This 50p tax rate

DonDaddyD

So I was listening to LBC and there was a discussion going on about a proposed cut to the 50% high earner tax rate.

http://www.politics.co.uk/news/2011/11/ ... te-dropped

Now apparently over 30 City Chief Executives want it dropped. Why?

Abandoning the 50p rate and raising the personal allowance by £630 to £8,105 by April 2012 would "boost demand and confidence at a modest short-term cost to the exchequer", they argued.

The letter stated: "An early removal of the temporary 50% tax rate would attract wealth generators to the UK and support the entrepreneurs we need to help us grow the economy and provide jobs.

Discuss

asprilla

At Mrs A's office the introduction of the 50% rate was much heralded as the end of high earners in the UK. In actual fact it led to one trader who was not originally from the UK relocating to a more tax efficient country.

I like Warren Buffett's stance on the subject: http://www.bbc.co.uk/news/business-15284410

rick_chasey

Never heard anyone in my 1½yrs as a exec search researcher in the sharper end of Investment banking have I come across anyone who has either moved from or refused to move to London because of the 50% tax rate.

The only time it's mentioned is in the context of Hong Kong, where they say "at least the tax rate makes up for an otherwise sh!tty time", and these guys genuinely get affected by it.

cjcp

Balls to higher tax rates. There's then less of an incentive than there is now (i.e. none) to streamline the existing services that's presently being paid for.

WTH should we pay more tax?

rick_chasey

cjcp wrote:

WTH should we pay more tax?

http://www.debtbombshell.com/britains-b ... eficit.htm

cjcp

That's not a reason for paying more tax, though. It's a reason for cutting costs.

DonDaddyD

My view:

Now setting aside my stringent belief in a flat tax rate I actually agree with this assertion. Now I'm nowhere near earning £150,000 per year but as a point of principle I think that no one should ever pay tax that is more than or equal to the amount they take home. Yes they earn more, no they shouldn't have to pay more as a point of principle. Maybe they worked harder to get there, maybe they were smarter, maybe they got lucky or had did what it took to get there at the expense of morals. Why we as a society feel that people with more than are somehow indebted escapes me. Numerically they pay more anyway.

greg66_tri_v2.0

Rick Chasey wrote:

cjcp wrote:

WTH should we pay more tax?

http://www.debtbombshell.com/britains-b ... eficit.htm

I think CJ's point is that we're being asked to pay more taxes to meet the costs of the expenditure incurred by Labour which is referred to in that link.

But if we pay more taxes, the expenditure becomes funded and will continue. Better to attack the root of the problem, and cut the expenditure.

I would have thought the £ raised by the 50p rate is like a small drip in a bucket when compared to the scale of the financial problems we have. but that's (ie whether the 50P rate is a genuinely necessary measure or a political gesture) a separate issue.

rick_chasey

cjcp wrote:

That's not a reason for paying more tax, though. It's a reason for cutting costs.

Both will have to happen.

Like any other place in Europe, people expect and demand certain services from the gov't.

You cut too much and you get Greece style rage > not to mention taking a lot of heat out of the economy.

Around 1-2% of earners fit into the 50% rate, and given that it's a democracy, it's pretty tough to argue otherwise.

The only saving grace for 50% earners is that most politicians either have a f*ckload of money, or are friends with people who are in the 50% rate.

rick_chasey

Greg66 wrote:

Rick Chasey wrote:

cjcp wrote:

WTH should we pay more tax?

http://www.debtbombshell.com/britains-b ... eficit.htm

I think CJ's point is that we're being asked to pay more taxes to meet the costs of the expenditure incurred by Labour which is referred to in that link.

But if we pay more taxes, the expenditure becomes funded and will continue. Better to attack the root of the problem, and cut the expenditure.

I would have thought the £ raised by the 50p rate is like a small drip in a bucket when compared to the scale of the financial problems we have. but that's (ie whether the 50P rate is a genuinely necessary measure or a political gesture) a separate issue.

It keeps the people who are feeling the real heat of the downturn happier.

TheStone

Include national insurance and it's closer to 65%. And then vat/duty/tax on spending the 35% left over.
That said, I doubt many people can justify earning above 150k.

rjsterry

Asprilla wrote:

At Mrs A's office the introduction of the 50% rate was much heralded as the end of high earners in the UK. In actual fact it led to one trader who was not originally from the UK relocating to a more tax efficient country.

