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!

Do you mean getting paid in dividends - is that still allowed? I’m not sure if it is now.

getting paid in shares does not avoid tax as they are normally given as an incentive work hard for the business on the basis you’ll reap a reward, either when it’s sold or if you are able to sell ( they are often structured so that you forfeit on leaving and can only transfer to other employees or back to the pot for redistribution). In which case you will pay tax as soon as those shares are sold for cash at current market value.

You know you don't need to use Mumsnet. You can read this on your own and maybe even ask chatgpt to summarise it neatly for you

@EggPuffsyou can say that about most threads on MNs….

I think any taxpayers are resentful of eg gov randomly deciding to remove the 2child cap. Obviousky many see we have a declining population but it doesnt mean they want more choldren born on benefits and likely going on them later too.

As pp says the drag of frozen limots
Frozen 2880/3600 for child unemp pension contributions
Pretty much child benefit considering the cost rises of children
The limits of paying tax.

A lot of people feel drowned under the costs rising after covid especially the gas/electric. Bus fayres for school etc.Food.

The most squeezed are the ft workers just above benefit level.

Shouldnt employer contributions to pensions also raise if potentially less state pension

@Sweepyedwe won’t get a load more dc on benefits. No country has seen a reverse in birth rate trends once below replacement rate despite bigger incentives.

Despite wanting more dc but feeling I could only provide enough for 2 dc I’m not resentful
of the lifting of the cap.

I agree, and it's human nature to strike back against a perceived unfair tax.

Look at the Window Tax from 1696! Where "the rich" paid more tax according to how many windows they had in their home! One of the first "politics of envy" taxes! The result was people bricking up some of their house windows to reduce/avoid the tax! Negative consequence of that was poorer health due to lack of light/ventilation and far lower than expected tax revenue. In older towns/cities, like York and Chester, you can still see where windows had been bricked up!!

The Window tax needs to be drummed into all governmental policy makers and politicians as it's one of the earliest recorded cases of a negative overall impact of a tax.

Another good one was the Brick Tax of 1784 where there was a tax fee levied on the number of bricks. This led to manufacturers making bigger bricks and actually changed the architecture of buildings which were subsequently built of larger bricks with less intricate detail.

Another was the 1746 Window Glass tax which changed glass usage from multiple small windows into large single pane windows.

Finally (for now) was a tax based on the street front width of buildings which meant builders built houses that were narrow but deep and tall instead, which led to cities like Amsterdam being predominantly tall narrow deep buildings.

So four examples of tax policy that heavily influenced architecture! Just shows the "unintended consequences" of tax policy not just on raising/lowering tax revenue but all kinds of other impacts.

I earn circa £140K per year and deal with the ‘cliff edge’ by stuffing my pension but am considering going part time when salary sacrifice rules change.
I have never been happy paying tax but more so now my pay is higher. This is due to the fact that I feel completely ignored and cut off from everything provided by the government and yet it feels like I’m expected to pay for it for others.
People get treatment on the nhs, yet I cannot get a GP appointment so have to go private, roads in a state, criminal justice system a joke - I could go on, I pay loads of tax but see very little benefit myself, there is no social contract anymore.

I don't mind paying tax on earnings, but I do feel a bit annoyed that it's difficult to build wealth. For example, people that are gifted large deposits from their parents or grandparents, and even people who bought houses years ago so have small mortgage payments in the hundreds. It feels that they have a lot more disposable income than me, and like I'll never "catch up".

I'm grateful for what I have, but it does feel like a huge chunk of my money goes straight out again - and I sometimes feel less well off than people who earn less, but have lower housing costs. Cliff edges and nursery costs are another thing - A couple where both are earning 90k each vs one person earning 120k.

Then you have sole traders who fiddle the books so they don't pay as much tax due to cash in hand.

All of this feels a bit unfair. Plus it feels like higher earners are generally disliked by society ("what are you complaining about, you earn 100k" - that kind of sentiment).

On the whole I'm fine with paying tax (I just with other people paid more too - higher PAYE earners can always be squeezed for more).

Honestly we want to move to the gulf where there is 0% income tax. I love it

Yet here you are ?
been some problems in that area lately hasn’t there ?
would you avoid states with modern slavery at their core ?

Cliff edge effects should be sorted out

and wealth hoarding from generation to generation should be sorted out

as should many other things that are generally cheaper run via the state than private ( health care, dentistry security etc etc )

Your example is poor because a qualified train driver earns about £55k a year to start with and rising with seniority whilst also benefitting from a defined benefit pension. Meanwhile a Tube driver’s package is more like 90k.

