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!

How has more money coming in to the exchequer not helped the country?

I agree, I'm seeing it all the time now, with highly paid workers reducing their hours or taking early retirement, small business owners doing the same, etc. It's massively detrimental to the UK.

Re the point re costs of working, some other European countries allow commuting costs and child care costs (and other work related costs) as a tax-allowable deduction from their earnings, so at least the workers aren't paying tax on their train season ticket just to get to work. It's something the UK should explore.

But, no, the Treasury baffoons have gone the other way and have now stopped the small "working from home" tax deduction in peoples' PAYE tax codes, so unless their employer is paying them towards their working from home costs, workers are now not even getting tax relief on the extra costs of WFH such as the extra heating and lighting they incur. Another stupid tax hike that will be more damaging to the economy as a whole that the paltry amount of tax it will bring in.

@Araminta1003’s post about the value of time put it more eloquently than I can!

@Araminta1003yes, time is so important to me.

Firstly, the IHT changes won't bring in anything, in fact, they'll reduce the overall IHT tax take over time because it's just led to more people undertaking tax planning to avoid it when previously they'd have paid a small amount.

Re VAT on private schools, lots of previously private pupils have now moved into state schools, so costing the country for their education. Many private schools have closed down, so loss of jobs, loss of them buying goods/services locally, etc.

You have to look at the bigger picture and not be blinded by the politics of envy which drove these policies rather than genuine benefit to the country.

Wasn't intending it to be aggressive. Just wanted an answer but you've given me one so thanks.

Oh great - we are a nation of tax dodgers who moan when nothing is right and there isn’t enough money, moan if our care home costs are too high , that schools are underfunded and as for pot holes - and yet will do anything to hang onto unearned inheritances that we will explore every possible loop hole rather than just say “oh I am now rather rich , would rather mum hasn’t died though “

I'm fine with the general principle of paying a higher rate of tax. What I don’t agree with is the government taking a large chunk of income and then saying one is not eligible for all of the services and support that tax money funds. It creates a situation where higher earners subsidise benefits they can’t access, and this is on top of the higher cost of living. It’s the combination of high tax + restricted access that feels inequitable.

😅I googled it too, the only possible example of it being an offensive phrase is if had used it to describe people with dwarfism!

So obv I thought you were red flag hunting, trying to find something offensive in what I as saying.

Why is it/was it considered offensive anyway?

Apologise for calling you a bull xx

i disagree - my DH is a live to work type because he enjoys his work. There’s the expression ‘if you live what you do, you’ll never work a day in your life’ and that’s him

whereas if you work to live you are very much oriented by money as that’s the only thing you are really doing it for

@howcometoday if you look it up as

"is the term little people offensive in the context of economics or class" I'll be interested to see if you get the same answer as me. I got told off by AI search saying it was an extremely offensive term - but maybe AI knew that that's what I already thought.

100% agree this this.

For instance , childcare subsidies should be universally available to all.

Many people love their work and it’s a key part of their life without earning big bucks / they are happy to earn enough because they have other things in their lives beyond work - work funds that, work is fun, work and money however are not the narrow confines of their lives

Mayen she's just lacking in comprehension

I think it’s more likely that they would invest their funds in something else that avoids CGT, like clocks, watches, racehorses, guns, boats etc. so in that regard they might start to spend it rather than sit on it, so more cash in circulation but it’s not going to increase the tax take for the govt, plus we have these freeport lockers everywhere now where they can park assets to avoid cgt on sale. So for it to properly work they’d have to ditch Freeports and somehow change the definition of cgt to lose the wasting assets category. I think a well designed wealth tax is a good idea but it’s usually badly done where it has been done and there’s a degree of capital flight.

Remember we had capital controls and a 98% top rate of tax on investment income with 83% on earned income in the 1970’s. we also got bailed out by the IMF.

anyway, American stock market is heading for a huge downturn so that will affect uk investors as most of the corporate investment companies have their client capital elbows deep in AI data centre and robotics investments. So there’ll be less to tax anyway.

we may have been in a better position for all that’s hit us in the last 15 years had we not sold off all our infrastructure to any bugger passing by.

It's more than that. It's about perceived fairness. Why should a worker pay more tax than someone with "passive" income of the same earnings level? Why should some people be expected to work hard when others live a similar standard of living not working. Why should, say, a doctor or dentist work 5 days a week when they'd be no worse off if they only worked 4 days? Why should a guest house owner open all his 10 rooms if he's worse off than if he opened only 8 rooms? Why should a pie shop open 6 days a week if he's worse off than only opening 3 days?