I like Warren Buffett's stance on the subject: http://www.bbc.co.uk/news/business-15284410

Interesting figures - perhaps this is partly an answer to why the idea of a universal income tax rate (as often espoused by DDD) hasn't been adopted. High earners - 6-figure salaries and upwards - have access to a lot more tax efficient savings and investments than those earning, say, under £20,000. A very simple example: if you don't earn enough to have any left over to save, then tax rebates on ISAs aren't much use to you. In other words, the higher income tax rate is intended to even out some of these inequalities.

asprilla

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

rjsterry

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

First.Aspect

Its not fair because those 30 CEOs only get about 25% of the 50% pay rises they awarded themselves this year. Shocking.

Isn't it about time that "the UK" just called the bluff? Okay chaps, do your worst. Relocate. We don't care any more, because it hasn't helped the rest of us much so far, has it?

greg66_tri_v2.0

Rick Chasey wrote:

It keeps the people who are feeling the real heat of the downturn happier.

It seems we agree that it is a political gesture...

bails87

"Top rate taxpayers in 'cut top rate tax' call shocker"

Do you think if 30 of us wrote a letter to the Telegraph demanding reduced income tax for cyclists they'd put it on the front page too?

jzed

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

cjcp

@G66 - correct.

@Rick - Greece's problems are different. They come from the rich not being taxed for decades e.g. a shipping company operated out of Piraeus, but registered in Liberia avoids a whole heap of tax. Then there's that funny rule about not paying tax if you don't have a completed roof on your house or something, which is why they build up a floor and not put a roof on that higher floor.

OTOH, we're taxed. A lot.

Remove the inefficiencies and dead wood, then work out how much you need to fund the service you're then looking to operate. Don't just chuck more money at it in the form of raised taxes. It's like trying to fill a bath by pouring more water in it instead of putting the plug in.

DonDaddyD

Remove the inefficiencies and dead wood, then work out how much you need to fund the service you're then looking to operate. Don't just chuck more money at it in the form of raised taxes. It's like trying to fill a bath by pouring more water in it instead of putting the plug in.

^^This^^

Torvid

DonDaddyD wrote:

Remove the inefficiencies and dead wood, then work out how much you need to fund the service you're then looking to operate. Don't just chuck more money at it in the form of raised taxes. It's like trying to fill a bath by pouring more water in it instead of putting the plug in.

^^This^^

+1 as a soon to be ex civil servent (finaly got my redundancy date) the amount of waste that goes on is incredible, from figures in the last closing meeting it turns out the government have spent about the equivelent of 40years worth runing costs to make us unemployed.

rjsterry

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

Someone earning that much on PAYE would almost certainly be receiving some other forms of income, from their employer in the form of shares, company dividends, not to mention the earnings from all that money they'll have in the bank/invested. They'll therefore need to do a tax return, and so will employ an accountant to put the most tax efficient spin on that tax return possible.

Inefficiencies and dead wood: there's a lot of that in the public sector, but the problem is whether the spending reductions are that selective, or just cutting out the green wood too. To over extend a metaphor, if you prune a tree badly, you won't rejuvenate it, you'll just kill it.

EKE_38BPM

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

By listening to their accountant?
I'm sure things like where you get paid (local Barclays or Swiss/off-shore account), how you get paid (£ or $ or € or whatever or share options etc), who gets paid (the earner or the earner's 1 year old kid/trustfund), place of residence (non-dom) etc.
One of my cousins worked abroad a lot, but for tax purposes he had to make sure he was only in the country for a certain amount of time, even when he wasn't working.

I think charitable donations reduce your tax liability, so setting up a charity to pay for the upkeep of your very nice house in the country (sung to the melody of Blur's song) because its listed, could help.

There are many loopholes and a good accountant will make sure you stick within the rules but avoid as much tax as possible.

rick_chasey

rjsterry wrote:

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

Someone earning that much on PAYE would almost certainly be receiving some other forms of income, from their employer in the form of shares, company dividends, not to mention the earnings from all that money they'll have in the bank/invested. They'll therefore need to do a tax return, and so will employ an accountant to put the most tax efficient spin on that tax return possible.

Inefficiencies and dead wood: there's a lot of that in the public sector, but the problem is whether the spending reductions are that selective, or just cutting out the green wood too. To over extend a metaphor, if you prune a tree badly, you won't rejuvenate it, you'll just kill it.

Ah I'll disagree with that.

Without wanting to get into how I know that, suffice to say, in my experience, the £150k -£250k earners I know personally don't have alternative incomes.


As for inefficiencies - I think the efficiency of the private sector is overrated. Ignoring the glaringly obvious banking crisis (which, at best, can be called inefficient), my office, which is an 8 person, eat what you kill style firm, very small, mobile office, is totally inefficient.

I'm spending half my time on bikeradar and boss seems to think I'm doing fine.

