When people say ‘the rich should pay more taxes’ who exactly are they talking about and how much extra should they pay?

[Ollyscarecrow]

Do most people think of celebrities, footballers, and a few exceptional entrepreneurs as ‘the rich’. Or is £100k household income in the UK ‘rich’?

If your household income is £100,000 (take home £60kish) that puts you in the top 10-14% of earners in the UK, and the top 3% globally.

If your household income is £30,000 (net pay £23k)then that puts you at the bottom of the middle 1/3 in the UK (you earn more than 35% of the population) but in the top 15% globally.

The Norwegian historian Rutger Bregman (who’s comments at Davos went viral) talked about ‘the rich’. Whilst he mentioned tax avoidance, he also talked a lot about the rich paying their fair share (which was up to 91% for the very richest) When you look at the figures above, and consider ‘the rich’ in global terms, most of the population of the UK is ‘rich’. So if we want a fairer UK who should be paying more and how much? If we want a fairer world then almost all of the UK should be paying a bit more tax. However, having mentioned this to a few friends/ colleagues (with a wide variation in earning) it seems that no-one actually wants to pay more tax either for UK or world benefit, and ‘the rich’ seems to apply to anyone that earns slightly more than they do. Thoughts please.

I don't think anyone should pay a higher rate of tax than the current rates. I do think that they should actually pay that though, rather than taking advantage of loopholes etc (including businesses). So I don't think the rich should pay more tax as such, just that our government work to close loopholes and ensure all tax is collected etc.

I agree that when people say 'the rich should pay more tax' they will generally be referring to people richer than themselves, and many people who say things like this are either oblivious or in denial that they themselves are in fact, compartively rich.

OP, you say that an income of £100k puts a family in the top 10% of UK incomes. I don't know if that is accurate, but it sounds reasonable, and people on those earnings already pay a lot of tax, but look how often on here people with such an income, say it isn't that much, because it doesn't buy the lifestyle they imagine a 'rich' person would have.

But the trouble is, the higher taxes are, the more effort people go to avoid them, so increasing tax rates can often lead to less tax being paid.

But when people talk about closing loopholes, they are also often referring to loopholes that other people or large corporations use and don't consider their own actions like an individual professional setting themselves up as a limited company to pay less tax, or putting extra money into pensions to keep their child benefit or avoiding going above £100k pa etc as tax avoidance.

Obviously the likes of Amazon, Google etc, should pay a fairer amount of tax on their very large profits, but there are relatively few of them, so targetting them on their own might not make as much difference as going after millions of middle to high earners who don't pay as much tax as would be expected looking at their income alone.

The thing is with Amazon - it’s so successful because it is cheap and easy for the consumer. If it had loads of taxes to pay, people blindly assume amazon would just cough up out of its magical bottomless bank account. Actually it would put prices up to cover the taxes and thus, us little consumers would be paying the bill anyway.

Similarly you cannot just think we can “get more taxes from the rich”. The rich (referring to those who earn well, but not footballer type rich). They actually already pay at a higher rate. Remember when GPs decided not to do sufficiently many hours to tip them over the a tax threshold? Then we all lose because we actually need them! Let’s say for your five day week you earn £100k and that makes you liable to some sort of mega tax. Well, people will then just work 4 or 4.5 days so they will come in just under the threshold. So we lose 10-20% of their services.

The super rich will just go live on a yacht somewhere if you demand taxes from them. So that’s not happening.

No one “sector” is going to fund our financial troubles.

Thomas pikkety has some interesting stats on this, but essentially, the biggest determinant of if you will be wealthy/successful is whether your parents were. After that, increasingly it's when you were born. I think we should tax and redistribute until that is no longer the case.

Everyone always focuses on income tax, but in reality, corporate tax practices favour large multinationals rather than local businesses and inheritance tax laws means money stays in families generations after anyone has done anything to earn it.

I'm in a reasonably high earning family and because I'm an only child and my parents bought a house in an area that massively increased in value, I stand to inherit a substantial amount of money. I've done nothing to earn that money, to be honest neither have my parents. Their house has accumulated substantially more value than they've earned over their careers which is nuts.

