Can the clever people of this parish indulge me in a thought experiment?Let's assume that the current income tax situation (for PAYE workers) is about right. It's not vastly different from most other EU countries and wages reflect take home pay (IMHO) rather than gross pay. (i.e. if a company wants an employee of "X" experience in "Y" place, they have to pay "ZZZ"/ year to attract this person. If income tax was higher, then wages would probably rise to mirror this).The previous assumption could be argued to death, but let's just take it as an fixed starting point.
Now, society is never going to be truly "equal" that's communism and in most people's eyes this has been shown to be ... well ... slightly ineffective. Ahem.
But, I don't think many people would argue that it is "fair" for the super rich, non PAYE earning, elite to get away with significantly less tax (as a percentage) than someone earning say £20,000, £50,000 etc. etc. And there's mechanisms like the non-dom rule that allow crazy rich foreigners to live in Mayfair for a paltry £30,000 a year with all their foreign wealth insulated.
So. Back to the original point.Labour have proposed the popular sounding, but IMO flawed mansion tax - any accountant worth his salt should be able to fiddle around with ownership and valuations to dodge this. To me it's hot air and an attempt at vote winning, but will not really address the major issues. Simon Jenkins suggested just using more bands of Cooncil Tax but that ignores the fact that the money from (mainly London) should be redistributed to more needy areas, rather than in the already wealthy areas it would be raised.
So how do we take a "fairer" cut of tax from the very wealthy? Ideas? Also, how do we stop successive governments sidling up to like big businesses and allowing them to get away with tiny corporate tax bills? VAT, Fuel Duty etc, fag duty, booze duty etc. are regressive so I don't believe increasing those will result in redressing the balance.
We already have entrepreneurs tax relief on investing in start ups, I don't think that all major taxes should be equal as I think it's valid to have a staged income tax rate from 0% to 40%
Tax all income at the same rate wether it is capital gains, PAYE, inheritance, etc. Then reduce corp income tax to offset a portion of the capital gains tax so that the incentive to start and own a business is not as greatly reduced.
If you separate the types of income and tax them differently i.e. ROI from wage income then there's an incentive to avoid tax by shifting wages into equity and then taking a divi: so if you're on £100 below the 20/40 margin and get a £1000 pay rise you get clobbered, instead if you take £x worth of shares and get £1000 divi you remain on the 20% rate.
Quote from: Sloper on January 21, 2015, 07:03:42 pmWe already have entrepreneurs tax relief on investing in start ups, I don't think that all major taxes should be equal as I think it's valid to have a staged income tax rate from 0% to 40%Entrepreneurs relief is actually relief for business owners who sell all or part of their business and means that they only pay 10% on the capital gain rather then 18%/28%.You're right though in that there is the EIS and SEIS whereby people investing in small businesses can get tax relief on the money they invest (30% or 50% depending on which scheme).Quote from: Sloper on January 22, 2015, 08:06:15 amIf you separate the types of income and tax them differently i.e. ROI from wage income then there's an incentive to avoid tax by shifting wages into equity and then taking a divi: so if you're on £100 below the 20/40 margin and get a £1000 pay rise you get clobbered, instead if you take £x worth of shares and get £1000 divi you remain on the 20% rate.Not quite. You wouldn't get taxed on the x amount of shares (provided x was > £11k) as this would be a capital gain, but if you were immediately paid a dividend of £1k this would still take you into the higher rate band and therefore create a liability (albeit at 25% rather than 40%).
A lot of the problem with this 1% stuff is that people don't realise who it's actually referring to. In income terms you are in the top 1% in the world if your net income is over about £25k, so it's not just Russian criminals by a long way.
I think there's two different issues here though:1. Local inequality (i.e. UK)2. Worldwide inequality.Ignoring the rest of the world, many people feel that the UK is becoming increasingly and detrimentally unequal. With regard to worldwide inequality, then I agree, the vast majority of the developed world are pretty rich in comparison. I'm not convinced both types of inequality can be discussed at the same time, or, even less so solved by the same means.
As per your suggestion that the rate is banded I seriously disagree. For it to work you have to take all types of income as the same: this would be a serious barrier to saving for a pension as growth in the pension pot could take you across a boundary and thus result in a massive tax hike without any increase in income.
My view is that Adam Smith hit the nail on the head when he said that what you need are 'fair laws and easy taxes' which is why tax should be progressive but never oppressive.
While there is much debate about 'the laffer curve' it is without doubt that if you tax at 99% people won't bother to 'work harder', innovate & etc, and if you tax at 1% the state cannot properly function: as such we're looking at what is the optimal tax rates which both properly fund the proper functions of the state and allows maximum freedom for individuals.
Which again is hardly Abramovich levels and why I think a lot of the reporting on this is misleading.
