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rjsterry

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rick_chasey said:

Stevo_666 said:

rick_chasey said:

What evidence is there to suggest we are already on the downward slope of the laffer curve?

A couple of examples:
- The last HMRC survey showing that the increase of the top income tax rate to 50% by the last Labour administration yielded pretty much nothing.
- The increase in the corporate tax revenues over the last while the CT rate has been declining.

What evidence is there to suggest that we are not?

So point one, if it’s correct, means we are at the top. I read that the Govt revs dropped around £1bn net after moving from 50% to 45%.

On point two; it’s more complicated than than in that if overall earnings are going up more than the cut they will continue to go up. That may be because of the tax rate but correlation is not causation by any stretch. For all we know govt revenues would have been even higher had the tax rate been higher.

I would imagine we are roughly at the inflexion anyway and your arguments for tax are more driven by personal preference and political ideology than optimising govt revenues.

Point 1: evidence? However if we take your claim at face value then the tax take stayed flat when the rate went to 50% but declined when it went to 45%. However the rate pre 2010 was 40%, so that means that a 45% rate yielded less than a 40% rate. Good case to cut to 40% then.

Point 2: All we know is that the rate went down and the take went up. That could not be accounted for by economic growth alone. Why not? It strikes me that both 1 and 2 are single data points and neither prove nor disprove anything on their own. Less incentive to mitigate tax when the rate is lower is one obvious explanation.

As for maximising government revenues, politicians have a tendency to justify their empires and make themselves popular by spending, so naturally have a tendency to want to tax more. On the contrary, while the first bit is correct, they will often go out of their way to insist that it won't cost anyone any more. "...Will be funded from existing budgets through efficiency savings" (😂) or if that isn't tenable, it will be paid by 'someone else' who happens to be whipping boy of the week. Which means that they are likely to be overtaxing taxpayers. Which is why I am in demand.

The threshold of what constitutes 'overtaxing' is pretty subjective.

It is subjective, but human nature being what it is and knowing what we do of politicians generally, there's a fair bit of truth in it. If the general impression was that we weren't being overtaxed, I'd probably be in a different line of work.

I think it's just a question of if we pay Stevo 666 £X and he saves us >£X it's worth doing. If the savings are <£X then it's a waste of time. Nothing to do with feelings.

Stevo_666

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rick_chasey said:

Stevo_666 said:

rick_chasey said:

What evidence is there to suggest we are already on the downward slope of the laffer curve?

A couple of examples:
- The last HMRC survey showing that the increase of the top income tax rate to 50% by the last Labour administration yielded pretty much nothing.
- The increase in the corporate tax revenues over the last while the CT rate has been declining.

What evidence is there to suggest that we are not?

So point one, if it’s correct, means we are at the top. I read that the Govt revs dropped around £1bn net after moving from 50% to 45%.

On point two; it’s more complicated than than in that if overall earnings are going up more than the cut they will continue to go up. That may be because of the tax rate but correlation is not causation by any stretch. For all we know govt revenues would have been even higher had the tax rate been higher.

I would imagine we are roughly at the inflexion anyway and your arguments for tax are more driven by personal preference and political ideology than optimising govt revenues.

Point 1: evidence? However if we take your claim at face value then the tax take stayed flat when the rate went to 50% but declined when it went to 45%. However the rate pre 2010 was 40%, so that means that a 45% rate yielded less than a 40% rate. Good case to cut to 40% then.

Point 2: All we know is that the rate went down and the take went up. That could not be accounted for by economic growth alone. Why not? It strikes me that both 1 and 2 are single data points and neither prove nor disprove anything on their own. Less incentive to mitigate tax when the rate is lower is one obvious explanation.

As for maximising government revenues, politicians have a tendency to justify their empires and make themselves popular by spending, so naturally have a tendency to want to tax more. On the contrary, while the first bit is correct, they will often go out of their way to insist that it won't cost anyone any more. "...Will be funded from existing budgets through efficiency savings" (😂) or if that isn't tenable, it will be paid by 'someone else' who happens to be whipping boy of the week. Which means that they are likely to be overtaxing taxpayers. Which is why I am in demand.

