To think that taxing high earners even more would actually be a bit unfair?

[bubbleymummy]

I hear this suggested a lot on mumsnet and I really disagree with it. High earners are paying a huge contribution in tax already - thousands and sometimes 10s of thousands more than a lot of people who are clamouring for them to be taxed even more! Why should they be punished for having a highly paid job? How would you like handing nearly half your income over to the government? I think we should be thankful that we do have high earners who are already making a significant contribution. We would be a lot worse off if we drove them away with higher taxes!

If you think people earning huge amounts lose motivation and choose to work less already, then raising their taxes ain't gonna motivate them!!

Onimolap. Top 1% of earners (around £150k+) earn around 12.5% of all income and will pay almost 27% of all income tax.

www.hmrc.gov.uk/stats/income_tax/table2-4.pdf

So they are already punching above their weight.

Problem is that as IslandMoose states the reaction to the 50% tax rate is to earn less (or offshore the earnings), move or use tax avoidance measures.

Lifeinlimbo - nonsense, I'm afraid.

High earners very rarely choose to work less - the reason they are high earners is, generally, because of their intense work ethic.

On the previous point, if somebody wants to set that kind of wage structure for their company then I'd applaud them. If the state tried to impose it for all companies, then the companies would simply be incorporated in another jurisdiction.

I think what happens in reality is that people earning huge amounts chose to work less - because they can afford it, nothing to do with tax. One could argue this leads to a loss of skills, talent and work effort in our top earners, so increasing rates of tax will ensure they pull their weight like everyone else has too

Whatevertheweather -

Rina - I don't know your situation but you seem extremely bitter. You talk about the higher earners must contribute more in taxes - even if the % was the same someone on a 50k wage would still contribute more in tax and NI than someone on say a 10k wage. Think about it.

But even with rising percentage taxes the higher earners still take home more actual money, although they take home a smaller percentage of their salary. That's what I'm saying. (And yes, I am pretty bitter. Sorry!)

Violethill -

You're right - I am not saying it. So why bring it up?

Because this is the thing everyone who is lucky enough to bring home lots of money always starts their protests with. If we are fair and assume that the majority of the people on this thread are hard workers, whatever their income, then there's just no point in saying "also the high earners are hard workers too". I don't think anyone is disputing that you don't tend to get paid lots of money for sitting around doing nothing. I really think that when people say "I earn a lot of money but it's because I work hard" they are also saying "and you lazy bastards don't." There is no reason to say it otherwise. I'm not articulating myself very well, I'm sorry. I hope you see what I mean.

You have hit the nail on the head there Islandmoose - they work hard because of their inate work ethic (much as a nurse works hard because of her work ethic, despite being paid very little and also having a degree and extensive training and a vitally important job).

Therefore increasing rates of tax would not hinder them, and increasing levels of income equality in society also would not hinder them. Like in Japan, where better wage equality means they can function effectively with a smaller state.

I am a higher rate taxpayer. I am willing to pay more tax. WTF would it make me work less hard?! I'm happy to pay more tax because I believe we have a social responsibility to each other to ensure that society can pay for things like protecting the vulnerable, educating the young etc. At the minute we aren't paying enough tax to do that to the standard of other European countries.

lifeinlimbo depending where you sit in benefits - i agree that the system can make it quite difficult to profit from your work between certain bounds. This is partly because some of the benefits are quite generous - though being given less isn't the same as being taxed more IYSWIM.

eg - every pound i earn over the tax threshold -

37p in CTC/WTC taper
11p in NI
20p income tax

68p gone - 32p earned. That's before any transport cost/ childcare costs is looked at (mine is free, but still) or any other benefits eg council tax relief or housing benefit (though these taper with all income, earned or unearned)

however once you're over 16k - no WTC lost - over 28k only a small remaining element of CTC to lose- once you're outside those bounds you start gaining £ again.

i don't agree that increasing he minimum wage to 15k (e.g) pro rata is a good thing either - don't forget many of those earning it are keeping a family but just want pocket money. Higher minimum wage = less export potential for UK goods.

