Tax and privilege

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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!

Thanks for your explanation- I love your accountant perspective.

Do you have a theory on why does the government do it this way?

It's so obviously an issue that annoys people to the point where resentment and evasion starts. Is it that it makes so much money that is needed, they don't care who it pisses off?

Some maybe. But in my case, I worked an hour away from home, so spent at least 2 hours per day commuting, and that was before working from home became a thing. Still managed to set up a side business in the evenings and weekends. Not saying it was easy, it wasn't, but very few people have everything handed to them on a plate or get windfalls. You have to put in the effort and make sacrifices, whether it's getting a good education, starting a business, etc etc.

Im starting to think they probably don't? Scary idea!

These were easy percentages though. 15%? Divide by ten and half it. 17.5%, half it again. Much easier than 16% or 17% or 18%

It depends on what industry but yes CEOs work long hours and are under a lot of stress and pressure. Perhaps the cleaner also works 50 hours a week but the job is not stressful and whilst the nurse’s job is stressful she doesn’t bring the stress home with her. Of course the CEO should pay way more tax on his/ her income however, if you tax too high the company may move the well paying jobs abroad so the Uk gov will end up with less. Or the CEO will decide actually he’d rather too a less stressful job.

How are you defining rich and poor, though? Your inverted commas are confusing because I have made clear that I’m talking about billionaires. I’m not one and I’m betting neither are you nor anyone else on here. Even if I were, my argument remains.

People who aren’t billionaires are already being punished in the ways that I’ve described. I don’t agree that taxing those who won’t even notice the difference is a punishment.

I don't mind paying tax, but obviously given the choice I wouldn't. What I object to is paying more because some people won't pay their fair share. Think about it every time says i can do you a deal for cash, put in a very simple way it's theft.

Yeah, Im examining my 'typical low earner' perspective. Try doing that :)

Higher earners are paid that way due to skill. Knowledge and intelligence. This is usually lacking in lower skilled menial jobs.

I think they probably do, but it's only one of multiple factors. In a democracy, governments have less incentive to implement reform that takes a long time and doesn't deliver more immediately positive results. In terms of tax, a lot of hard conversations need to be had with an electorate who aren't feeling very responsive or willing to compromise.

It's also very difficult in a society where age and location make such a vast difference to people's finances and feelings about money. It comes up a lot, but someone earning 100k and either privately renting or a relatively new buyer in the south east is in a completely different landscape to someone on half that in a northern city who's been on the housing ladder since the 00s. But not all the population understands that.

I don't know, I think thats too much of a simplistic take (pushed by media).

Maybe it's because they're in power post-covid, growing population, global economic issues, political instability, and the easiest way to fill the black hole is to tax people.

I think calling it envy muddies the waters. Why wouldn't they just punish the billionaires? I guess because previous governments protected them and their money so well with providing loopholes, all they can do is go after regular people.

And then the billionaire buy tv channels, newspapers, and politicians- and tell you its because its politics of envy.

It's not just resentment when a change can end up costing you more than the extra you "earn". No sane person would accept that.

As to why they do it. I genuinely think it's because they're out of touch and don't understand the changes they're making or they're incompetent. They live in a bubble. Also, of course, there's the politics of envy where they know their changes won't improve anything but just want to "punish" whoever they don't like of the moment. Maybe they're just "playing the game" for their own enrichment rather than genuinely wanting to improve the economy/country.

A classic "I've not a clue moment" was just after Gordon Brown reduced corporation tax for smallest limited companies which caused a stampede of sole traders (cleaners, window cleaners, plumbers, gardeners etc etc) to convert to limited companies - literally hundreds of thousands of them, as the change saved an average of £2.5k in tax each per year!! It was huge! Then his paymaster general made a statement in Parliament (in Hansard) that she didn't think sole traders would convert to limited companies "just to save tax"!! Utterly, utterly deluded. If that's the standard of the policy makers, we're really doomed!

Look at Sunak's covid support for small businesses. Caused a whopping 3 million to be excluded due to insane, complicated and unfair eligibility rules. Whichever fool drew them up clearly hadn't a clue. Most made no sense at all. Then Sunak had to lie in Parliament to try to justify them rather than correcting all the errors! Likewise the bounce back loans which were literally given away with barely any checking - fraudsters buying old/unused limited companies off ebay to fraudulently claim they were trading which opened the doors to tens of thousands in loans which they had no intention of paying back. Again, which utter clown set up the loan scheme without any checks and balances?

I don't think thats true at all.

Are you a higher earner? What do you do?