The threshold of what constitutes 'overtaxing' is pretty subjective.

It is subjective, but human nature being what it is and knowing what we do of politicians generally, there's a fair bit of truth in it. If the general impression was that we weren't being overtaxed, I'd probably be in a different line of work.

I think it's just a question of if we pay Stevo 666 £X and he saves us >£X it's worth doing. If the savings are <£X then it's a waste of time. Nothing to do with feelings. </p>

Lower tax burden = less incentive to tax plan. So the feeling and subjectivity does come into it. See my previous comments on the reaction to Labour increasing the top income tax rate to 50%.

Also given the complexity of tax affairs of many in question, if you're already in a jurisdiction where rates are competitive compared to other countries then there is less opportunity.

Longshot

Stevo_666 said:

Lower tax burden = less incentive to tax plan. So the feeling and subjectivity does come into it. See my previous comments on the reaction to Labour increasing the top income tax rate to 50%.

Also given the complexity of tax affairs of many in question, if you're already in a jurisdiction where rates are competitive compared to other countries then there is less opportunity.

This, absolutely. There is little point in raising taxes against the most wealthy as they can afford to employ people and methods to mitigate it.

Taxing the tall bit of the bell curve a little bit more is way more effective than trying punitive increases against the top end.

rjsterry

longshot said:

Stevo_666 said:

Lower tax burden = less incentive to tax plan. So the feeling and subjectivity does come into it. See my previous comments on the reaction to Labour increasing the top income tax rate to 50%.

Also given the complexity of tax affairs of many in question, if you're already in a jurisdiction where rates are competitive compared to other countries then there is less opportunity.

This, absolutely. There is little point in raising taxes against the most wealthy as they can afford to employ people and methods to mitigate it.

Taxing the tall bit of the bell curve a little bit more is way more effective than trying punitive increases against the top end.

Was going to say something similar. For the vast majority tax isn't that complicated There are far more individuals and small businesses for whom employing a tax consultant is uneconomic regardless of how fair they perceive the tax regime to be.

I do think a lot of the fuss about Labour and tax is a bit hysterical and perception based on Corbyn and McDonnell's background rather than rational assessment. That said, their current demonisation of billionaires is just as bad as banging on about "benefit scroungers". No government should be pitting one part of the electorate against another.

kingstonian

Definitely agree that political parties which (deliberately or not) pitch segments of the electorate against each other aren't what we need.

Longshot

kingstonian said:

Definitely agree that political parties which (deliberately or not) pitch segments of the electorate against each other aren't what we need.

But it is what they need. Polarising voters works in a two party system.

pblakeney

longshot said:

kingstonian said:

Definitely agree that political parties which (deliberately or not) pitch segments of the electorate against each other aren't what we need.

But it is what they need. Polarising voters works in a two party system.

Exactly! Last thing they want is a united electorate.

TheBigBean

I'd be interest to know how many people would swap a top rate of 50% for the reinstatement of their personal allowance, child benefit and pension contributions.

TheBigBean

I also don't really understand how many wealthy people are unable to see that some more tax might ultimately reduce crime. Significant chunks of wealthy London have problems with crime.

Longshot

TheBlueBean said:

I also don't really understand how many wealthy people are unable to see that some more tax might ultimately reduce crime. Significant chunks of wealthy London have problems with crime.

Hence why many of them pay for additional private security. At least they know what the money it costs is being spent on.

TheBigBean

longshot said:

TheBlueBean said:

I also don't really understand how many wealthy people are unable to see that some more tax might ultimately reduce crime. Significant chunks of wealthy London have problems with crime.

Hence why many of them pay for additional private security. At least they know what the money it costs is being spent on.

Yes and no. That works in Hampstead Garden Suburb where you can have a private road or security patrols, it works less well in central London when your Aston Martin parked on the street is vandalised or you're mugged walking to the shops or someone is stabbed round the corner.

rjsterry

Don't be ridiculous, wealthy people don't walk to the shops.

😉

TheBigBean

rjsterry said:

Don't be ridiculous, wealthy people don't walk to the shops.

