The 60p tax rate, over £100k

ceivegz

And a Facebook page here set up by people who think it should be scrapped:

https://www.facebook.com/scrap60

CLAPTON

ceivegz wrote: »

There's a good blog article in the Spectator about the 60% rate and how it's basically a back door stealth tax for the "affluent but not necessarily rich":

http://blogs.spectator.co.uk/coffeehouse/2013/03/forget-50p-scrap-the-60p-tax-rate/

why is it a stealth tax?

would it have been better to simply have a 60% tax for all income above 100,000 ?

zygurat789

CLAPTON wrote: »

why is it a stealth tax?

would it have been better to simply have a 60% tax for all income above 100,000 ?

It would have been simpler and more easy to understand, would that be better?
I also note that the powers that be thought that the device of reducing an allowance by £1 for every £2 of income was far too complicated and resulted in far too much work for the poor overworked darlings at HMRC so they would abolish age allowance altogether, thus increasing the tax burden on the over 65s.
Now, for some reason, it is alright to introduce such a measure presumably to pay their inflated salaries and their exhorbitant pensions.
Yet another example of terminological inexactitude from osborne and the treasury.

ceivegz

CLAPTON wrote: »

why is it a stealth tax?

would it have been better to simply have a 60% tax for all income above 100,000 ?

It's a "stealth" tax because it's an unofficial tax band that is "unseen", not publicised as a 60% tax rate but effectively it one. If HMRC stated the 60% rate as an official marginal rate of tax the Tories would go mental.

Yes, it would be easier to have a 60% income tax on ALL earnings over £100,000 and arguably farer in that you wouldn't find people earning £100,000 paying more tax on every incremental £1 of earnings than people will much high salaries.

However, the highest tax rate has always been reserved for much higher earners (e.g., someone with a salary, 2 or 3 children, a mortgage and a stay at home partner is hardly rich, especially following the loss of Child Benefits).

Also a 60% rate hasn't been in force since the mid-1980s and is hardly in keeping with a party that claims to be the party of low taxation.

ceivegz

CLAPTON wrote: »

why is it a stealth tax?

would it have been better to simply have a 60% tax for all income above 100,000 ?

Also, some would argue that the archaic definition of "Stealth", i.e. "to Steal" would also be an appropriate definition.

CLAPTON

ceivegz wrote: »

Also a 60% rate hasn't been in force since the mid-1980s and is hardly in keeping with a party that claims to be the party of low taxation.

they aren't the party of low taxes

they are the party with aspiration to be so (for the avoidance of doubt, I mean they are liars.)

in any event, what is the effective tax marginal rate when one losses child benefits?

ceivegz

Also, this invisible 60% tax rate (62% including NI) is just plain bad business for employers. Once you add the employer's NI, the employee receives just 33% of the amount it costs employers!

zygurat789

ceivegz wrote: »

Also, this invisible 60% tax rate (62% including NI) is just plain bad business for employers. Once you add the employer's NI, the employee receives just 33% of the amount it costs employers!

My heart bleeds for all these poor people earning over £100,000, pass the hat round my way I want to put something in it.

When young families today increase their income they suffer 20% PAYE, 12% NIC AND their benefits are cut by 41p isn't that 73%? This is for people earning less than £42K.

grey_gym_sock

well, yes, it is hardly a pressing issue ... if you earn £110k, just put at least £10k in a pension - job done. (or make gift aided donations to charities, if you're that way inclined.)

whilst, in theory, you can try similar things on a low income - viz. make big pension contributions so that you retain mean-tested benefits - it a lot harder to live on the net income that leaves you (though some will manage it).

CKhalvashi

chrismac1 wrote: »

In fact from a revenue-generation point of view this was a really shrewd stealth tax on Darling's part. How many jobs do you see advertised at £97k plus bens compared to £100k plus bens?

The £100k to £110k area is a real sweet spot and Darling whammied it! For clients in this bracket, it makes sense to make substantial pension contributions to get back out of the 60% marginal rate area.

I'm £10k + £90k dividend + £40k pension this year for that reason, anything not to go over the £100k. It's little more complicated than that, but I'd be no better off going over this in real terms, unless it's a lot over.

CK