Progressive taxation - has the UK gone too far?
Discussion
I'm all in favour of those with the "broadest shoulders carrying the heaviest burden", but the more I look into it, the more I see that we are carrying it to an extreme.
Take one tax as an example, income tax. In the UK we now have:
- a 50% marginal tax rate for those earning over £150k;
- a 40% marginal rate for those earning over £35k ; and
- a 20% marginal rate for those earning up to £35k
This use of percentages hides the fact that a flat tax rate is actually progressive, i.e. with a flat tax rate of 20%, someone who earns £50k pays twice as much tax as someone who earns £25k. So, the more you earn, the more you pay.
However, with the current system, someone who earns £100k pays something like 7.5x what someone who earns £25k does!
And then you have all the additional taxes that wealthier people pay and low earners generally do not, to name a few:
- higher stamp duty rates on more expensive properties;
- higher council tax on more expensive properties;
- inheritance tax on their estates; and
- VAT on all of their additional purchases.
It just strikes me that most people (regardless of income) don't realise just how much more tax wealthy people are paying compared to someone on an average salary and so calls for more taxes for the rich (mansion taxes, keeping the "temporary" 50% income tax rate, etc.) really frustrate me - they're already being taxed up to the eyeballs, at some point they're going to say enough is enough, surely (which brings us on to the Laffer curve)?
I guess my point is that we seem to be moving more and more towards a society where we're happy for higher taxes and cuts, just as long as it only affects someone else (student tuition fees, anyone?) and I find that quite depressing.
Take one tax as an example, income tax. In the UK we now have:
- a 50% marginal tax rate for those earning over £150k;
- a 40% marginal rate for those earning over £35k ; and
- a 20% marginal rate for those earning up to £35k
This use of percentages hides the fact that a flat tax rate is actually progressive, i.e. with a flat tax rate of 20%, someone who earns £50k pays twice as much tax as someone who earns £25k. So, the more you earn, the more you pay.
However, with the current system, someone who earns £100k pays something like 7.5x what someone who earns £25k does!
And then you have all the additional taxes that wealthier people pay and low earners generally do not, to name a few:
- higher stamp duty rates on more expensive properties;
- higher council tax on more expensive properties;
- inheritance tax on their estates; and
- VAT on all of their additional purchases.
It just strikes me that most people (regardless of income) don't realise just how much more tax wealthy people are paying compared to someone on an average salary and so calls for more taxes for the rich (mansion taxes, keeping the "temporary" 50% income tax rate, etc.) really frustrate me - they're already being taxed up to the eyeballs, at some point they're going to say enough is enough, surely (which brings us on to the Laffer curve)?
I guess my point is that we seem to be moving more and more towards a society where we're happy for higher taxes and cuts, just as long as it only affects someone else (student tuition fees, anyone?) and I find that quite depressing.
You missed out that people in 50% tax lose their tax allowance (I think).
Yes I agree the UK is far far too progressive and it drives me insane that 'progressive' is the current buzzword in politics as if there's some kind of race to be the more progressive. You are unPC if you are not progressive it seems.
This is why I'd welcome regressive taxes such as VAT or road pricing over increased/increasingly progressive ones.
Yes I agree the UK is far far too progressive and it drives me insane that 'progressive' is the current buzzword in politics as if there's some kind of race to be the more progressive. You are unPC if you are not progressive it seems.
This is why I'd welcome regressive taxes such as VAT or road pricing over increased/increasingly progressive ones.
Chrisw666 said:
youngsyr said:
So, the more you earn, the more you pay.
Sounds fair to me, but only if that amount more is a proportionate %age of your salary. Surely a 30% rate for everyone would be much fairer and would be an incentive to those on lower salaries to earn more. Pity the poor rich people.
Taxation has nothing to with fairness and everything to do with politics.
Until there is compelling evidence that the deficit can be further reduced by lower taxes on the rich then it will be political suicide to lower such taxes in this country.
Completely different situation in the USA.
Taxation has nothing to with fairness and everything to do with politics.
Until there is compelling evidence that the deficit can be further reduced by lower taxes on the rich then it will be political suicide to lower such taxes in this country.
Completely different situation in the USA.
Chrisw666 said:
Sounds fair to me, but only if that amount more is a proportionate %age of your salary. Surely a 30% rate for everyone would be much fairer and would be an incentive to those on lower salaries to earn more.
Please let me know when you are running for PM, you will get my vote all day everyday. R.
It's interesting, I heard a Vox Pop on the radio the other day talking about the 50% tax rate and whether it should stay- One woman was saying "Absolutely, they should double it!" which I found amusing.
Yes, the rich are terrible. Tax them ALL of their income!
I think the public overall welcomes progressive taxation- Those that earn more paying a higher percentage. I don't really know where I stand, to be honest.
I recently helped out a friend on their catering stall for the day after they had someone cancel. They pay roughly £6/hr which is the going rate, and is exactly what I was earning working in a shop at University- 10 years+ ago. It was a surprisingly small amount of money, all told.