😉

I was watching a guy trying to get his shopping out his Aston Martin the other day. It inspired my post on what is the point of expensive cars.

rick_chasey

Quite stunning that accounting for inflation that pay levels in the UK are still lower than in 2008.

Growth has come from more people working.

Longshot

TheBlueBean said:

longshot said:

TheBlueBean said:

I also don't really understand how many wealthy people are unable to see that some more tax might ultimately reduce crime. Significant chunks of wealthy London have problems with crime.

Hence why many of them pay for additional private security. At least they know what the money it costs is being spent on.

Yes and no. That works in Hampstead Garden Suburb where you can have a private road or security patrols, it works less well in central London when your Aston Martin parked on the street is vandalised or you're mugged walking to the shops or someone is stabbed round the corner.

Many wealthy 'apartment blocks' and terraces in Central London have their own private security that patrols the pavement and locality outside.

If "someone is stabbed round the corner" then presumably they're some kind of ruffian or hoodlum whose dastardly and no doubt criminal activities brought it upon them.

TheBigBean

longshot said:

If "someone is stabbed round the corner" then presumably they're some kind of ruffian or hoodlum whose dastardly and no doubt criminal activities brought it upon them.

That's a view I sadly hear a lot. The ruffian, who is often a child, has no stake in society, and some investment of taxes might help, but I guess that is a more nuanced view.

kingstonian

TheBlueBean said:

I'd be interest to know how many people would swap a top rate of 50% for the reinstatement of their personal allowance, child benefit and pension contributions.

Good question. To be honest it is so bloody complex that I don't fully know what the financial implications would be of those changes. Ultimately, I am far more interested in the overall mix of taxation and benefits (personal allowance, income tax rate, child benefit, pension, National Insurance, etc etc) than just purely the rate of income tax, but I can see why big public announcements on Income tax are what attracts the headlines.

TheBigBean

kingstonian said:

TheBlueBean said:

I'd be interest to know how many people would swap a top rate of 50% for the reinstatement of their personal allowance, child benefit and pension contributions.

Good question. To be honest it is so bloody complex that I don't fully know what the financial implications would be of those changes. Ultimately, I am far more interested in the overall mix of taxation and benefits (personal allowance, income tax rate, child benefit, pension, National Insurance, etc etc) than just purely the rate of income tax, but I can see why big public announcements on Income tax are what attracts the headlines.

Well crunching some numbers, one child is £1,076, another one is £712, loss of personal allowance is £5,000. I don't think the loss of pension can be calculated. I suppose therefore anyone on £250k or less would be better off swapping a 50% rate for their personal allowance, and £300k or less with 3 kids would swap it for a 50% rate.

Longshot

TheBlueBean said:

kingstonian said:

TheBlueBean said:

I'd be interest to know how many people would swap a top rate of 50% for the reinstatement of their personal allowance, child benefit and pension contributions.

Good question. To be honest it is so bloody complex that I don't fully know what the financial implications would be of those changes. Ultimately, I am far more interested in the overall mix of taxation and benefits (personal allowance, income tax rate, child benefit, pension, National Insurance, etc etc) than just purely the rate of income tax, but I can see why big public announcements on Income tax are what attracts the headlines.

Well crunching some numbers, one child is £1,076, another one is £712, loss of personal allowance is £5,000. I don't think the loss of pension can be calculated. I suppose therefore anyone on £250k or less would be better off swapping a 50% rate for their personal allowance, and £300k or less with 3 kids would swap it for a 50% rate.

Don't forget you don't get child allowance if either member of the household pays higher rate income tax.

kingstonian

On the basis of those numbers you're right, it would be an obvious trade-off to make.

One big issue with the tax system is the salary level at which 40% kicks in, which hasn't by any stretch of the imagination kept up with wage growth. I've no issue with a 45% or 50% rate, but the point at which 25% becomes 40% should be raised IMO.

Stevo_666

kingstongraham said:

In the UK?

Depends if you count some of the Crown dependencies as the UK.

Stevo_666

longshot said:

Stevo_666 said:

Lower tax burden = less incentive to tax plan. So the feeling and subjectivity does come into it. See my previous comments on the reaction to Labour increasing the top income tax rate to 50%.