Personally I would be happy to pay more tax to feel confident in education and healthcare and have a more regulated housing market.

I grew up in a country where the norm was to have health insurance: I can't tell you the difference it made living with the NHS for the first time, not having to worry about becoming ill and paying for doctors that weren't covered by insurance etc.

We're moving further and further from a meritocracy and I think a reform of taxation is the only way to change that.

This is an interesting question. In regards amazon as an example I do think that they should be paying more tax than they are. If that puts up the prices and limits the profitability of the company I'd think know of that as a readjustment to where it should be. Taxing an organisation to the point it folds is obviously not beneficial so it's a balancing act, at the moment it a balancing act in favour of big organisations.
Defining the rich is difficult. My partner and I would come close to one given definition and I do feel lucky. However we live in an ex local authority house (sold off to the previous owners) that has been a building site for six years whilst we slowly renovate, no driveway, 15 year old car and very little savings. So we certainly don't exhibit wealth or middle class affluence. Two children leaving full time nursery will certainly help things along but we won't be buying sports cars anytime soon! I do think we are fortunate but is our lifestyle on that should be further taxed? I'm not sure we would have been able two have children and buy a house, these seem to be the normal social and economic activities that build societies so I think it would have a high cost.
Inequality is the route problem but inequality and ambition are bound up together. Where we need to get to is that the average person can expect to be able to comfortably feed, house and cloth themselves whilst raising children and not worry about being a burden in their old age. Taxation is a part of this picture but it's a tool rather than an answer.

Sales tax would make it fairer, across the board. As effectively everyone is then paying the tax they can afford, and no one can avoid it and adjust it. But absolutely no one would want that.

Psychologically people want to see the wealthy paying more and the poor paying less, but it’s a perceived fairness as loopholes exploited by the very rich wield much more profit than loopholes exploited by the poor, and the average incomes.

Psychologically people want to see the wealthy paying more and the poor paying less

The trouble is higher earners are more able to move out of the U.K. or reduce their earnings to avoid the high taxation. The same is true of corporations (the moving bit).

I think we need to tax most people a bit more (those earning over £25,000 - this would include me and my dh by the way)).

People in the U.K. seem to expect good public services but don’t seem to want to pay for them.

That’s what I meant about the loopholes. Tax avoidance is never fair, but it’s so much worse for the economy on a larger scale. And those in charge never seem to want to shut the loopholes. Even the ones that allow actual Tax evasion.... and no penalties for breaking the law

I think everyone who earns over £25,000 should be taxed a little bit more.

Perhaps we need to address tax internationally instead of nationally so that corporations and individuals don't have incentives to move profit and loss centres. Perhaps be comming part of some sort of union with the intent of closer alignment of physical and social policies, oh wait a moment....

Fiscal even! Not physical!

It does make me cross when I read that some premiership footballers are domiciled elsewhere (and spend x days out of the country) in order to avoid tax. Likewise many, many other wealthy individuals. Or BBC staff being "self-employed" and working on a contract, even though their only job is with the BBC.

So the tax burden falls to the next down the rung... and the next rung is a long, long way down. The schmucks in the middle are always clobbered with tax because they can't escape. £100K salary doesn't mean you can flee the country, employ expensive accounts, set up trusts etc. You're not poor , but certainly aren't living the high life if you have mortgage, bills, commuting costs etc.

I agree that at the moment we are moving away from a meritocracy. Education does not determine success. My dcs are already way behind those of a schoolfriend who can give her dcs free accommodation in London and a large grandparental inheritance. You can work your socks off but you can't compete with a big inheritance.

I thought that it was more about taxing the top 1% of earners. The multi-millionaires and billionaires. A proposal I heard was that they could have the first £10million each year on current tax rates but after that be taxed at 70%. The argument being that they could have a very comfortable life on £10million. There’s a good podcast episode on Reasons to be Cheerful about this where an American billionaire explains very well why this is a good idea that he fully supports. It’s interesting listening.

I think if people want fairness, no one should be allowed get out more than they put in and there should be a time limit on benefits - with the exceptional of disability. Far too many feel they are entitled to everything but contribute little to nothing.

