Labour Plans to Cut Taxes Paid by Rich

Generali

http://www.telegraph.co.uk/finance/personalfinance/tax/11411790/Britains-highest-earners-pay-a-quarter-of-nations-income-tax.html

Labour plan to increase the tax rate to 50% on top earners. I fully expect that, as the last time Labour increased the top rate to 50%, higher earners will pay less tax. How? Mostly by simply earning less. If you took away half my income I'd work less and spend more time with the kids.

michaels

It is about fairness not about how much revenue is raised.

CLAPTON

Generali wrote: »

http://www.telegraph.co.uk/finance/personalfinance/tax/11411790/Britains-highest-earners-pay-a-quarter-of-nations-income-tax.html

Labour plan to increase the tax rate to 50% on top earners. I fully expect that, as the last time Labour increased the top rate to 50%, higher earners will pay less tax. How? Mostly by simply earning less. If you took away half my income I'd work less and spend more time with the kids.

The turning point of the laffer curve is unknown,
but the recent UK experience of changing the upper tax rate gives no clues for the reasons that every person knows.

Thrugelmir

michaels wrote: »

It is about fairness not about how much revenue is raised.

The UK needs to raise tax revenues. The "rich" are an easy target.

Generali

michaels wrote: »

It is about fairness not about how much revenue is raised.

I suppose that persuading rich businessmen and women to work less is one way to improve equality. I would have thought it would be better to make poor people richer, by getting more of them in gainful employment, would be better. I'm being naive perhaps.

BobQ

Generali wrote: »

I suppose that persuading rich businessmen and women to work less is one way to improve equality. I would have thought it would be better to make poor people richer, by getting more of them in gainful employment, would be better. I'm being naive perhaps.

I agree there is little gained if the overall impact of a change is that the tax revenue falls, other than furthering the concept of fairness. Another factor is that people need not just to be in work but they need to be earning enough to pay tax. Just getting people off the unemployment figures by putting them in the position of having 15 hours a week on a ZHC or self employed but just scraping a living or claiming other benefits due to low income is not a solution either.

I doubt the difference between 45% and 50% is enough to be a disincentive. The reason tax take falls is they look for ways of avoiding paying it. Some will just pay more into a pension, the more affluent will look for more creative solutions, with the aid of accountants, working abroad, offshore investments, etc. But you may have evidence to the contrary?

stator

Under the current Tory system university graduates will have a marginal tax rate of:
Basic Rate: 20+12+9 = 41%
Higher Rate: 40+2+9 = 51%
Top Rate: 45+2+9 = 56%

An average graduate salary will have a marginal rate of 41%. So 50% isn't really that big a deal, especially for all the rich people who got free degress.

Generali

BobQ wrote: »

I agree there is little gained if the overall impact of a change is that the tax revenue falls, other than furthering the concept of fairness. Another factor is that people need not just to be in work but they need to be earning enough to pay tax. Just getting people off the unemployment figures by putting them in the position of having 15 hours a week on a ZHC or self employed but just scraping a living or claiming other benefits due to low income is not a solution either.

I doubt the difference between 45% and 50% is enough to be a disincentive. The reason tax take falls is they look for ways of avoiding paying it. Some will just pay more into a pension, the more affluent will look for more creative solutions, with the aid of accountants, working abroad, offshore investments, etc. But you may have evidence to the contrary?

It appeared to be last time so there is a good chance it will be this time.

The whole point of the Laffer Curve is that there is a point where your tax take will fall off. It wouldn't be surprising if losing half your incremental income was a significant figure to many.

CLAPTON

Generali wrote: »

It appeared to be last time so there is a good chance it will be this time.

The whole point of the Laffer Curve is that there is a point where your tax take will fall off. It wouldn't be surprising if losing half your incremental income was a significant figure to many.

maybe, but is there any evidence for this ?

Generali

CLAPTON wrote: »

maybe, but is there any evidence for this ?

Yes. Go to Google Scholar and put in Laffer curve. There is a huge amount of evidence that the Laffer Curve exists.

michaels

Anecdote and data but the govt tried to save 2.4k pa by stopping me getting child benefit. In fact it has lost about 8k pa because I have put my salary over 50k into my pension. So a tax change intended to net 2.4k has cost 8k.

May not be the laffer curve but I wonder how much the change has actually benefited the exchequer?