But aside from that - the CEO probably never switches off. The CEO takes their laptop on holiday and lives and breathes work. They accept a huge amount of stress and risk and offer a level of drive and commitment and skill above the ordinary .

I think the size of the gap is important and has become disgusting, but the CEO should warn more.

I find it harder comparing salaries of say a locum dentist and a GP. There is no equity.

I did that. Paid my entire mortgage off and could afford my first brand new car.

Bloody excellent healthcare as well: employers pay for insurance, I had multiple issues diagnosed and treated where the NHS had just shrugged and fobbed me off. Also regular, routine gynecology appointments for the first time.

I would absolutely recommend a period of ex-patting when young and carefree. But do take tax advice before you return.

Hi OP,

I would say that generally I do agree that higher earners should pay more taxes. I’m in London and my husband is a higher earner (Just over 100k) and I’m a doctor , so we technically should be well off and we do pay higher rate taxes, which feels proportionate. However, what I have found is that there creeps in additional taxes… so for instance we have 3 young children all in nursery (one set of twins so this was very much not expected). Because my husband earns over 100 k (so we lose all childcare suppprt benefits) and we live in London our nursery fees are astronomical. I’m talking almost 7k per month given we are not eligible for government support. The obvious thing is that I would need to give up work, but honestly, why should I? I’ve worked my arse off to get to this job, and not for the money. We won’t be able to afford to live if my husband gives up his job. I’ll lose my entire career if I take a 3 year break.We are technically at the point where we are actually paying for me to go to work instead of me actually earning anything back (given the nursery fees). I could try to work part time and have the kids a couple of days- but again I dont feel like I could do both well in that scenario, and my kids love their nursery setting so much. I think despite is being in the higher earner bracket I certainly don’t feel like a higher earner, especially being in London and we are often worrying about money every month. I guess this is quite a unique situation but maybe an example of where the hard and fast tax rules don’t really add up given the purpose of the free childcare hours is to enable people to get back in to work.

Which have been resolved now.

DH does a lot of work with clients there and recently returned to the area for business.

We know if we moved we could give our DC a good boost in life (giving them money tax free for their deposit and not having asset sales taxed to death).

taxation has never been recorded on a death certificate that I am aware of

@Mailanacan your DH pay more into his pension to bring him under 100k?

It is absolutely nuts that there is an effective tax rate of 62% between 100 and 125k pa that goes down to a “mere” 45% when the personal allowance has entirely gone.

Imagine taxing people on NMW x 35 hours a week at a higher rate than those of NMW plus 20%. There would be uproar, but apparently it’s fine because we are overpaid anyway… 🤷‍♀️

As a director, I am never “off” which includes holidays, evenings, weekends. My hourly rate is probably about £1.50, but I don’t mind….id just rather not have my pips squeaked any more. It’s no easier to get a GP appointment when you pay tax hand over fist, but it is extra galling.

My DH would often have to take calls even when he's booked AL. We'd be on holiday and he'd been to spend significant time answering calls.

I think the biggest source of friction on tax is that income is so location-dependent in the UK, so the people paying the most income tax are also stuck with massive housing costs, massive childcare fees etc.

Here's a thought experiment - imagine tax was organised at the global level rather than the national level, so the richest people in the world were taxed at a level that allowed everyone to live to a decent 'average' standard. The global median income is only around $12K per year (despite most of those people working much harder and in worse conditions than we do) so everyone in the UK would have to be taxed down to around that amount, regardless of what they do or how much more it costs to live here.

It's an extreme example but this is basically the situation with a lot of higher earners in the South.

(I'm referring to PAYE here, obviously those rich enough to live off their assets should pay more).

Tax set at global level makes me laugh. If this happened as a nation I'd break and cut taxes to get all the skilled high wage earners.

The NHS is just crap isn't it

I think everyone should pay the same percentage. Be it 20% or 30%. That way those earning nore will pay more, but its the same percentage as a lower earner.

Yes, I think that would cause less friction and resentment. So-called progressive taxes are anything but. It also leads to less jiggery poker in trying to avoid cliff edges, tapers, etc.

realistically the top 10% (anyone over £72k) pays 60% of all income tax, so that wouldn’t be workable unfortunately. But you aren’t wrong, as the more you earn the more you’d pay.