As I've said upthread and in other threads. I see it in my work as an accountant. People go along "happily" paying all taxes due, but then they hit a threshold or the law changes, etc., and the extra "cost" is out of proportion, so they take action to reduce it, often leading to paying less tax. Whether that's using legal tax planning measures, reducing working hours, changing their will, changing where they invest in, early retirement, or whatever.

How is it more acceptable for a benefit claimant to stay working only, say, 16 hours per week, when they "could" work longer, than for a high earner shovelling money into a pension to avoid the stupid £100k tax cliff edge?

There are many MN posters who also don't work. Someone who hasn't worked 20+ years due to "MH issues" but has all the time in the world to comment and post here.

Another MN poster whose in her late 20s can't work due to "it makes me ill" but has all time in the world to play on her switch etc.

@NattyKnitter116

Remember we had capital controls and a 98% top rate of tax on investment income with 83% on earned income in the 1970’s. we also got bailed out by the IMF.

I remember lots of people with "passive" income such as book authors left the country to avoid the 98% and who could blame them. No sane person would think anyone would stay in the UK to only keep 2% of their earnings when they could simply move abroad and pay substantially less.

Look at Tyson Fury moving to Isle of Man. It's not because he likes steam trains, it's because it's a tax haven.

Same with all the music artists who move to Switzerland "for creative reasons". Yeah right!!

I think what confused me was you're actually talking about tax policy and human behaviour- not capitalism. In a true capitalist system, taxes would be minimal or non existent anyway.

Self interest reactions towards government policies is a universal human behaviour, not an invention of capitalism. People in socialist or communist societies also look out for their own benefit first...

In a capitalist society people want to minimise their tax bill. The UK is a capitalist society

It also benefits people who have built businesses, employed people etc, then they sell to retire reinvest in to another
business and pay CGT on anything over the entrepreneurs relief threshold.
these are the employers of many people - none of them appeared by magic. If you take away the incentive to invest and take financial risk it directly affects how many jobs are available.

otherwise it’s govt jobs only, MRP’s, and heavy restrictions on capital which historically has been pretty grim.

These entrepreneurs then pay CGT and Dividend tax every year after so they are still
paying a sizeable level of tax, but I think govt could fiddle about with CGT and Div tax, maybe more sliding scales - but that makes it even more complex, and we already have to most complicated tax system in the world.

there just isn’t an easy answer which is why, if you look at the tax changes in the budget every year, they are rarely changing the % they take, just shifting it around to suit the political landscape.

I do agree we need more social housing and better MH care though but govt has literally got to point where it will no longer be able to borrow and 2010 austerity will look like a picnic in comparison. It has bugger all to do with who’s the PM currently.

Of course, it's human nature to pay as little as possible, whether it's tax, a new car, weekly food shopping, a holiday, etc. People want value for money. But very few are motivated to take extreme steps to minimize/zeroise. People generally don't mind paying what they feel to be a fair amount for what they get back in return. Unfortunately, that balance has become out of kilter, especially for workers. When roads are crap, you can't get an NHS dentist, you have to wait 48 hours in A&E, when the High Street is full of money launderers, open drug deals on your streets, etc etc, then the "social contract" has broken down.

Sorry for being so off topic, but how much of a shakeup do you think AI and tech will have on the world economy?

Without diving deeper into capitalism/socialism etc...you've answered your own question.

'Self interest is a universal human behaviour'.

Hence people resent an unfair/flawed tax system.

@NattyKnitter116

These entrepreneurs then pay CGT and Dividend tax every year after so they are still paying a sizeable level of tax, but I think govt could fiddle about with CGT and Div tax, maybe more sliding scales - but that makes it even more complex, and we already have to most complicated tax system in the world.

Taxes on dividends and CGT are the highest in two decades since they were historically low under Gordon Brown (who ironically for a Labour Chancellor, started out as a tax reducing Chancellor - which stoked the economic growth under his reign!).

There's very little difference these days between taxes payable by a business owner if he operates as a limited company compared with operating as a sole trader. In fact in plenty of income level scenarios, more tax is payable going down the limited company low salary/high dividend route which had been made popular by Gordon Brown!

Taxes on capital gains and dividends have risen quite considerably over the past few years, under both Tory and Labour governments.

I don't think there's any scope to increase further.