Anecdotally, the wages of the lowest earners just aren't rising. Given 4.5% official inflation and possibly far higher in real terms, it's getting increasingly hard to earn a crust. I'd like to see a significant "bubble" to protect the lowest earners, possibly even more so than there is now, because these are the people who could potentially be "better off" on benefits, so there needs to be incentive to work...
The words of the BoE governor (?) a few months ago still resonate with me- "Families are facing the most sustained fall in living standards since WW2". That concerns me.
Yes, the rich are terrible. Tax them ALL of their income!
I think the public overall welcomes progressive taxation- Those that earn more paying a higher percentage. I don't really know where I stand, to be honest.
I recently helped out a friend on their catering stall for the day after they had someone cancel. They pay roughly £6/hr which is the going rate, and is exactly what I was earning working in a shop at University- 10 years+ ago. It was a surprisingly small amount of money, all told.
Anecdotally, the wages of the lowest earners just aren't rising. Given 4.5% official inflation and possibly far higher in real terms, it's getting increasingly hard to earn a crust. I'd like to see a significant "bubble" to protect the lowest earners, possibly even more so than there is now, because these are the people who could potentially be "better off" on benefits, so there needs to be incentive to work...
The words of the BoE governor (?) a few months ago still resonate with me- "Families are facing the most sustained fall in living standards since WW2". That concerns me.
[devil's advocate]
I suppose it depends on what you're trying to achieve. If some notion of absolute fairness is your goal, then you'll structure taxation one way; if a more outcome-driven approach is your thing, where you're interested in the happiness of people, then you'll structure it another. Those countries where measured levels of happiness and quality of life are higher than in the UK do, I think, tend to have more and higher taxation than here. You pays yer money, you takes yer choice.
[/devil's advocate]
I suppose it depends on what you're trying to achieve. If some notion of absolute fairness is your goal, then you'll structure taxation one way; if a more outcome-driven approach is your thing, where you're interested in the happiness of people, then you'll structure it another. Those countries where measured levels of happiness and quality of life are higher than in the UK do, I think, tend to have more and higher taxation than here. You pays yer money, you takes yer choice.
[/devil's advocate]
Puggit said:
otolith said:
It's surprising how much of the tax burden comes from such a small proportion of the population.
Where does this come from, please? And don't say the bbc.I'd like to put this on facebook...
turbobloke said:
Puggit said:
otolith said:
It's surprising how much of the tax burden comes from such a small proportion of the population.
Where does this come from, please? And don't say the bbc.I'd like to put this on facebook...
Epic Googling skills
I think the govt should bring forward plans to increase the tax-free allowance and make it at the level equal to a full-time job on minimum wage. If they did that I would feel comfortable with a uniform rate for all taxpayers. The personal allowance is £6,475 at the moment and due to go up to £7,475 from next April but I still think that’s too low. A full time job on minimum wage equals approx. £11,700 a year – earning that tax free would be a real incentive to take work at that kind of level.
The 40% and 50% income tax rates are both outrageous when you also add in NI contributions. I'd say a fair top rate would be 30%.
However, it's also true that the rich and super-rich do not earn much of their income via PAYE, and more frequently take advantage of lower dividend and capital gains tax rates than the general populace. Due to this many rich pay an effective overall lower tax rate than their employees. There are also many disparities in the current council tax system due to limited amount bandings, allowing those with houses worth 10 times or 100 times more than the average to only pay approximately 3-5 more.
However, it's also true that the rich and super-rich do not earn much of their income via PAYE, and more frequently take advantage of lower dividend and capital gains tax rates than the general populace. Due to this many rich pay an effective overall lower tax rate than their employees. There are also many disparities in the current council tax system due to limited amount bandings, allowing those with houses worth 10 times or 100 times more than the average to only pay approximately 3-5 more.
rover 623gsi said:
I think the govt should bring forward plans to increase the tax-free allowance and make it at the level equal to a full-time job on minimum wage. If they did that I would feel comfortable with a uniform rate for all taxpayers. The personal allowance is £6,475 at the moment and due to go up to £7,475 from next April but I still think that’s too low. A full time job on minimum wage equals approx. £11,700 a year – earning that tax free would be a real incentive to take work at that kind of level.
I do like the sound of that. I think that there should be significant incentives to get onto the bottom rung of the work ladder. £12000 a year really doesn't go far.And given the relative tax "Takes" from different strata in the employment ladder I can't see that it would be an expensive measure. Particularly given that taking a lot of people from benefits-work would be a significant saving.
rover 623gsi said:
I think the govt should bring forward plans to increase the tax-free allowance and make it at the level equal to a full-time job on minimum wage. If they did that I would feel comfortable with a uniform rate for all taxpayers. The personal allowance is £6,475 at the moment and due to go up to £7,475 from next April but I still think that’s too low. A full time job on minimum wage equals approx. £11,700 a year – earning that tax free would be a real incentive to take work at that kind of level.
Hey, that actually doesn't sound too bad. What would the uniform rate be, though? How would it be worked out?
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