The super rich are able to avoid a lot of tax by moving it around to different countries. If super rich who are resident in the uk paid their tax here on their whole income it would generate a lot of tax income.

A proposal I heard was that they could have the first £10million each year on current tax rates but after that be taxed at 70%.

They'd just move abroad to a lower tax country, as many already do. We already have top sports personalities, TV personalities, Film and Pop stars living in low tax countries who limit their days in the UK so they don't have to pay UK tax.

In fact, the HMRC did a "deal" with some Olympic athletes so that they were "excused" from UK tax when they had to spend an extended period of time in the UK for the Olympic games. Those top athletes had threatened to boycott the games if they'd end up having to pay UK tax on income during them!

I think most people mean that higher tax should be paid by people who earn about 5k more than they earn

I think if people want fairness, no one should be allowed get out more than they put in

The thing is the majority take out more than they put in. There needs to be a general increase in the tax take. The rich can’t pay for it all, if we try and make them pay lots more that will just bugger off.

I think if people want fairness, no one should be allowed get out more than they put in and there should be a time limit on benefits - with the exceptional of disability. Far too many feel they are entitled to everything but contribute little to nothing.

You obviously mean corporations like tescos receiving their wage bill subsidies in the form of tax credits instead of paying an actual living wage, or do you mean the MP's who are on 77K a year and have all their expenses paid for, or the bankers having thrown the global economy into a tail spin and not facing any consequences for doing it?

You obviously didnt mean poor peoples benefits because nobody is that blinkered or stupid anymore are they?

Trouble is, the evidence from across the world shows that lower tax rates increase tax revenue collected.

So I would end all taxation on people who earn the average salary: iirc it's approximately 25k now. Then impose a flat rate of, say, 20% on all income above that (NI on top, though) and make it unavoidable - close the loopholes and keep them closed.

The trouble with "tax the rich" is that it ends up disproportionately impacting the not-so-rich: the real wealthy ones can invest in tax avoidance mechanisms etc, and moving countries if necessary (see: France) and actually, we need them here for a variety of reasons.

Increasing sales tax disproportionately impacts on poorer people, and again, we need money to be in circulation, not under mattresses.

The 'invisible hand of the state' only works if you don't interrupt the process, which we already have.

Taxing corporations more impacts disproportionately on small business and leads to capital flight, impacting jobs and prices - also not good.

Trouble is, the evidence from across the world shows that lower tax rates increase tax revenue collected.

Citation needed

So if the tax rate was 0% theyd collect the most revenue?

I think we should have a maximum income as well as a minimum income. Minimum should be 20k, maximum should be 80k, then tax everyone 10%. Benefits only for those that can't work. That sounds about right to me.

Really interesting discussion.

I think it would be helpful if people felt differently about the tax they pay.

Ages ago someone referred to paying income tax as their contribution to society. I find that a really helpful way to think about it. I'm about to get a pay rise and when calculating my net increase in my head I've thought 'great, so I'll be £240 a month better off and I'll be contributing £80 more to society'.

I know you can then moan on about how the government wastes our taxes but actually, I prefer to focus on my £80 paying the salaries for nurses because actually we need nurses. (And should pay them more)

If I don't like how the government spends our taxes I am invited to influence that with my vote. And I have the option to lobby my MP or other elected representatives at any time.

We do have a big problem of inequality being perpetuated down the generations. We also have a massive problem of intergenerational inequality. So like everyone else I think the other groups to me should be taxed more (I'm looking at you baby boomers). But actually, we should all be contributing lots because when there's no rough sleeping and no child poverty we all benefit.

Personally I don’t think you can just look at income tax, particularly when you consider how much harder it is for the youth these days. They have higher education costs, housing costs etc plus potentially a future with no state pension & a NHS that is no longer free.

As someone who has been a higher rate tax payer & potentially will be again, who has paid NI contributions since I was 17 I don’t want to just pay more income tax. The burden needs to be spread more equally. There are thousands of people in London who have made fortunes off their properties simply because they were born 5-10 yrs before me.

So if the tax rate was 0% theyd collect the most revenue?

Obviously not. The theory is a curve

en.m.wikipedia.org/wiki/Laffer_curve