Is it possible to become a millionaire (or near to) through investments?

Glen_Clark

bowlhead99 wrote: »

But if housing costs are through the roof such that affluent young professionals run off in their droves to Germany, perhaps such extortionate costs will also limit the number of economic migrants coming here and fueling the demand for the limited space.

That isn't happening because those on low wages get housing/landlord benefit (adding to our National Debt) to bring it up to the level where they can afford to pay rent for overcrowded slum accommodation. What the economy needs is young people earning high enough wages to pay for habitable accommodation, and service our debts and state pensions. Unfortunately they are the ones most likely to emigrate.
The alternative would be a genuine free market in housing, which would involve taking planning decisions away from local nimbys, and slaying some sacred cows like parts of the so called 'Green Belt', 'Wild Bird Habitat' 'SSI' or some other excuse not to build. I don't see any Government ministers with the political courage to do that. But they could at least stop borrowing money to stoke up even more demand through Osborne's obsessive housing market interventions.

bigadaj

Glen_Clark wrote: »

Hong Kong has a genuine shortage of building land. Their building land shortage hasn't been created artificially, like in Britain.

You need to do a bit more background research before making statements like that. Most if Hong Kong is national park, everything not assigned is owned by the government as well, which they auction off every now and then. There is far more government control of building land in Hong Kong than the uk, with consequent greater inflation in flat prices, which is partially counteracted by low tax rates.

bigadaj

bowlhead99 wrote: »

As a youngster it's certainty worth "shopping around" if you don't like tax rates, laws, housing costs, job opportunities etc etc. And many do.

But Glen is worried that all the kids will run off and not be around to pay his state pension and my point is that most of them will stick because there are practical "barriers to entry/exit" when it comes to what country you're going to live in and what city you prefer. That helps to create a somewhat inelastic curve of demand against supply in the face of cost of living changes which is perhaps why house prices do not self-moderate so much, just like demand for cigarettes or petrol versus price before people became more health and enviro-conscious.

Yes if tax rates went up to 70% I would look around elsewhere, much as I would if London property prices trebled from here relative to salaries - which I don't expect them to. As it is, I've had the 60% effective marginal rate which is quite painful but it is only a relatively small band and then back to 40/45% which is not completely intolerable.

If income tax rates were 10-15% or 0% as is some places it would make somewhere sound good on paper but the extra cash in peoples pockets translates to high prices for goods and property, not to mention an even wider disparity between the haves and the have nots, which isn't always attractive (e.g. Dubai).

Looks like a lot of conflation there though, not to say I'm not guilty of that myself.

What you do now obviously doesn't necessarily bear any comparison with what a new graduate might do, you have benefitted from London house price inflation which is a problem to those starting off on the ladder now.

You acknowledge that there is a balance between tax, property and living expenses and social welfare provision but this doesn't seem to be recognised by most of the British electorate. The combination of a relatively low ceiling on taxes, generous welfare provision and continually increasing national debt is a recipe for disaster.

BananaRepublic

Glen_Clark wrote: »

The very rich did pay a bit of tax when we had a Labour Government in the 1960's and 1970's.

From Wikipedia: "In 1971 the top rate of income tax on earned income was cut to 75%. A surcharge of 15% kept the top rate on investment income at 90%.In 1974 the cut was partly reversed and the top rate on earned income was raised to 83%. With the investment income surcharge this raised the top rate on investment income to 98%, the highest permanent rate since the war. "

Glen_Clark wrote: »

Sir Geoffrey Howe started the change when he cut income tax and increased stealth taxes like VAT, shifting the tax burden from the rich to the poor.

Income tax take increased during the Thatcher reign:

http://www.ukpublicrevenue.co.uk/revenue_chart_1900_2017UKd_15c1li011tcn_10t

Increase precipitously the income tax on the rich and they find ways to avoid it.

Glen_Clark wrote: »

Where else can he [Osborne] find the money for his housing market interventions now he has doubled the 300 year old National Debt in 5 years?

Interesting lack of any mention that the deficit was at record and unsustainable levels at the end of the last Labour regime, and has since been reduced significantly as a result of spending cuts by the Liberals and Conservatives.

Glen_Clark wrote: »

But that was before G Osborne's housing market interventions pushed housing costs through the roof!

Glen_Clark wrote: »

I'm hoping to have enough investment income to live modestly when I retire. If G.Osborne's Housing Market Interventions haven't bankrupted us by then, my State Pension will be a bonus. But I dare not calculate and count on it.