I agree with you bubbly. Interestinging to hear others' stories. So much of their hard earned money is wasted and still they are asked for more.

rina - my point is that yes, many people work hard BUT market forces dictate that jobs which require particular pressures and challenges, and which may also carry huge burdens of risk or responsibility, are going to be less attractive to many people.

I know people who work damn hard day in day out on the shop floor at tesco - but at the end of the day, they aren't making life changing decisions, performing specialised tasks which took years of training, or carrying out high risk activities. I worked very hard every day all summer when I was a student and did factory work. But I didn't have the pressure I had when I started teaching, and faced a class of 30 rowdy teenagers every day. It's not simply about how hard someone works - its about the level of challenge/risk etc they are prepared to take on each day

Rina, yes, they take home more but that doesn't necessarily mean they are 'better off' because of it. I agree with the poster who gave the definition of being rich as not having to think about whether or not you can afford something etc (sorry can't check who it was!) everyone has different circumstances - people may have to pay more to live near their high paid job and have to pay more for childcare etc. Just because someone earns over a certain amount does not mean they wouldn't miss an extra few thousand coming out of their salaries!

My DH is paid in another EU country and pays 55% tax. The idea that we are 'squeezing' high earners out of the UK already is ridiculous. We need to rethink the social bond we have in this country. I don't think rules on income multiples will work (though they should apply in public sector organisations). We need the sort of social change that makes massive income differentials unacceptable. There is lots of evidence that the lower the gap between high and low earners, the happier the country overall.

Exactly bubbley.

I was 'better off' in terms of what I had as disposable income, when I earned a lot less.

Agree that 40% is too high on earnings over £37,500. I thought the threshold was much higher than that? More like £45,000?

Two thoughts: not picking on this post in particular, but it is representative for me

"We both have good jobs but its not luck, we both have middle class parents who paid for our private schools, university education and guided us to getting good jobs."

I feel very differently - I didn't go to private school, but I feel that I am incredibly lucky to have had involved hardworking parents who made sure that I had a good state secondary education, encouraged me to go to university and made it possible for me to get a good job. I can't see any reason why I deserve to have massively more money and opportunities in life than my friend who was abandoned by his parents as a baby & grew up in and out of care/foster homes etc.

If you have had the good luck in life to have received a good education and be in good health, it seems to me that you do owe something to those who aren't doing so well.

Second thought - maybe what we need to worry about is not tax rates, but wage inequalities. If wages were more equal (or at least less massively unequal), then there would be less need for redistribution.

Its hard to get definitely comparable figures because of the various taxes (central/local income tax, social security contributions etc) but I'm not sure that the UK tax rates are massively lower than those elsewhere in Europe.

We do, though, have vastly more unequal pay rates than most other western European countries.

So did I bibbity! I checked it on the hmrc website.

I see that MainlyMaynie has said what I was trying to say far more coherently

The £37,500 doesn't include your personal tax allowance which means in practice the threshold is £45,000.

The points about the unequal payrates are very interesting. Is it Sweden that had quite a small difference in salaries and everyone pays quite a high tax rate but they have excellent services?

I don't think so mainlyM - here are the thresholds

Just noticed that from April the 40% threshold starts at 35k.

bubbleymummy, I think that is true about Sweden.

I believe that Japan has relatively low tax rates/social spending, but has very low income differentials, another interesting example.

From April 2011 the rate is being reduced to about 42k which brings millions more people into the higher rate tax band.

Including teachers, nurses and police...

bubbleymummy, I am pretty sure that MainlyMayney is right about the £37,500 not including your personal allowance.

I have expected to fall into the 40% band in the past and not done so, because I'd not knocked off the personal allowance from my earnings.

42k is including the non-taxed bit...but sounds like it's nearer 40k

Bubbley, that table does not include your personal tax allowance.