TAX ON FULL STATE PENSION APRIL 2027

BikingBud

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I also watched the Spectator piece.

But I feel in terms of people retiring early it is a little more than just accepting the quantum of tax that is being taken, it is a vote for not agreeing what the tax is being spent on.

Some will always need to work, so hitting higher rate thresholds and having to plug on, despite the tax take being higher, to cover mortgages, children, just fundamental costs of living will be unavoidable.

Others who may have got beyond those costs and now have enough income or reserve cash to cover all foreseeable costs will value their time and object to committing 40% of it to support the Government's spending decisions.

Trying to focus on the National optimal tax rate must take into account where that balance lies for the majority of UK population. Does it keep people in work, does it draw people back into work, does it inhibit self progression, staff refusing promotions due to increase wages leading to loss of benefits, child care and jumping up tax bands. 

So I feel it is very personal decision but starting by making the playing field much clearer, redrawing the lines, removing opaque legislation and ensuring everyone can understand their own optimum would be a massive step forward.

And we also need to get a balanced, well defined, well presented budget that covers an accepted set of obligations.

I just can't understand why that would be unachievable or intolerable to many. 

BlackKnightMonty

BikingBud said:

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I also watched the Spectator piece.

But I feel in terms of people retiring early it is a little more than just accepting the quantum of tax that is being taken, it is a vote for not agreeing what the tax is being spent on.

Some will always need to work, so hitting higher rate thresholds and having to plug on, despite the tax take being higher, to cover mortgages, children, just fundamental costs of living will be unavoidable.

Others who may have got beyond those costs and now have enough income or reserve cash to cover all foreseeable costs will value their time and object to committing 40% of it to support the Government's spending decisions.

Trying to focus on the National optimal tax rate must take into account where that balance lies for the majority of UK population. Does it keep people in work, does it draw people back into work, does it inhibit self progression, staff refusing promotions due to increase wages leading to loss of benefits, child care and jumping up tax bands. 

So I feel it is very personal decision but starting by making the playing field much clearer, redrawing the lines, removing opaque legislation and ensuring everyone can understand their own optimum would be a massive step forward.

And we also need to get a balanced, well defined, well presented budget that covers an accepted set of obligations.

I just can't understand why that would be unachievable or intolerable to many. 

The challenge comes from fewer and fewer households being net contributors in terms of tax (receiving more in benefits and services).

in 1977 it was only 37% of all UK households which were net benefiters. Now the figure is 53.3%.

Cobbler_tone

BikingBud said:

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I just can't understand why that would be unachievable or intolerable to many. 

Because most of the radical ideas (and they are radical) are not being started from a level playing field. Everyone has a starting point. The main noise coming from those who have worked and paid in all their life (or partially) and could be left a lot worse off. 

A lot of this utopian view is based heavily on socialism.
I’m all for a simplified tax point but no idea what that looks like but I suspect the rich will get richer and visa versa.
The next lot plan to raise the basic rate of tax to £20k, which is clearly a vote winner and an attempt to benefit those at the lower end the most.

Andy_L

Cobbler_tone said:

BikingBud said:

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I just can't understand why that would be unachievable or intolerable to many. 

Because most of the radical ideas (and they are radical) are not being started from a level playing field. Everyone has a starting point. The main noise coming from those who have worked and paid in all their life (or partially) and could be left a lot worse off. 

A lot of this utopian view is based heavily on socialism.
I’m all for a simplified tax point but no idea what that looks like but I suspect the rich will get richer and visa versa.
The next lot plan to raise the basic rate of tax to £20k, which is clearly a vote winner and an attempt to benefit those at the lower end the most.

Cobbler_tone said:

BikingBud said:

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I just can't understand why that would be unachievable or intolerable to many. 

Because most of the radical ideas (and they are radical) are not being started from a level playing field. Everyone has a starting point. The main noise coming from those who have worked and paid in all their life (or partially) and could be left a lot worse off. 

A lot of this utopian view is based heavily on socialism.
I’m all for a simplified tax point but no idea what that looks like but I suspect the rich will get richer and visa versa.
The next lot plan to raise the basic rate of tax to £20k, which is clearly a vote winner and an attempt to benefit those at the lower end the most.

Cobbler_tone said:

BikingBud said:

MetaPhysical said:

I watched an interview with Art Laffer. What a great guy and so articulate.  To go a large way to correct the distorted and perverse mess of the UK's income tax system that disincentives going to work for those not in work and causes people, our brightest and best amongst them to take less work or even retire when near certain benefit and PA thresholds and tapers his suggestion is a dramatically simpler system; all round, three easily understood bands; a lower rate, a middle rate and a higher rate.  and, controversially, no allowances and no NI.  He didn't give the rates and thresholds, that calculation the government would need to do.,

Everyone, billionaire or tea boy pays a new combined Income tax above age 18 from the first pound earned.  You pay, say, X% on everything up to the middle threshold of say A.  You then pay a higher Y% on everything above that until you get to the additional threshold, B.   You then pay an even higher Z% on everything above that.  Importantly, no tapers, cliff edges, PA withdrawals or allowances. 