Quote from: Sloper on January 22, 2015, 08:06:15 amAs per your suggestion that the rate is banded I seriously disagree. For it to work you have to take all types of income as the same: this would be a serious barrier to saving for a pension as growth in the pension pot could take you across a boundary and thus result in a massive tax hike without any increase in income.I'm trying to understand this. Perhaps it's different in the US, but we yanks only pay capital gains when we cash out on an investment or when we receive a dividend. As such, I have control over when that income gets taxed and can plan for it so that I don't wander into the next bracket. Thus our pension pot only gets taxed when we pull it out (ignoring for now the "Roth IRA" retirement accounts)Quote from: Sloper on January 22, 2015, 08:06:15 amIf you separate the types of income and tax them differently i.e. ROI from wage income then there's an incentive to avoid tax by shifting wages into equity and then taking a divi: so if you're on £100 below the 20/40 margin and get a £1000 pay rise you get clobbered, instead if you take £x worth of shares and get £1000 divi you remain on the 20% rate.So this is where I disagree. Why should someone pay less tax on your income because part of it is divi vs. someone who makes all of it in wages? I think someone who makes 150K in wages should pay the same tax as someone who makes 150K in Divi. I'm not sure how it sits in the UK, but here in the US, the progressive side of taxation only hits the portion of your income above that line. i.e. if the tax rate is 15% below 100K and 35% above 100K, and you make 150K, then you pay 15% on the first 100k, then 35% on the remaining 50K for a total of 32.5K in taxes and a "real" rate of 25% despite being in the "35%" bracket. So in your example, only £900 would get taxed at the 40% rate. Does it not work this way in the UK? Quote from: Sloper on January 22, 2015, 08:06:15 amMy view is that Adam Smith hit the nail on the head when he said that what you need are 'fair laws and easy taxes' which is why tax should be progressive but never oppressive. I fully agree, hence why I think getting rid of most loopholes and equaling taxation on all income types. Income is income regardless of source. Quote from: Sloper on January 22, 2015, 08:06:15 amWhile there is much debate about 'the laffer curve' it is without doubt that if you tax at 99% people won't bother to 'work harder', innovate & etc, and if you tax at 1% the state cannot properly function: as such we're looking at what is the optimal tax rates which both properly fund the proper functions of the state and allows maximum freedom for individuals.Agreed. But there is both the question of optimal rates and also of tax structure. In the US, the current tax rate/structure is blatantly skewed towards screwing the working middle class and helping the rich.
I'm sure the system in the US is very different.In the UK (and I'm shure Jasper will step in if I'm wrong) all tax payers have a capital gains tax allowance of about £11k per year after which you pay (I think) 40% regardless as to whether you're a 0% or 45% income tax payer.I think I may have misunderstood your proposal, I though you were saying that once you went over the threshold then everything i.e. including earnings below the change point would be taxed at the higher rate, but I think I got that wrong.As to why we pay lower rates on divi than paid income I'm not sure (Blondie) but I can imagien that in theory it's to do with the risk and also social good that investments produce and hence the discounted rate.I'd say it was impossible to close loopholes entirely but we've seen more progress in the last 5 years in the UK than probably in the last 50.
http://voxpoliticalonline.com/2015/01/21/unemployment-figures-are-a-sanction-based-stitch-up-research-shows/ It strikes me that the current government are just taking advantage of a long tradition of inadequate reporting of figures for unemployment - by aggressively and heartlessly skewing the figures even more.Happy Thursday.
Quote from: Sloper on January 22, 2015, 05:26:36 pmI'm sure the system in the US is very different.In the UK (and I'm shure Jasper will step in if I'm wrong) all tax payers have a capital gains tax allowance of about £11k per year after which you pay (I think) 40% regardless as to whether you're a 0% or 45% income tax payer.I think I may have misunderstood your proposal, I though you were saying that once you went over the threshold then everything i.e. including earnings below the change point would be taxed at the higher rate, but I think I got that wrong.As to why we pay lower rates on divi than paid income I'm not sure (Blondie) but I can imagien that in theory it's to do with the risk and also social good that investments produce and hence the discounted rate.I'd say it was impossible to close loopholes entirely but we've seen more progress in the last 5 years in the UK than probably in the last 50.That would be nice and means my view is mostly a moot point in the UK. In the US, if you earn over 250K you pay about 20% capital gains tax, instead of the stand 39.6% income tax. So in the US, there's an exceptionally strong tax incentive towards div and capital gains if you makes significant amounts of money. Hence why Warren Buffet claimed to pay a 14% tax rate.Good to hear you've been more successful at closing loopholes. I haven't seen it in the US, but then I don't have a strong historical perspective either.
Quote from: psychomansam on January 22, 2015, 06:07:44 pmhttp://voxpoliticalonline.com/2015/01/21/unemployment-figures-are-a-sanction-based-stitch-up-research-shows/ It strikes me that the current government are just taking advantage of a long tradition of inadequate reporting of figures for unemployment - by aggressively and heartlessly skewing the figures even more.Happy Thursday.Ahh the usual fuckwit lefty drivel from our own Dave Spart, have you anything to contribute other than being a legitimate target for abuse?PS congratulations on your engagement.
The more I think about that paper the more I think Sloper is right; some force is causing both slow growth and suppression of wages for the poorest. Thus growing inequality and poor growth are linked but not causally. That force might be worsening standards of education or the lack of well paid industrial jobs, I don't know.