Tax and privilege

[howcometoday]

This might be a bit of a clumsy question, but I’d love to understand different perspectives on taxation/economic models. I’m not a high earner, so I am mindful that my own situation shapes my view.

To me, higher taxes on higher salaries feel fair. For example, if a CEO makes £15k a month and a train driver makes £3.5k, both are contributing to society in different ways. While the CEO has of course worked hard in education and putting in long hours, high earning ability often relies on a mix of luck, privilege, and opportunities that aren't available to everyone.

Personally I think using tax to level the playing field so everyone can live a decent, comfortable life is a positive thing. Surely a CEO doesn't objectively work 'harder' than a nurse or a cleaner?

I wonder if the resentment towards high tax comes down to a lack of collective responsibility (eg "why should I support random strangers?") or frustration that the dream of keeping wealth isn't being realised?

I'm trying to understand beyond my own thoughts and the people around me- so I welcome some gentle educaiton!

I am a higher rate taxpayer but not by much - I earn £58k so £8k of it is taxed at 40%. I don't feel resentful about paying tax and I agree with you that it's fair for higher earners to pay higher tax rates. The only thing that can be a bit annoying is when you get a pay rise, think "oh good" and then calculate the amount that your actual take home pay will increase by!

I have a friend who runs his own business and works very hard to minimise the amount of tax he pays (in legal ways I hasten to add). I think it almost becomes a bit of a puzzle to solve!

The people who should pay more tax always earn a little bit more/ have more wealth than the people asking them to pay.
No-one wants to give up money do they?
I do agree that hard work doesn't lead to high pay in lots of jobs. I think wealth and income should be taxed the same amount if that can be done. Rich people are not on PAYE tax rates that's for sure.

I’m probably not providing a different perspective because I largely agree with you. I don’t earn CEO money but I earn enough to start losing my personal tax free allowance now.

I really don’t mind paying tax even though it’s a lot. I never check how much tax I pay we just live on the take home pay and I never think about how much I ‘could have had’. It’s not an issue that I would change my vote on although that appears to be unusual

I agree that I should pay more tax to fund public services. I agree that whilst I have worked hard I did also have a lot of advantage good health, good parents, a decent although not super privileged upbringing.

However it is very galling when the said public services appear to be shit and not worth funding or waste a lot of money or money is spent on stuff I don’t agree with. I’m afraid I am not on board with the alleged urgent need to spend more on defence considering the MoD appear to usually piss it up the wall on various failed or obsolete projects. When you feel you are putting a lot of money in you do want to see something decent out of it. Not necessarily for me personally but actually for the country in general.

The challenge to your view I guess is that the ultimate extension of it is basically communism ie everyone having the same take home pay and resources no matter what and this usually fails as it seems incompatible with human nature. If you make it all the same it removes any incentive for anyone to work harder or innovate or take risks which we need as a country to get economic growth to pay for public services.

So for me it’s not that I dream of having more (I’m fine as I am) or resentment over paying more to support others but I do resent if I feel
my money is poorly spent. I don’t want to pay winter fuel allowance to well off pensioners. I’m glad it was taken away it’s a joke that super rich people were entitled to it. I don’t want to pay for young people NEET to never work their entire lives. That’s a tragic outcome and I don’t want to be complicit in enabling that. I want to pay for better MH services but no bigger seems interested in that in government. I like to give my money to charities that I support because honestly I feel that it’s going to where I want it to then.

I think that it depends on the view hard work.
A cleaner will have a more physical job, wont necessarily need to think about work while not there, wont have many people depending on them making the right decisions regarding the business.

A person who has set up a company, worked very long hours, put their home on the line, done absolutely everything to ensure success.
They work weekends and evenings to make it happen. Cover staff holidays and sickness because that is the only way to get the work done.
The people I know who have done the above don’t have a problem with paying tax but they will all tell you they have worked incredibly hard and have had huge amounts of stress.

Resentment builds due to fiscal drag. Every year more and more people become higher rate tax payers at the same time as the cost of living sprialling. I just checked and the (long frozen) higher rate tax threshold should be £75-£80K adjusted for inflation. There also comes a point I believe where people pay 60% marginal tax at £100K. I don't earn that much, and I still think that's way too much money to take off people.

Its a balancing act. Yes the broadest shoulders should take the biggest weight, but you want to still give people a reason to work harder, earn more, and grow the economy.

The 60% marginal tax thing happened to me and I thought at that point bugger that for a game of soldiers and dropped my hours instead. There comes a point where I don’t want to work long hours in a demanding job for the majority of my pay to go to the government. I don’t mind paying tax but 60% feels like a piss take. It makes no financial sense for me to do any overtime now or even to work full time. My time is more valuable than 40% of my pay to be sure. Unfortunate for the NHS though who will now only have my skills and effort 80% of the time (I don’t and have never worked privately either I will just be having a well earned day off)

I don’t think many people would disagree with your general premise, op.