Also given the complexity of tax affairs of many in question, if you're already in a jurisdiction where rates are competitive compared to other countries then there is less opportunity.

This, absolutely. There is little point in raising taxes against the most wealthy as they can afford to employ people and methods to mitigate it.

Taxing the tall bit of the bell curve a little bit more is way more effective than trying punitive increases against the top end.

More than that, taxing the most wealthy and larger corporates can be counterproductive as it can cause them to invest in business ventures elsewhere and so pay their taxes elsewhere - it is this set of people and companies who tend to have the choice.

rick_chasey

Stevo_666 said:

longshot said:

Stevo_666 said:

Lower tax burden = less incentive to tax plan. So the feeling and subjectivity does come into it. See my previous comments on the reaction to Labour increasing the top income tax rate to 50%.

Also given the complexity of tax affairs of many in question, if you're already in a jurisdiction where rates are competitive compared to other countries then there is less opportunity.

This, absolutely. There is little point in raising taxes against the most wealthy as they can afford to employ people and methods to mitigate it.

Taxing the tall bit of the bell curve a little bit more is way more effective than trying punitive increases against the top end.

More than that, taxing the most wealthy and larger corporates can be counterproductive as it can cause them to invest in business ventures elsewhere and so pay their taxes elsewhere - it is this set of people and companies who tend to have the choice.

I think this is overplayed and there is the rather more obvious point that there are plenty of things which are most effectively paid for by the state as you cannot trust market forces to adequately allocate resources, and the well off can literally afford to pay more than others. The money has to come from somewhere. So where is it going to come from, Stevo? There comes a point where there is no optimal solution so the solution will be political. So who do you want to have the burden? Those who have more, or those who have less?

Sounds rather obvious but to illustrate with a hypothetical example; the lifestyle of someone who has $2bn and who has $20bn is not going to be materially different at all. They both have more money than they could spend.

The person on £12,000 however, will notice £500 difference. The person on £500,000 probably won't.

Longshot

rick_chasey said:

Sounds rather obvious but to illustrate with a hypothetical example; the lifestyle of someone who has $2bn and who has $20bn is not going to be materially different at all. They both have more money than they could spend.

Now we're just back at Stevo's story about the guys in the restaurant.

kingstongraham

longshot said:

rick_chasey said:

Sounds rather obvious but to illustrate with a hypothetical example; the lifestyle of someone who has $2bn and who has $20bn is not going to be materially different at all. They both have more money than they could spend.

Now we're just back at Stevo's story about the guys in the restaurant.

In that story, if I had $2bn, I'd offer to pay.

surrey_commuter

kingstongraham said:

longshot said:

rick_chasey said:

Sounds rather obvious but to illustrate with a hypothetical example; the lifestyle of someone who has $2bn and who has $20bn is not going to be materially different at all. They both have more money than they could spend.

Now we're just back at Stevo's story about the guys in the restaurant.

In that story, if I had $2bn, I'd offer to pay.

but what if they beat you up because you did not get them a taxi home?

rjsterry

kingstonian said:

On the basis of those numbers you're right, it would be an obvious trade-off to make.

One big issue with the tax system is the salary level at which 40% kicks in, which hasn't by any stretch of the imagination kept up with wage growth. I've no issue with a 45% or 50% rate, but the point at which 25% becomes 40% should be raised IMO.

Wage growth has barely kept up with inflation over the last 10 years. If the thresholds were to raise that's just dumping more tax on the top earners and giving Joe Average the idea that they shouldn't be contributing that much.

Longshot

Here's a thought for you on alternative taxation.

Why don't we have a basic rate of income tax plus a higher rate of income tax at the same levels as now but with the starting point for the higher rate moved further out.

Then, we implement an ego tax. It's entirely voluntary but everyone who donates has their amount published annually.

kingstonian

Here's a contentious perspective - I'm convinced that the government has sufficient funds being raised through taxation today, the issue is that it isn't used effectively enough.

TheBigBean

kingstonian said:

Here's a contentious perspective - I'm convinced that the government has sufficient funds being raised through taxation today, the issue is that it isn't used effectively enough.

To do what?