The massive increases in house prices are due to a shortage caused by an increasing number of people living on their own, massive immigration and low levels of house building.

Glen_Clark wrote: »

But the reality is that whilst countries like Norway invested their North Sea Oil Money wisely, Britain has wasted all ours so there is nothing in the kitty to pay our pensions but a pile of debts which Osborne has doubled in 5 years to fund his obsessive housing market interventions.

From Wikipedia: "Export revenues from oil and gas have risen to almost 50% of total exports and constitute more than 20% of the GDP.[104] Norway is the fifth-largest oil exporter and third-largest gas exporter in the world"

Norway population: 5.084 million (2013)
UK population:64,716,000 (2015 estimate)

Glen_Clark wrote: »

Well yes, we talk about EU Bureaucracy, yet since Cameron sent another 40 unelected troughers to the House of Lords (including the one charging for cleaning out the moat on his second home) the House of Lords alone is bigger than the EU Parliament. And don't get me started on the unemployed - I don't mind paying the unemployed REASONABLE benefits but the Royal Family are just taking the p*ss :mad:

Okay, fair points.

jamesd

Glen_Clark wrote: »

The very rich did pay a bit of tax when we had a Labour Government in the 1960's and 1970's.

I'm curious, what are your personal definitions of "very rich" and "rich"?

I'm asking in part because apparently there are now 715,000 millionaires in the UK, a 41% increase over the last five years. Using the 4% rule commonly used for rough pension planning that's enough to provide a gross income of £40k or so a year. Another story says it's actually close to a tenth of adults who have assets worth a million or more but doesn't include debt like mortgages.

HMRC numbers for 2012-13 showed that the highest 5% of tax payers in the UK had incomes of at least £67,900 and the highest paid 1%, £150,000. If I recall news stories correctly there are something like 700,000 with incomes over £100k at the moment. A person on £100k PAYE with no planning or pension contributions would pay £29,403 in income tax and £5,271 in national insurance while their employer would pay £12,680.54 in NI.

jamesd

BananaRepublic wrote: »

From Wikipedia: "In 1971 the top rate of income tax on earned income

One aspect of general Conservative party tax philosophy has been an increase in sales tax, so some portion of income tax was replaced by VAT. Using Wikipedia-sourced numbers the percentage of total tax take from VAT rose from 7% in 1978/79 to a high of 16.7% in 1993/4 and was at 13.3% in 2013/14.

One useful aspect of VAT is that it is hard to avoid, with no significant ways to mitigate the liability when buying things. You spend on VAT-liable things, you probably pay the full VAT on it, to dodge you need to not spend or limit what you spend your money on.

On the negative side of VAT, low income households can pay quite a lot, particularly if they buy lots of items that are not classed as necessities, so benefits and tax rates have to factor in this spending and be a bit higher.

My own VAT bill is very low as a portion of income becaue I have a very high savings ratio, well over 60% of income. Since I also use allowances and investments that have income tax benefits I'm anticipating that this year my income tax bill will be less than 3% of my total income, assuming I get my calculations right. Much of the low income tax bill is due to investing in small business-related investments and making high pension contributions.

grey_gym_sock

Glen_Clark wrote: »

That isn't happening because those on low wages get housing/landlord benefit (adding to our National Debt) to bring it up to the level where they can afford to pay rent for overcrowded slum accommodation. What the economy needs is young people earning high enough wages to pay for habitable accommodation, and service our debts and state pensions. Unfortunately they are the ones most likely to emigrate.

as others have said, there are a range of factors affecting emigration, and not that many ppl are likely to leave anyway. and indeed, immigration remains higher than emigration, which suggests the UK is doing something right / less wrong.

that is not to say that unaffordable housing isn't a huge issue, for nearly everybody in the UK who hasn't already bought their own home (plus for some of those who did buy, but at the price of being saddled with excessive debt).

