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!

The UK businesses will be paying VAT, employers NIC, business rates, buying goods and services, employing people, renting/building premises, etc etc. It's not as if they're not contributing to the economy.

Look at Ireland - they actively courted multi national firms to locate there by offering low corporate taxes which massively boosted the Irish economy in terms of tax revenue (even at a lower rate) but also employment etc. Those firms would have located to a different European country otherwise.

Better to have a small percentage of something huge than a big percentage of nothing!

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

Absolutely, I think the electorate have to take some responsibility. Too many want things fixed yesterday but someone else to “pay” for it.

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.

Yes, salary is often not as important as other factors.

So what is the solution to this? Would it be a fixed % of tax after a certain amount? Or like a gradual increase with no cliff?

It is true. High earning jobs "in general" are well paid due to skill. There's a reason surgeons are well paid. They are paid incredibly more in the "evil" USA. There's a reason they get paid more than someone stacking shelves in Asda.

Both higher rate tax earners here

What annoys me is when people sneer at the amount you earn but overlook the progressive rate of tax and large contributions made.

Its not just about paying 40 and 45%tax when you get to a certain amount you lose your personal allowance also, you also lose relief on additional pension contributions- those top earners really do pay in lots but boy the resentment often seen on here because people earn well.

Also people forget and the spending power of higher earners within the economy- we always try to buy local and support small business

There is a simple story about people going to a pub and buying pints and the one with more money buys pints for others so all is fair but then doesn’t go one week and the overall ability to provide the rest of group with a drink is reduced - sorry it explains it better than that’s

To be clear no problem with paying tax to address inequality.

I am pissed off about pensions being tasted as part of IHT - trying to provide for our two children and because we’ve saved into pensions and not spent on holidays we being penalised that has pissed me off

@Badbadbunnyan hour commute is very normal I would say, I have done longer & many of my colleagues particularly younger ones do. Im
not saying you didn’t work hard, I just think it’s different.

Again perhaps it’s just my circle but pretty much all my friends (we are Londoners) have needed some form of help to get on the ladder. The ones who didn’t have help moved further out despite their hard work & sacrifices. My dc go to one of the best state secondaries in London again because I could afford the house prices due to earlier help.

They're a bit of an exception aren't they?

It isn't about resentment. It is simple logic for most people in the same way as it is for those on benefits. If someone doesn't actually see the benefit of increased effort/stress/hours in their take home pay because of increased deductions then it's not worth taking on the higher salary - they are better off in most ways remaining where they are. Sometimes it is worthwhile doing this e.g. because it is a step on the career ladder and you expect to progress or the employer provides an excellent package but usually it isn't.

As I said upthread, the graph of marginal taxes should be a gently upward curve.

At the moment it's a mountain range.

Everyone that's employed pays income tax at the appropriate rate and most wealthy people work. People with more complicated tax have to fill in a tax return every year, declaring income from all sources. Income from wealth is taxed the same as income from employment unless it's in an ISA. If it's property it gets hit with inheritance tax.

Oh & my parents were immigrants with little when they came to London but I still think it’s very different now, largely due to housing costs probably.

Do you work as a surgeon?

Completely agree. And in some cases (like mine) we would actually lose money working more because we'd have to pay full costs of childcare at exorbitant rates as we would become ineligible for the free hours

If they can afford it. They can afford it?

We pay so much tax we no longer have a gardener, a cleaner, tutors for the kids. So effectively we can no longer pay people who may end up on benefits - which we pay (and then do our own gardening / cleaning etc...)
Mad isn't it.

child benefit & free hours should just be universal.

I studied engineering

The Zucman proposal is 2% on fortunes over 100 million. https://gabriel-zucman.eu/we-need-to-tax-billionaires/

What taxes do you think non UK resident billionaires are evading?

pay is linked to supply and demand - there are fewer people with the personality/skill/intelligence to be a CEO or surgeon than to be a train driver/cleaner so there will be less people available for the former than the latter

Or to live in their home country, in a civilised society, where poor people aren’t looking at you with hungry eyes because you have everything and they have nothing.

As per the Patriotic Millionaires, a good and fair system gave them their chances and a nice life: https://patrioticmillionaires.uk/media/bbcradio They want to stay and not emigrate for the sake of cash, there is more to life.

when I was a higher rate tax payer, i was only too glad because I felt I had 'made it', it was a mark of my success and ability to now support others. My university grant and health care has provided a good return for society but its a virtuous circle. Linear systems lead to social collapse.

My thinking was that they keep these very unpopular policies in place knowing it will piss off a lot of people because they have to.

Public services based salaries like in the NHS or university lecturers are so bad that people leave the country. They need to raise money, and this is the easiest less messy way for them to do so is this kind of taxation.

@howcometoday It sounds like there's been some change since you replied to me

So it sounds like you didn't understand how the cliff edge worked at the start of the thread, but now you get it?

I would add to this... you have commented about it being worth it for later, promotions and so on

But in reality, only a tiny minority of people are earning this kind of money. I don't have exact figures, but if you are already at the cliff edge, chances are you are at the top of your career.

So you won't be thinking about getting promoted and earning more. Cutting back on hours and stress seems much more logical.

If you thought you were going to earn half 1million per year, you might think about it differently I guess - but that will be a truly tiny proportion of the population.

I must admit, I'm a bit flummoxed by your question because there's a million reasons why people don't want to pay more tax. The government wasting it is probably the biggest by miles.

In my previous area, we had £3 million allocated for the redevelopment of a tiny little space off the High Street. I was really baffled when I heard that amount of money. Then I discovered, through getting involved with the consultation, that it was basically the cost of getting it repaved and putting a couple of benches on it. They literally had several consultants being paid to talk to the public about what they wanted doing with an awkward space next to a busy road - I'm trying to give an estimate of the size - maybe 7 m²?

This kind of waste of money is replicated throughout the public sector. Private money can do what it wants. But I don't want my taxes being wasted in that way. Imagine what you could actually do with £3 million
to benefit the local community.

Anyway, I'm nowhere near being a high earner but that's my view.

also with the resentment other people have mentioned - I couldn't access an NHS dentist at all recently, and my experience with parents and the NHS has been so appalling, I don't know what I'm paying for. Mum has done two periods of waiting in a corridor for 20+ hours. On one of these occasions, she'd had a stroke. So her priority was high, which is why she was on a trolley and not sitting down. And it was still 20+ hours. And we have been pouring money into the NHS!

The priority now for her would be to keep her out of hospital. I have actually had a doctor confirm that. It would be more safe to keep her out of the hospital than in one. How mad is that?

Tech leadership for a global company. It’s not saving lives but my decisions can and do directly impact the performance of the company and the livelihoods of it’s 600 strong workforce so it’s significant responsibility and often stressful. I get paid to reflect that level of responsibility and stress.
I was too ambitious when I was younger to not climb the ladder but I do think the tax cliff edge makes it a significant decision and that companies are in danger of not having the best people for the job in some cases because it’s not worth it.
Politicians are a prime example of where we should have the best and brightest and instead we get at best, idealists and at worst arrogant buffoons who can do real damage. No sane person with a salary above cliff edge would take the pay cut required to be PM!

Oh, you've hit another one of my favourites (I have a distant family member who works for university)

Have you seen how universities mismanage their money?

I think we should stop giving universities any taxpayer funding and let them charge what they want.

Funding uni is another thing I don't want to do as a taxpayer.

@Projectprincesschaos pensions are there to provide for your old age, not give your children a tax free lump sum to inherit. if you are using a pension as savings for your children you have cbosen the wrong vehicle.