Theoretical optimum income question
Discussion
Hi all,
Just having a chat with others this evening while waiting for the Newark result to come in (because I'm cool, that's why), we got to wondering if there's an optimum public sector salary. Allow me to elaborate:
By our (wholly inexpert) reckoning, unemployed people get benefits, they spend little money, they don't drive, they don't shop, they don't go on holiday, they generally don't do things which attract tax. They spend much less at the shops on essentials (Basics range food, for example), so pay less VAT. They don't really drive, so pay no fuel duty, road tax, VAT, IPT etc. They don't go for days out and pay VAT on that, they don't go on holiday and pay air fare duty (or whatever it's called).
Clearly, this is a generalisation. There are the proper benefits scum who spend all their money on booze and fags and give back their money in that manner, but let's forget them, this isn't Benefits Street, this is real life.
Employed people in the public sector clearly take more out of the system than someone on benefits. Someone earning a £30,000 annual salary from the public purse takes that amount out, but they give back an amount in tax and NI (the app I have on my phone says this will be £6644.28). They also spend more at the shops, they have cars and holidays and bigger houses for which they pay higher rates of council tax, they have larger, thirstier cars which use more fuel and attract higher rates of road tax etc.
Without wishing to be rude, I'm not especially interested in stories of "well I earn half a million pounds and I take the bus everywhere, but my unemployed neighbour takes his private jet to the Bahamas every other week". This isn't that sort of thread (not that they aren't enjoyable).
What we're wondering is if there could be an optimum salary (from the perspective of the Treasury) at which the amount paid in salary is most recouped in tax by the effect of higher rates of income tax, increased spending and all those other things?
Simon.
Just having a chat with others this evening while waiting for the Newark result to come in (because I'm cool, that's why), we got to wondering if there's an optimum public sector salary. Allow me to elaborate:
By our (wholly inexpert) reckoning, unemployed people get benefits, they spend little money, they don't drive, they don't shop, they don't go on holiday, they generally don't do things which attract tax. They spend much less at the shops on essentials (Basics range food, for example), so pay less VAT. They don't really drive, so pay no fuel duty, road tax, VAT, IPT etc. They don't go for days out and pay VAT on that, they don't go on holiday and pay air fare duty (or whatever it's called).
Clearly, this is a generalisation. There are the proper benefits scum who spend all their money on booze and fags and give back their money in that manner, but let's forget them, this isn't Benefits Street, this is real life.
Employed people in the public sector clearly take more out of the system than someone on benefits. Someone earning a £30,000 annual salary from the public purse takes that amount out, but they give back an amount in tax and NI (the app I have on my phone says this will be £6644.28). They also spend more at the shops, they have cars and holidays and bigger houses for which they pay higher rates of council tax, they have larger, thirstier cars which use more fuel and attract higher rates of road tax etc.
Without wishing to be rude, I'm not especially interested in stories of "well I earn half a million pounds and I take the bus everywhere, but my unemployed neighbour takes his private jet to the Bahamas every other week". This isn't that sort of thread (not that they aren't enjoyable).
What we're wondering is if there could be an optimum salary (from the perspective of the Treasury) at which the amount paid in salary is most recouped in tax by the effect of higher rates of income tax, increased spending and all those other things?
Simon.
It will depend on how the person chooses to spend their money but I can't think of a way of recouping more than if you pay somebody a very high amount so the government receives higher rate tax and higher rate national insurance, and then the person spends all their money on the most highly taxed item (and I can't think of anything that is taxed more than the 400% or so on fuel).
Mathemeticians would probably say that an infinite salary is optimum as even 1% of infinity is infinity therefore you get all your money back as tax.
Mike...
Mathemeticians would probably say that an infinite salary is optimum as even 1% of infinity is infinity therefore you get all your money back as tax.
Mike...
I don't consider my public sector salary to be "taking" from the system. Somebody has to implement the system and very few would do it for free.
What is truly surprising, although a simplistic point of view, is when you think about how much tax you pay, and the government talks about limiting benefits to £26K a year......
What is truly surprising, although a simplistic point of view, is when you think about how much tax you pay, and the government talks about limiting benefits to £26K a year......
supersport said:
What is truly surprising, although a simplistic point of view, is when you think about how much tax you pay
About half of everything you earn goes in tax. That's why people on £50K pa need help to pay for their children, apparently. Slash taxes and guess what - people would be so much better off they wouldn't need benefits.Rick101 said:
Don't forget my public sector salary pays for my Fri nights in the pub. That salary supports local jobs, local pubs, local brewerys nevermind the direct tax on beer & scratchings.
Yeah, plus all the extra money you save on fuel because you stay at home most of the year because you are allowed 6 months a year 'off sick' paid, is spent on other nice things that attract even more VAT 
It's a bit like asking what is the optimum amount of pocket money to give your kids in order to get a nice Christmas present.
As for the buyer in any transaction it's basically the lowest amount possible to ensure that the work required is done to the standard required. You can pretty well forget tax and NI from public sector employees as it simply amounts to lower wages.
As for the buyer in any transaction it's basically the lowest amount possible to ensure that the work required is done to the standard required. You can pretty well forget tax and NI from public sector employees as it simply amounts to lower wages.
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