We've had calculators since the 70s! Over fifty years since we needed pen and paper or mental arithmetic. So the justification for "simplicity" is long gone. And as I say, things aren't "simple" in other areas of tax, so no need to have over-simplified cliff edges etc when much more sensible ones can be introduced instead that don't drive the detrimental human behaviour.

I think Sunak and Brown were both smart intelligent chancellors. They obviously didn't get everything right.

I like Sunak on general ethos and beliefs in lowest taxes as possible and free markets. The loans and COVID support were done completely at rush in a national emergency. So yeah some checks were missed.

I think a lot of the problem is that it is the higher PAYE earners that keep being slammed as they are an easy target. Their tax take then subsidises low wages through the benefit system. A few extremely wealthy business owners are the ones that benefit from this. So Bezos and his ilk get wealthier and wealthier whilst people earning nicely but are not madly wealthy are subsidising the wages of Amazon warehouse workers and delivery drivers through universal credit, child benefit, etc.

How can the UK "punish" a billionaire who doesn't even live in the UK? The UK has no jurisdiction in the taxation of the countries where Elon Musk, Richard Branson, Bill Gates, etc., live.

So why do the Royals get so much money thrown at them, when they only thing they have remotely like a skill is being good at waving and none of them are exactly Mensa material.

It's really not bait. I hadn't realised how the tax cliff worked before this post.
Even before understanding, I know people are inherently bad or evil.
I'm just curious and I knew there was something I wasn't getting. I'm just trying to understand why this has happened and what could possibly be done to fix it.

Not that I actually have the opportunity to fix it!

I don't know, don't they have offices/services in the UK? We use and buy their tools. There must be a way.

Punish billionaires for tax evasion, not for being billionaires- I thought that was obvious :)

Don't try to excuse Sunak. He had months to change the flawed eligibility criteria but instead he lied and doubled down on the flawed rules. The immediate/urgent schemes during the first lockdown - fair enough, time was tight and "something" had to be done quickly. But no excuse at all for not making any changes as the months passed. The schemes lasted over 18 months - more than enough time to "tweak" the clear and obvious and unfair faults.

I think most people of all economic statuses are happy to contribute taxes to ensure everyone has a decent standard of living.

You have over simplified things suggesting is an exec not OK with working hard like other people.

In America, they believe in the land of opportunity - the idea of people being able to 'live the american dream' is being taught in the UK schools curriculum as a theme when analyzing american texts in english. Ie in America, the population believes that if you work hard you can go from having nothing to living your dream.

In england we have more of Robin hood approach - take from the rich and give to the poor.

When I was young, I had ideals of everyone living a happy life - and then I went to business school and learnt about economics and realised the only way that is possible is to stimulate an economy so people make more money and pay more taxes to distribute within communities.

And what I see in the UK is very strong socialist ideals where everyone wants to tax the wealthy without any thought to the fact their economy needs that wealthy to be stimulating the economy through their purchases and paying tax so everyone can benefit.

A business owner needs money to set up their business and they take the risk they will lose that money (or more) and they hope they will get a good return on that money to live the dream life they want. People with jobs with jobs who go to them 9-5 and then go home and enjoy their families do not have the same level of stress their boss has who set up the business. But if their boss had not taken that risk and set up the business - that 9-5 person would not have a job.

The answer is not to take from the rich to give to the poor - the answer is to stimulate the economy so those with more wealth spend more money and pay more taxes.

This exactly. There is a point at which it is no longer worthwhile taking on the additional pressure, hours and stress because the take home pay rise is meagre compared to effort required.

We similarly chose to reduce our hours and decline promotions as it made no sense to go over the £100k salary band. Losing tax-free childcare and increasing deductions would leave us worse off so it was a no brainer. It's really bad for productivity in this country.

Also everyone works hard but the pressure is different in v senior roles. I've worked in retail and hospitality where jobs are hard but when you finish your shift you are done. Whereas as a senior manager you are taking critical decisions, often work unpaid overtime and are responsible for lots of people - you can't switch off and often don't have anyone to escalate issues to as you are the decision maker. If pay wasn't an issue I would love to go back to my first graduate job where I was 'doing' the work rather than managing people to deliver it.

In the scenario of lower tax possible, what happens to people who can afford expensive medication? Do you think it's a case of personal responsibility?

I'm a higher earner and happy to pay my tax. I'm slightly disappointed that since I've been a high earner the tax thresholds have remained frozen. But I get why it has to be that way. I'm grateful for the legal ways I can pay a little less tax too ie savings in an ISA.