Would you support a 50% tax rate – even if it didn’t raise extra cash?

MercilessKiller

stevemcol wrote: »

Ask yourself this: based on your performance, your boss offers you a £50k rise but only available if you pay 50% of it in tax. Would you accept? I know I would. Surely once someone has earned 150K, they can afford to pay half of the remaining surplus in tax. They should feel privileged to be able to make that contribution. How much money does an individual need?

It's good logic Steve but it is slightly flawed. Lets say you currently earn £149k and a day later you earn't £150k - You'd end up taking home less money. So your raise isn't in proportion.. a 10% raise isn't a 10% increase in post tax income.

Also, the problem is the more you raise tax on income for high earners, the less financially attractive the UK is for investment. We need more investment.. 45% of a lot more is much better than 50% of less. That's if it makes a difference to investors as current figures suggest that it wont raise nearly the amount Labour think it will, meaning the only thing this will achieve is annoy the rich, and not make the money it intends. If it was going to make that money, then it would be a different story.

I agree with what Labour are trying to achieve. The fact they have got their methods wrong concerns me a lot though - If they're this ignorant about the economy, how can they progress the recovery?

stevemcol

MK. I don't get your logic. The additional rate tax is only payable on amounts above 150K, so you would always take home more.
Of course, economies will potentially prosper if you incentivise the rich at the expense of the poorer but there comes a point where moral obligation is more important than pandering to greed.

ifan.goch

I think that rather than raising the tax rate the government should close the glaring loophole of taxing dividends at a mere 10% irrespective of any other income. This allows company directors to pay themselves an amount above the lower earnings level to obtain a National Insurance Contribution without parting with any money, and is also below the threshold for Income Tax. The remainder of their income is paid in the form of dividends, often paid monthly just like a salary, but only attracting tax at 10%. I used to work for HMRC as a PAYE compliance officer, and it made me sick to see the office cleaner paying more tax and NI than the company directors. If we're all in it together, let's have a level playing field rather than one set of rules for workers and another more preferential set of rules for company directors.

MercilessKiller

stevemcol wrote: »

MK. I don't get your logic. The additional rate tax is only payable on amounts above 150K, so you would always take home more.
Of course, economies will potentially prosper if you incentivise the rich at the expense of the poorer but there comes a point where moral obligation is more important than pandering to greed.

Ha, you're right Been a long day. No idea what I was thinking.

BUT, the point about deterring investment is the main one :P

You say incentivising the rich is at the expense of the poor but I disagree. The more rich there is, the more tax is paid, thus the less tax the poor have to pay.. The rich already pay a lot of tax.. the debate is whether it's enough, but if you cross a line, it could hurt the economy and cost the poor more.

stevemcol

MK. I'm the first to admit that my view is idealistc and probably a bit niaive. It just really irritates me that people capable of earning these sums begrudge paying a bit extra tax both in real terms and as a proportion. Personally I'm on higher rate (40%) and I don't begrudge paying the extra 20% above basic. So why do they squeel at an extra 10% on earnings over 150K?

MercilessKiller

stevemcol wrote: »

MK. I'm the first to admit that my view is idealistc and probably a bit niaive. It just really irritates me that people capable of earning these sums begrudge paying a bit extra tax both in real terms and as a proportion. Personally I'm on higher rate (40%) and I don't begrudge paying the extra 20% above basic. So why do they squeel at an extra 10% on earnings over 150K?

I think it's because their other tax methods have gone up too. Stamp duty, inheritance, capital gains, VAT, fuel etc.. so if those weren't going up, they wouldn't care as much. People forget all of that (easy to do understandably).

I'd still rather have a rich haven so to speak and they're paying all our other taxes.. that means more money for benefits/welfare and lower tax rates at the lower end. Makes sense logically...

I don't think it can ever be perfect.

XRAT

I vote ifan.goch for chancellor!!!


One would need to be earning an awful lot before paying 50% tax. First off you could currently hide £50,000 of income in pensions before paying any tax.


Please, please, please people.., look into it. My own pension contributions reduced the university costs for my child from £9,000 p.a. to £2,000 p.a. by allowing them to claim poverty. (One does not have to divorce to meet the criteria, though many do!)

Terranaut

Nothing much to choose between the main parties. All are trying to position themselves with populist promises in the run-up to the election next year, so it's just politics.

Coalition reduced the top rate to 45% but took thousands out of tax altogether by raising the tax-free allowance, Labour got rid of the 10% bottom rate but want to reinstate the 50% top rate. Which is more important, punishing the successful (rich), who already pay a third of all income tax, or helping the lowest-paid?

Beware of manifesto promises; things look very different when in government, especially as a coalition.

ayayay

It's not really a 50% tax for employed people its a lot more. On top of the 50% the employee has to pay 2%NI and the employer has to pay 13% . So for every £1 the employer pays, 43p goes to the employee and 57p to the government.

I don't know why everyone thinks this is the top rate anyway, if you earn between £100k and around £120k, because of personal allowance tapering, you pay an effective tax rate of 60% (62% inc. NI). For every £1 the employer pays, 33p goes to the employee and 67p goes to the government.

That's more than enough in tax.

As for happyinflorida, I suggests he gets counselling for his anger issues. As for letting the banks go bust? I can't imagine many people would have been happy to lose their life savings or their jobs when their employer went bust.

ayayay

ifan.goch

That's not right. What you won't see as someone doing the payroll is that the director then has to fill out a tax return every year and pay the additional 35% (or whatever) to bring the effective rate to the higher rate.