Every Friday from between 2:30-3:30 till the end of the day is just a total write off with regard to work > and they still make a fortune > mainly because, like many private sectors, it's a boardline racket.

Last week the office was playing catch and indoor cricket >> and they think public sector guys are lazy!

secretsam

I have a degree in Economics from a proper university, so am not going to engage in this debate

Apart from this: technically, DDD's suggestion of a single tax rate is the most efficient

rhext

I don't pay tax in this bracket! But to me, tax is there to raise revenue for the exchequer, not to punish people who earn more. If the 50p tax bracket raises a significant amount of money, I'm in favour for some of the reasons already mentioned above. If it doesn't however, then it should be scrapped on principle: the government has no business taking money off groups of people unless there's a material benefit to society as a result.

Whenever this subject comes up, the 'counter argument' is always some 'person in the street' saying 'those who earn more should pay more', followed by some lib dem talking about how we need a 'progressive' tax system. This seems to skate over a couple of obvious facts: if you earn more you do pay more - 40% of £100K is twice as much as 40% of £50K; so the existing system is already progressive in that the more you earn the more you pay.

If it were me, I'd scrap the 50p tax band and concentrate on simplifying and streamlining tax legislation so that people who earn more pay the same proportion as everyone else. So someone earning £150K pays 40% of that regardless of how clever their accountant is and regardless of what proportion is paid in capital gains vs income....

rjsterry

Rick Chasey wrote:

rjsterry wrote:

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

Someone earning that much on PAYE would almost certainly be receiving some other forms of income, from their employer in the form of shares, company dividends, not to mention the earnings from all that money they'll have in the bank/invested. They'll therefore need to do a tax return, and so will employ an accountant to put the most tax efficient spin on that tax return possible.

Inefficiencies and dead wood: there's a lot of that in the public sector, but the problem is whether the spending reductions are that selective, or just cutting out the green wood too. To over extend a metaphor, if you prune a tree badly, you won't rejuvenate it, you'll just kill it.

Ah I'll disagree with that.

Without wanting to get into how I know that, suffice to say, in my experience, the £150k -£250k earners I know personally don't have alternative incomes.


As for inefficiencies - I think the efficiency of the private sector is overrated. Ignoring the glaringly obvious banking crisis (which, at best, can be called inefficient), my office, which is an 8 person, eat what you kill style firm, very small, mobile office, is totally inefficient.

I'm spending half my time on bikeradar and boss seems to think I'm doing fine.

Every Friday from between 2:30-3:30 till the end of the day is just a total write off with regard to work > and they still make a fortune > mainly because, like many private sectors, it's a boardline racket.

Last week the office was playing catch and indoor cricket >> and they think public sector guys are lazy!

Really? I find that very hard to believe. They really just get a single payslip with £12,500+ in the 'gross' column and it all sits in their current account or at a push an NS&I savings account? They're stupider than I thought.

Completely agree with the mythical nature of private sector efficiency, although the really inefficient ones tend to go to the wall.

rick_chasey

Greg66 wrote:

Rick Chasey wrote:

It keeps the people who are feeling the real heat of the downturn happier.

It seems we agree that it is a political gesture...

Yeah, I'd say it largely is.

I don't think it achieves an enormous amount of revenue - similarly, I don't think it upsets an enormous amount of people.

When the economy goes t!ts up, any economics becomes pretty politically charged.

1/4 unemployment for youth is pretty extreme, and something that will be felt 10-20 years further on.

rick_chasey

rjsterry wrote:

Really? I find that very hard to believe. They really just get a single payslip with £12,500+ in the 'gross' column and it all sits in their current account or at a push an NS&I savings account? They're stupider than I thought.

Completely agree with the mythical nature of private sector efficiency, although the really inefficient ones tend to go to the wall.

One bought a flat, but it's a holiday flat so it's not being rented out. Where it is means that it's the financial equivalent of having your money in a big ISA.

The others live in London, so £150,000 doesn't go as far as you'd think it would.

rjsterry

Rick Chasey wrote:

rjsterry wrote:

Really? I find that very hard to believe. They really just get a single payslip with £12,500+ in the 'gross' column and it all sits in their current account or at a push an NS&I savings account? They're stupider than I thought.

Completely agree with the mythical nature of private sector efficiency, although the really inefficient ones tend to go to the wall.

One bought a flat, but it's a holiday flat so it's not being rented out. Where it is means that it's the financial equivalent of having your money in a big ISA.

The others live in London, so £150,000 doesn't go as far as you'd think it would.

DonDaddyD

Mr Sterry,

The assertion that all or most people earning £150k have alternative incomes I think is a wrong one. Some will some won't.

Public and Private sector inefficiencies are different. But both have them.