The alternative would be a genuine free market in housing, which would involve taking planning decisions away from local nimbys, and slaying some sacred cows like parts of the so called 'Green Belt', 'Wild Bird Habitat' 'SSI' or some other excuse not to build. I don't see any Government ministers with the political courage to do that. But they could at least stop borrowing money to stoke up even more demand through Osborne's obsessive housing market interventions.

no: the alternative is not the free market. it's to build lots of social housing. the private housebuilding sector is almost exclusively interested in building for owner-occupiers, much less in building for the private rented sector, and not at all in building social housing. that's not even a criticism of the housebuilding sector: let it do what it's good at, and let the State build social housing.

now, it may be necessary to amend planning laws in order to carry out a large programme of building social housing. start by insisting on large percentages of social housing in new developments. then look at possible brownfield sites. and eventually, yes, perhaps take a few strategic chunks out of the greenfield - but this needs to be planned around where it will work with transport links and other facilities: a complete free-for-all would be a disaster.

to pay for all this building, the UK can now borrow money at 2% or less. the rent from social housing will be far higher than that - say 4-5% - so it will more than pay for itself, just in the rental yield.

in addition, a fresh supply of social housing will mean that less of the housing benefit bill has to go to the private rented sector, so the cost of housing benefit will fall.

in addition, a greater supply of housing will lower rents in the private rented sector, too.

and will lower house prices.

and of course, all the schemes to prop up house prices should be scrapped.

grey_gym_sock

bowlhead99 wrote: »

Sometimes governments of all colours run deficits.

it's normal to run deficits. it's what happened in about 90 of the last 100 years, and the other 10 years didn't noticeably stand out as the best years.

it's also normal for the total outstanding government debt to rise. gilts are a safe store of value (if you're based in the UK). as ppl get richer, they have more wealth to store. other things being equal, you'd expect government debt to rise proportionately with rise in GDP.

it makes no sense that the chancellor has adopted the aim of eliminating the deficit - i call this "deficit fetishism". the chancellor's aim should be to meet the needs, and some of the wants, of ppl in the UK, without doing too much damage to the environment.

(that's not really directed at you, bowlhead - just kicked off from your remark.)

BananaRepublic

grey_gym_sock wrote: »

it's normal to run deficits. it's what happened in about 90 of the last 100 years, and the other 10 years didn't noticeably stand out as the best years.

it's also normal for the total outstanding government debt to rise. gilts are a safe store of value (if you're based in the UK). as ppl get richer, they have more wealth to store. other things being equal, you'd expect government debt to rise proportionately with rise in GDP.

it makes no sense that the chancellor has adopted the aim of eliminating the deficit - i call this "deficit fetishism". the chancellor's aim should be to meet the needs, and some of the wants, of ppl in the UK, without doing too much damage to the environment.

(that's not really directed at you, bowlhead - just kicked off from your remark.)

Under the last government the deficit (difference between spending and income) ballooned:

http://www.debtbombshell.com/britains-budget-deficit.htm

The above graph shows the deficit as a % of GDP which is a reasonable measure. A couple more graphs:

http://www.rightsandwrongs.co.uk/qui%20%20ck-links/136-politics-britain/24747-i-promise-to-pay-the-bearer-much-less

The problem with such a high deficit is that the national debt increases dramatically, and then we end up spending a huge amount of money each year in the form of debt interest. In other words this is money that is not doing anything productive. Pay off the debt, and we then have that money to spend on healthcare etc. This might explain that:

http://www.ukpublicspending.co.uk/uk_budget_pie_chart

It suggests that 6% of government spending is simply to pay the interest on the debt. It is equivalent to the entire defence budget and half the education budget. It would be nice to increase education spending by 50% instead. (But we will get a Labour government who will find more 'effective' ways to use the money, before creating a new deficit.)

_CC_

grey_gym_sock wrote: »

it's normal to run deficits. it's what happened in about 90 of the last 100 years, and the other 10 years didn't noticeably stand out as the best years.

it's also normal for the total outstanding government debt to rise. gilts are a safe store of value (if you're based in the UK). as ppl get richer, they have more wealth to store. other things being equal, you'd expect government debt to rise proportionately with rise in GDP.

it makes no sense that the chancellor has adopted the aim of eliminating the deficit - i call this "deficit fetishism". the chancellor's aim should be to meet the needs, and some of the wants, of ppl in the UK, without doing too much damage to the environment.

(that's not really directed at you, bowlhead - just kicked off from your remark.)

^^ Someone with their head screwed on.

Large, unsustainable deficits for day-to-day spending are clearly not good, but it usually makes economic sense to have some level of deficit over the long term if spent properly.

Looking at the nominal increase of the national debt on a debt clock is missing the point.

You can bring the debt down to manageable level while still running a deficit.