.3K Reduce Debt & Boost Income
- 453.8K Spending & Discounts
- 244.4K Work, Benefits & Business
- 599.7K Mortgages, Homes & Bills
- 177.2K Life & Family
- 258K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards