MSE News: Super-rich must give more, says Nick Clegg

grey_gym_sock

public sector pay is much lower than private sector for comparable jobs. e.g. compare tax inspectors to accountants in private practice. and the gap is wider than it was a few decades ago. or compare graduate through to senior jobs in the civil service: they are paying vastly less than private sector management jobs.

in higher paid jobs, what's happened first is a huge rises in private sector pay - i.e. increasing differentials between low- and high-paid jobs; and then some incomplete catching up in high-paid jobs in the public sector - i.e. differentials have also widened in the public sector, but high-paid public sector jobs remain far behind comparable high-paid private sector jobs.

in lower paid jobs, many jobs have been contracted out to the private sector, and at the same time pay has often been cut. which distorts the statistics.

on taxing companies, i am suggesting scrapping the idea of taxing them based on where the company is domiciled (which is a legal formality), and instead taxing them based on where they have employees, assets, or sales. if that was done, there would be very little chance of a company like ARM leaving. to reduce their UK tax, they'd have to actually move their employees overseas, which would be crazy from their point of view. top-quality R&D is critical to their business model. the UK will never be the cheapest place for R&D; they're here because they think it's the best place (for them).

interesting that you mention raising tariffs on imported goods. my suggestion of taxing a proportion of the profits of companies who make sales to the UK is in some ways similar. but i'd generally rather be taxing profits than raising tariffs.

i'm not sure that anything can or should be done to discourage high-earning IT workers from working overseas. i happen to be a high-earning IT worker who's stayed in the UK. probably most stay, so i'm not sure that a lower tax on IT workers would actually succeed in maximizing UK tax revenue. and even if it would, perhaps it shouldn't be done, because the tax system is supposed to be (among other things) fair, which it wouldn't be if it taxed IT and non-IT (or less mobile) incomes at different rates.

Randvegeta

grey_gym_sock wrote: »

public sector pay is much lower than private sector for comparable jobs. e.g. compare tax inspectors to accountants in private practice. and the gap is wider than it was a few decades ago. or compare graduate through to senior jobs in the civil service: they are paying vastly less than private sector management jobs.

To be perfectly honest, senior jobs in the public sector should be considerably lower than private sector. If they feel they are not rewarded fairly, let them get a higher paying job in the private sector and pay more income tax. Not to mention, public sector jobs typically have better pensions, better job security, AND let us not forget they are not wealth producing members of society. That is not to say they are not worth anything (they are!). But something's got to give. Private sector = more important, full stop.

At the other end, junior or 'low level' public sector jobs should really be a little less than comparable private sector jobs. Having highly paid public sector workers makes employing people in the private sector more expensive as they have to compete with government wages. That means more pressure on companies. Less tax revenue and more government spending. NO ONE WINS apart from the public sector workers.

on taxing companies, i am suggesting scrapping the idea of taxing them based on where the company is domiciled (which is a legal formality), and instead taxing them based on where they have employees, assets, or sales.

I don't know how that would work in the UK, but the important thing is that high taxes should be applied to domestic income and low taxes for export income.

if that was done, there would be very little chance of a company like ARM leaving. to reduce their UK tax, they'd have to actually move their employees overseas, which would be crazy from their point of view. top-quality R&D is critical to their business model. the UK will never be the cheapest place for R&D; they're here because they think it's the best place (for them).

If taxes were raised to say.. 50%, they may very well leave, along with the employees. They don't depend on the UK market to survive, and they do not manufacture anything. They design their chips, not make them. They could easily just pick up and move to another country with lower taxes an the UK would have no way of getting any money off them at all. Other countries would probably welcome this high value, high tech company with open arms.

interesting that you mention raising tariffs on imported goods. my suggestion of taxing a proportion of the profits of companies who make sales to the UK is in some ways similar. but i'd generally rather be taxing profits than raising tariffs.

As I said. I am not against high taxes per se. I am against the system which discourages work and encourages complex avoidance schemes which cost the country billions. But tarrifs may be the easiest thing to do since taxing overseas corporations would be difficult.

We could have a tax system in the UK that encourages small/medium businesses while deterring complex avoidance schemes.

For example. If we take supermarkets as an example, you can tax them at say... 50% of their profits. They may attempt to 'reduce' their earnings by purchasing produce from another country and the profit is simply passed on abroad. So to resolve that, you raise tarrifs to claw that money back. At the same time, you encourage small businesses (maybe a smaller supermarket) and give them a lower rate of tax based on their profit. With the high tarrifs in place for imported goods, they will source local produce instead. In this way, we keep the money in the country, encourage business start ups and only tax those who can A) really afford it, and earn their money from domestic only sales. And as I said before. Supermarkets make most of their money from the working and middle class. It seems only fair they pay the most in taxes to put some wealth back.

perhaps it shouldn't be done, because the tax system is supposed to be (among other things) fair, which it wouldn't be if it taxed IT and non-IT (or less mobile) incomes at different rates.

But the tax system ISNT fair now. How is progressive tax fair? Okay, so the claim is that the rich can afford it. But that's not much of argument. Lets say it cost $10,000 /year to live for a single adult. That technically means anyone who earns over $10,000 can afford to pay all of their income above $10,000 in tax. So why not set a nice high limit for tax free income and then a flat rate of tax on top so everyone pays the same amount above what they can realistically afford?

Okay so now you may ask, what about married couples and children? Update the system so that a married couple can be treated as a single entity with double the allowance. And if they have children, an even higher allowance. So extra money they earn isnt taxed untill it hits that predefined affordable number.

Another thing to consider is that people who are involved in exporting are bringing wealth into the country. Why is it fair they pay the same amount in tax as the person who earns domestically only? We should encourage exports. And there is nothing wrong with using taxes to do that. Why do I say that? Well don't the government tax alcohol and tabaco at high rates to discourage their consumption. Why cant we do the same with industry and types of jobs. Use the tax system to encourage exports and make the country wealthier!

And again, why not encourage/discourage certain industries with tax. If the country is lacking in exports related to engineering, give them a tax cut! If the country has too many call centers, tax them more. I don't know exactly what policy is right but I know the current policy is wrong and discourages exports and hard work.

grey_gym_sock

the idea that the public sector doesn't contribute to the economy is nonsense. for instance, if low-paid public sector workers are paid more, they'll spend it in the private sector. the 2 sectors are mutually dependent.

when the public sector pays a lot less, it can cause problems. i suspect that 1 of the reasons that big companies are running rings round HMRC in tax avoidance is that the calibre of staff on the HMRC side is far lower.

overall, we don't have a progressive tax system. the highest effective rates are for ppl on low incomes, hit by a combination of income tax + NI + loss of benefits.

we should have a progressive tax system, because it hurts ppl less to pay a higher rate when they're on a higher income. simple.

Randvegeta

the idea that the public sector doesn't contribute to the economy is nonsense. for instance, if low-paid public sector workers are paid more, they'll spend it in the private sector. the 2 sectors are mutually dependent.

I didnt say they dont contribute. I said they are not wealth producing. They produce nothing. They export nothing. They are paid by people who DO!

That is not to say I don't think their work is valuable. It certainly is. But the one who works in manufacturing and export is generally a more productive member of society than a public sector worker of comparable pay.

We need the public sector but they are, for the most part, overpaid.

when the public sector pays a lot less, it can cause problems. i suspect that 1 of the reasons that big companies are running rings round HMRC in tax avoidance is that the calibre of staff on the HMRC side is far lower.

I didn't say a lot less. I said a little less. And if the tax system wasn't so poor, big companies wouldn't try to evade/avoid as much as they do, negating the need for SUPER qualified HMRC staff.

overall, we don't have a progressive tax system. the highest effective rates are for ppl on low incomes, hit by a combination of income tax + NI + loss of benefits.

I really hate when people bring up 'effective' tax rates. Let's look at ACTUAL tax rates please. Benefits are paid by those who pay tax. If you are on benefits, chances are you pay negative tax. The way I see it, if you earn $10,000, pay $1,000 in tax, and you receive $1,000 in tax credits, YOU DONT PAY TAX. They cancel each other other. This effective tax rate crap means if earning $11,000 means you're no longer eligible for that $1,000 in benefits and tax remains at $1,000, are you really saying their tax went up? That's one way to distort the statistics!

I say most benefits need to be scrapped!

we should have a progressive tax system, because it hurts ppl less to pay a higher rate when they're on a higher income. simple

I disagree. When living in the UK, I was never entitled to any benefits. So every extra pound I earned meant more tax I paid. And that hurt me more proportionately since the more I earned, the higher overall percentage I would have to pay in tax.

grey_gym_sock

yours views are a confusing mish-mash. you say the public sector isn't productive, but its work is valuable. at one point you weren't against a 50p tax rate, but then you wanted a flat tax rate. etc, etc. you seem to have half-swallowed a bunch of loony-right ideas; when challenged, you first back off a bit, and then come back with an even loonier idea. i think this discussion has become pointless.

Randvegeta

I don't think I said that public sector workers are not productive. What I said, or at least what I mean was, they don't produce anything. Meaning they do not increase the wealth of the country. They do not create anything. And although they do provide a service, I think private sector, particular those in the manufacturing and export industries contribute MORE to society pound for pound than public sector workers.

I don't want a 50p tax rate. But if it must be charged, it should be charged to those who can both afford it, and have no way of avoiding it. Not to those who contribute to wealth creation.

Finally, you talk about progressive taxes being fair. I disagree. A fair system would be flat so everyone pays the same percentage of their income above a certain threshold. The idea being, anyone earning over said threshold can afford it so why should there be progressive tax? It should be flat if yo want to talk about fairness.

Taxes can be quite complex. I am breaking it down into smaller segments to simplify. Obviously there is a balance somewhere, but I do not know where. You have your views, I have mine, We disagree but any opinion that says progressive taxes are FAIR and uses an 'effective' tax as a reference of comparison is what I would call !!!!-eyed-loony-left-bull-s***.

grey_gym_sock

obviously the public sector contributes to the wealth of the country. it provides an educated population, a transport system, a stable legal system, etc, without which the private sector could hardly operate.

public and private sectors are an interconnected system. the attempt to label certain parts as "wealth creating" is a distortion. it isn't that simple. in fact, the greatest contributions to wealth are from scientific research, which is far from the most lucrative line of work.

if you can't understand that it hurts more to pay (say) 20% tax when your income is 10k than when it's 100k, then you have clearly not only led a fortunate life (i have too), but also have no imagination to put yourself in other people's positions.

Randvegeta

Let me clarify one more thing.

I think it is UNFAIR to have progressive tax, but I also believe it has harmful effects on the overall economy. So my opinion is that taxes should be flat in order to be fair. That being said, I understand that there is a large national deficit that needs to be dealt with so higher taxes may be necessary.

So the solution is tax those who CANNOT leave at a higher rate. Is it fair? Morally right? God no. But if we are going down the unfair route anyway, lets at least not drive away the other rich, and mobile people.

Hope that clears it up for you.

Randvegeta

obviously the public sector contributes to the wealth of the country. it provides an educated population, a transport system, a stable legal system, etc, without which the private sector could hardly operate.

I agree that the public sector is vital for all those reasons above. But you obviously haven't read what I said.

public and private sectors are an interconnected system. the attempt to label certain parts as "wealth creating" is a distortion. it isn't that simple. in fact, the greatest contributions to wealth are from scientific research, which is far from the most lucrative line of work.

Research is funded in large part by the private sector. I know public funds contribute greatly towards R&D but so what? I never said public sector workers were not valuable. I simply said they are not worth as much as similarly paid private sector workers. Why can you not understand that simple idea? Public sector = better pensions, better job security, and funded by real tax payers. If the government want to give those benefits to everyone, and not just the public sector, fine. But while pensions and job security favour government workers, it seems unfair they get paid as much (if not more) too!

if you can't understand that it hurts more to pay (say) 20% tax when your income is 10k than when it's 100k, then you have clearly not only led a fortunate life (i have too), but also have no imagination to put yourself in other people's positions.

Well that's what the allowance is for isnt it? The allowance is too low now. It should probably be that if you are on minimum wage, no income tax is due. Beyond what everyone needs to live (that is food, clothing, transport, heating, accommodation, and a bit of leisure funds) no, 20% does not hurt the lower income earners any more than the high earners. At least not proportionately. Can't you see that?

grey_gym_sock

Randvegeta wrote: »

But you obviously haven't read what I said.

you said: "they do not increase the wealth of the country."

i replied: "obviously the public sector contributes to the wealth of the country."

I simply said they are not worth as much as similarly paid private sector workers. Why can you not understand that simple idea?

i can understand it, but it's blatantly false. in comparable jobs, the public sector mostly pays less. (where comparisons make sense, which is not everywhere.)

Beyond what everyone needs to live (that is food, clothing, transport, heating, accommodation, and a bit of leisure funds) no, 20% does not hurt the lower income earners any more than the high earners. At least not proportionately. Can't you see that?

are you kidding? you clearly haven't got the faintest idea what it's like to barely have enough to get by. you need to use a little imagination.

there isn't a simple cut-off income, after which it doesn't hurt you at all to pay tax. people have different needs and circumstances; some are fine on an income on which others would struggle. that's why the marginal rate should rise only gradually.

you are not even consistent. if it doesn't matter how high a marginal rate people pay, so long as they keep everything up to the minimum wage, then it equally doesn't matter high a marginal rate somebody on a high income pays.