People above SPA who have retired and have no way to go back to work and earn are exempt from Income tax completely until a certain number - he didn't give the number.  All benefits are means tested against the national minimum wage.  No one gets more benefits that push them above the NMW.  The bin man working hard doesn't and so benefits claimants shouldn't, no matter how many kids they have - that's a lifestyle choice you make and not the business of the tax payer to support.  If that's hard on you then tough - study more or improve your lot in life.  Tough talking and politically hard to implement I'm sure because of  people who will - rightly - say I've paid in my NI contributions all my life for my pension!  Desperate times call for desperate measures.  I think most people could stomach this if the rules were applied equally to everyone.  

Laffer says this is the only way to get the economy moving with a clear-to-understand income tax system that doesn't penalise work when crossing thresholds and incentivises people to work.

I just can't understand why that would be unachievable or intolerable to many. 

Because most of the radical ideas (and they are radical) are not being started from a level playing field. Everyone has a starting point. The main noise coming from those who have worked and paid in all their life (or partially) and could be left a lot worse off. 

A lot of this utopian view is based heavily on socialism.
I’m all for a simplified tax point but no idea what that looks like but I suspect the rich will get richer and visa versa.
The next lot plan to raise the basic rate of tax to £20k, which is clearly a vote winner and an attempt to benefit those at the lower end the most.

and the losers will complain loudly,while the winners will pocket their gains and keep quiet

GunJack

You're never going to have a tax system that everyone agrees with, but it undoubtedly needs to be reformed and drastically simplified in order to be as fair and equitable as possible. Yes the transition will be messy for a couple of years but it it needs to be done. 

In terms of state pension I don't have an issue with it being taxable income, yes it would be ideal if it could be done under PAYE arrangements but as discussed already to change IT systems to do this may be cost prohibited, but has it really been looked at properly to see what's possible for a reasonable budget? I doubt it....

Oh, and to all the people who complain about paying tax, I personally would rather pay a bit more to have a better functioning country to live in which would benefit all, the problem with that is I don't believe we have the calibre of politicians to achieve that at the moment.

Cobbler_tone

GunJack said:

You're never going to have a tax system that everyone agrees with, but it undoubtedly needs to be reformed and drastically simplified in order to be as fair and equitable as possible. Yes the transition will be messy for a couple of years but it it needs to be done. 

Good luck with that. Most people would be content for the poor to be better off and the rich paying for it (well, the wealthy wouldn't be happy) but it usually the ones in between who carry the can. With the caveat of course that it would need to raise more tax than today.

No tax to NMW, then x% tax for all after that. Good luck establishing x. 
Blend NI/IC somehow to simplify things....that could be coming, along with closing the net on the means of avoiding tax.

Whatever changes are made will always be highly controversial, especially any big ones. 

BlackKnightMonty

Personally I would prefer they lowered the 45% band or pumped it up a bit, to remove the £100k-125k  loss of personal allowance. (Which makes for a marginal tax rate of 60% Income tax [65% in Scotland]). It’s encouraging reduced productivity for the high income earners like doctors and other professionals.

MetaPhysical

Be prepared to be here again next year ad infinitum.  Until spending is addressed and brought down we can tax everyone into the ground, confiscate every penny from everyone and it still won't be enough.  Too many people are living a lifestyle funded by the government to which they are not entitled.  Harsh?  Sure.  But what's the alternative?

booneruk

MetaPhysical said:

But what's the alternative?

Fingers in ears. The masses clinging to the opinion that someone richer needs to pick up the bill. Ultimately kicking the can down the road and letting the bond vigilantes or the IMF panic subsequent generations into dealing with a much worse situation.

OldScientist

MetaPhysical said:

Be prepared to be here again next year ad infinitum.  Until spending is addressed and brought down we can tax everyone into the ground, confiscate every penny from everyone and it still won't be enough.  Too many people are living a lifestyle funded by the government to which they are not entitled.  Harsh?  Sure.  But what's the alternative?

The roughly half of households that 'take' more than they contribute is solely based on their income rather than their actual contribution. For example, someone working in a coffee shop on minimum wage ensures that the coffee shop functions and is able to be (hopefully) profitable. While the owner will claim all of the profit as 'their' contribution to society, their business would not run without those who are deemed non-contributing in a simplistic analysis. We might also remember the case of those working in retail on minimum wage (and others in the supply chain) who kept supermarket shelves stacked during the lockdowns whose contribution to national wellbeing far outweighed their salaries.

If we look at the big ticket items of government expenditure (e.g., see https://researchbriefings.files.parliament.uk/documents/CBP-8046/CBP-8046.pdf ) we see that

The state pension costs £140 billion per year
Sickness and disability benefits £70 billion
Education £120 billion
Health £200 billion (roughly half on pensioners?)

If I was a ruthless politician wanting to drastically reduce government spending, I would indirectly attack life expectancy - reduce expenditure on health (i.e, the NHS) and sickness benefits, allow more people to die younger with a knock on effect of eventually reducing state pension costs too. It is interesting to note that life expectancy projections in the UK have gradually been revised downwards over the last decade or so (although they still exceed those of the US) with a strong reduction of LE in poorer postcodes (as much as 10 years less than the average).