I think resentment comes from the fact that high earners pay so much more tax (30% off all income tax is paid by the top 1% of earners) and yet are still talked about as not contributing enough or assumed not to be paying their share.

CEO might have taken more risks (house on the line if the business doesn't work out). Level of responsibility counts for something too. You also don't want to disincentivise those people who do take those risks (why would you risk your house starting a company if you weren't going to benefit from it and it was all negated by tax levels?). They create jobs.

Tax is important though and I have nothing against some people paying more, I think people are less likely to be happy if they don't think it's fair or well spent.

I agree, and I'm an 'above average' earner.

one challenge is, for people earning £200K per year and more, there is a feeling that (a) they don't get much back for their tax. their kids go to private school, they have private healthcare etc. they don't see the benefits and (b) they have a whole industry of advisors who make money by helping these people pay less tax, including schemes to put money in trust or move to Dubai or invest in farmland or whatever. So the chatter at parties will be about tax avoidance and that becomes the social norm.

I wish there could be a social norm to be proud of paying more tax, but that would require a level of altruism that is hard to find.

I absolutely agree on paying tax.

What I struggle with is seeing what it's spent on and wondering where it's gone. I do also think that those paying tax should have access to the services provided so things like childcare limits are pretty galling when it's a time when I probably have lower disposable income than someone on the right benefits, despite a lot of sacrifices over years to get a good wage.

I think there's a lot of frustration with the attitude that someone else with pay for things so the money isn't necessarily spent carefully. We need to solve that to change attitudes.

I think people would be happy to pay taxes / higher taxes if they could see the benefits. All the while nothing works people feel resentful.

A lot of the resentment towards ever increasing tax comes from people not wanting to pay for all and sundry coming over from the rest of the world and or an ever increasing contingent of benefits scroungers who cannot be bothered to work.

If we get taxed more and actually see tangible improvements in our public infrastructure and services then people would not be so fed up.

DH was a CEO and despite people’s misconceptions he worked harder than anyone I’ve ever met (as in a bone fide workaholic, as are many at that level). He earned well but by god, he worked hard for it - 5am-9/10pm most days, and most of the weekend. He’d take one week off in the summer and the bank holidays over Christmas. All other bank holidays were spent catching up on emails or writing reports or doing accounts.

I agree about the tax though!

So the chatter at parties will be about tax avoidance and that becomes the social norm

This is very much not the case in my experience. Yes, rich people often have advisers to help them structure their affairs in a tax efficient manner, but a) they’ll already have paid massive amounts of tax eg 45% income tax, and then want to invest what’s left in tax efficient ways, and b) chatter at parties is the exact opposite of this- all about being happy to contribute, supporting liberal left political parties and charitable giving. Literally no one would talk about tax avoidance- it would be like a Bateman cartoon- “the man who mentioned tax planning at a Notting Hill dinner party” 😂

That’s it, exactly. If you take more than 50% people usually decide to either work less hours or to change for a position with less pay but also less stress / shorter hours / no overtime / no overnight travel / no accountability etc.

This higher rate tax payer is not resentful of immigration or benefits claimants. I think immigration is a good thing and so does the ONS. I also don’t mind at all paying benefits but I do mind if they serve to keep people in a dependent position and don’t give the right incentive to work or otherwise be productive within a persons capacity. I believe work or at least constructive activity of some kind is good for everyone

@Rachelshair How is taxing wealth and income separate? Are they not the same thing?

Assets are wealth and not income
land, property, shares all taxed less than earned income which benefits people with inherited wealth

Thanks for this reply! So would you say the concept/ideology of high taxation (is this socialism?) is great, its the people running the collective pot of money that have no idea what they're doing? Lots of waste, miss management, theft...

I sometimes think this, but cant tell if I'm miss-reading or being simplistic!

Would you increase the current level of inheritance tax/ stamp duty? I don't own property but it does seem nearly prohibitively high at this point.

Yeah that makes sense to be honest. The resentment builds up, and the goodwill of paying taxes becomes less appealing when more money is involved. I don't understand why tho? If you're okay with taxation at a lesser salary, and the concept of collective good. Why does it change when you are faced with the prospect of earning more.

And it's not like you NEED the money at that point for basic human needs of housing, eating, heat. Its when it infringes on possible lifestyle improvement no?

Yes I would bring up taxes on all asset classes not just property but shares etc as well ie CGT to a level more comparable to income tax. This would be a progressive move in my view as it will fall on richer people who often divert money into other asset classes eg getting paid in shares as tax avoidance

People on lower salaries also make the calculation about whether it's worth working more. It's just that it's usually about the interplay between income and loss of benefits. But the outcome is the same. If people aren't going to be much better off by working more, you have to expect that a lot of them won't.