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!

No that’s not my thinking
I don’t need or want more money or luxury as evidenced by the fact I have actually stopped working to reduce my pay! I’m not getting. More money I am getting the same but working less. I will get the same money or near enough for 4 days work as 5 so why would I work 5 days?
Sure I believe in collective good but not enough to work a day for free. Would you?

Yes it’s precisely that trade off with benefits. I frequently hear people not wanting to do more than 16h because it will cut their benefits. I don’t blame them either

We have an issue with tax bands in this country. For instance, the cliff edge at 100k is completely unfair and disincentivises people with young children to earn more. Also child benefit is an issue and is unfair on those with one high earner - two people earning just below the threshold can claim the full amount , whereas a household with one person earning just over the threshold can't claim. We need to be incentivising people to work more and earn more, this massively benefits the country.

I don't think anyone is against taxation - its how its applied. And as a poster above pointed out, the rich are always seen as those who earn just a bit more than the person making the point. How often do we see on mumsnet that those earning 100k aren't rich? Which I agree with BTW, but for those earning 20k, 100k would seem a massive amount.

You also said about wealth and income - these are very different things. Someone could be earning 150k but renting, has no property assets or shares or anything but their income. Someone earning 50k could own 3 properties and therefore be 'worth' far more. Net worth is a good way of calculating wealth.

The truly rich people are not on PAYE.

Yeah I think its about an ideological decisions

A. People can make lots of money, and enjoy their lifestyle, but:

1. Systemic lack of equity equality in life (education, health, social mobility)
2. Accept/ignore moral discomfort that this as a fact of life, shrug shoulders etc

B. We are equal (surgeon/nurse/hospital porter) and contribute equally, but:

1. People will play the system (benefit fraud)
2. Skilled people will choose not to work (NHS Dr reducing hours at 60%)
3. Skilled people will leave (finance/doctors)
4. Immigration becomes attractive (human rights)

But you're not actually being paid a day less. That your interpretation or feelings because the tax went up. The more you make the more you give back is the collective agreement no?

Some great points being made here so I won't repeat them

If I may, I will use the example of a cardiologist or an oncologist

There's a tax cliff edge at 100,000

That cardiologist or oncologist is going to look at that cliff edge and say "it would be better for me to work fewer hours"

And I don't blame them

So why disincentivise people to work?

Similarly, if they were going to buy shares or a rental property with the extra money, if you increase the CGT they have to pay when they sell those assets, they will say "why bother working more?"

if no one has an incentive to invest in anything, what kind of economy do we end up with?

It's not an interpretation

If you put the figures into a salary calculator, you'll see

It's a fact

This isn't wrong, but it's also not just about ideology and it isn't just skilled people either.

Everyone has to make a money v time/effort calculation to some degree. Some people's version of that is always going to fall at the lower hours, less money end. It doesn't have to be about belief particularly, it can just be I'm happy doing 4 days a week/bimbling along and that matters more to me than any extra money. It doesn't even have to be consistent. Someone's priorities could change multiple times across their lifetime.

The issue with this all is that the people earning £200k aren’t the problem - it’s the ones earning millions and billions who pay less tax than the ones earning £100k! That’s why it feels unfair.

Also the basic of percentages means that no matter what, a high earner would pay more tax but the increase in percentage begins to feel punitive. The childcare cap also reduces economic output.

I think the whole premise is mistaken. We need to tax wealth, not work. Instead of thinking how we can get more money out of working people, we should turn our minds to breaking up some of the hoards of the ultra rich. That money isn't circulating in the economy, it's just buying up assets the rest of us actually need. It's a problem for our economy in the round.

Jeff Bezos claims benefits his "income" is so low. Income tax on the ultra rich is a joke. We need to tax their assets.

That's extremely naive thinking. Nobody - or very very few people - are going to happily work extra time for no benefit to themselves. Paying more tax is all well and good but who on earth takes on more stress,, more pressure, more responsibility just to pay more tax but see no benefit to themselves??

People who propose taxing wealth, how would that work? What are the thresholds that would be fair?

Someone with 500K floating in the bank? A million? £10 mil?

This is it, 200k earners on PAYE aren't really the issue.

Yeah, I'm trying to understand the psychological shift at the cliff edge. People are usually fine contributing to society below that line, so why the sudden resistance?

People say the system makes progression pointless and not worth the effort, that it's smarter to just overpay your pension and start to relax at the top. That doesn't really add up on paper, because promotions are usually easier and more lucrative later in your career.

Yes I agree with this point. But benefits and immigration are blamed 99% of the time by everyone- media, politicians, mums netters

I’m not sure I understand what you mean? It’s not about more money = less inclined to pay tax. People are fine with progressive taxation.

All I’m saying is that there is a limit where people will stop wanting to earn more: if you receive a 1000£ raise but you will ocasionally need to work late at night, you might be ok with it, then you realise that after tax it is only £500, maybe it’s still worth it, maybe not. What if it was £400? Or £200? at one point you will decide that actually you’d rather not have to work at night as the take home after tax is not worth it. Same argument if the raise is £100 or £10000.

I don’t think the majority resent paying tax however the bands should not have been frozen & I think the cliff edges are stupid.

It is. Your place of work hasn't said we're not paying you for a day a week. The government has taxed you more, and when you plug it into a calculator it's like you're not being paid for a whole day.

These are two separate things. Im not saying you're wrong to feel this way at all btw.

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 think the 70k threshold is still pretty high

The 100k cliff edge is a specific problem because people lose both personal allowance and free childcare hours entitlement. They can literally be worse off. It's a bit different to some of the other bottlenecks where you're probably still taking home a bit more even after any extra costs but it doesn't seem worth it.

In the NHS example given, the people affected will already be consultants and aren't going to get any significant career benefit from working a few hours a week more.

I think this is too simplistic a view and creates another problem – many CEOs do work much harder than cleaners and train drivers and nurses. Some don’t, but many absolutely do. So you can’t split tax by assuming who works hard.

Many high level jobs also requires years of extra study and professional exams that train drivers and cleaners, and many nurses, would not have had to complete.

High income individuals already pay an awful lot of tax already.

To a point and this is my breaking point I guess
It’s a practical not a theoretical point to me now. Classic squeeze generation teens, ageing parents, menopause, post Covid burn out and disillusionment with the job, some health issues starting to set in myself. Plus as I said the feeling that maybe I could do more good with my resources than the government will. If I care for my elderly dad on my day off or volunteer with MIND am I OK to pay less taxes?

Same moral issue as a person not wanting to work more hours and lose UC at the other end.

Judge me if you will but not more harshly than the people at the other end please.

@howcometodayI work p/t, if I increase my hours anymore anything extra I earn will be taxed at the higher rate. So for me that’s not enough to give up my work/life balance. I wouldn’t go f/t but I would definitely increase my hours if the band was higher because I struggle to get all my work done.

Far and away the two biggest economies this century have been USA and China, which both have far lower taxation levels than Europe.

Europe's economy has stagnated this century - the EU's was the same size as the USA's 25 years ago, and far bigger than China's, but they both dwarf our economies now.

They key difference between them and us is we have far higher levels of tax and spend.

I pay £5k a MONTH in tax and NI which I don’t object to per se BUT like everyone else in the country I can’t actually get to use the services that money is supposed to go towards so I end up paying again to use the private versions of health, education etc.
I fully recognise my privilege in being able to afford both but it’s really discouraging when basic public services are being run into the ground by piss poor management and the answer seems to be tax people (not corporations!) more to pay for better services which never materialise