to wonder if people think very high earners should be taxed more, even if it results in a net loss of tax for the government?

[Orwellian]

According to this article (yes, it is the hated DM);

www.dailymail.co.uk/news/article-2239534/Millionaires-exodus-Two-thirds-Britains-earners-deserted-UK-50p-tax-rate-introduced.html

The 50p tax rate brought in by Labour in 2010 resulted in a loss of £6.9 billion in the year 2010/2011, because there was a drop in the number of millionaires paying the 50p tax rate from 16,000 to just 6,000 (i.e. they either left the country or reduced their taxable income).

Do people think it is better to introduce an ideologically driven tax on earned income for very high earners, even if it means there is actually a net loss in tax take for the government? If so, why?

YABU What's the point in an 'ideologically driven tax' that results in less revenue? The whole point of taxation is cash in the coffers to be redistributed where it is required and the only ideology that should be at play at either end of the equation is the ideology of fairness, because that ensures support. Personally, I'd rather see a much higher personal allowance and a flat rate for everyone above that whether they derive income from salaried employment, shares/dividends, asset sales or whatever. Far fairer.

I'm not being unreasonable. It wasn't me that introduced the stupid 50p tax rate which was obviously just going to provoke those that could afford to leave the country rather than pay it, to do so. That is what always happens when the tax rate is raised to silly levels. It was ideologically driven as even Labour must have known the effect it would produce.

I think that they should raise the base rate from 20%. They could increase the basic rate to 25% and have a higher personal allowance to help people with a low income. Tax needs to be a way of raising revenue rather than fueled by jelousy of the rich.

I feel that some of the measures like removing child benefit from higher earners hurt the ecomony because they discourage people from taking promotions or working harder. (I am not affected by the child benefit changes!)

Prehaps our tax system should promote philanthropy by making it advantageous for the rich to give away some of their assets. (Maybe their personal tax allowance could be increased if they choose to give money to community projects or fund a scholarship at a university or private school or some other charity)

The super rich need to be made welcome in the UK. We want them to spend money in our country as it creates jobs.

The article is sadly lacking detail. However it does say that most people deferred income. So basically they saw a Tory coalition come in, figured they would change the tax back and delayed income for a year.

I am not convinced by this article that if the 50p rate had stayed we would have seen this lost revenue. I think most of it would come back in future years.

Getting those who can afford it to pay more is a good concept in my opinion. Where this went wrong was in loopholes. How many of those leaving actually left the UK as oppose to taking non dom status and fiddling the money around to avoid tax? This should be stopped so fair tax is paid by all who enjoy the UK.

The evidence for a fairer, more equal distribution of wealth having a positive health, education and happiness impact on ALL echelons of a society are too strong to ignore.

So many of the social ills that the Daily Mail deplore are the result of inequality and people understandably being mightily fucked off by having so very much less than others, even after a 40 hour working week. They need to build a coherent answer that is backed up by research evidence. Instead the DM etc pumps out propaganda to persuade middle and lower earners tovote against their own financial best interests and keep the rich getting (much) richer.

Rant over

reallytired I am strongly opposed to tax promoting philanthropy. The us system disgusts me.

Essentially it allows Richyboy to opt to fund a new wing of a museum and get his name on it and kudos and back slapping and lots of warm fuzzy INSTEAD of paying into the coffers that support desperately needed social services.

Maybe we should all do it. I pay about £30k a year in income tax. I think i'd rather give that to Oxfam to help people in developing countries.....

@Thinkaboutit... There's a lot of publicity given to things like non-dom status and various Chris Moyles-type schemes to reduce tax bills for the - I don't know - 1% of people with enough money to take advantage. However, I think there's a lot we could do with the meat and potatoes of the tax system that the other 99% of us are covered by that would increase revenue. You mention loopholes and some of the most glaring ones are in the difference between Capital Gains and Income Tax. Results in a big incentive to be paid in shares etc. rather than cash. If the rates were the same the incentives would disappear.

Thinkaboutit, re your question on loopholes/leaving the country, either has the same effect on tax revenue, at the point where people feel they are being taxed unfairly they will seek ways to avoid paying it, there is evidence to show that that level is around 50%, which the OP's info appears to support.

If an ideology results in less income, it's time to let pragmatism win

Cogito but if capital gains incentives were removed then so would the appeal for entrepreneurs to take risks, build businesses that employ people, pay tax etc that they can eventually sell for a hopefully large personal gain...also for further investment into businesses by wealthy imdividuals?

I agree with ReallyTired. A higher personal allowance before tax and the same rate for everyone would be much fairer.

The tax system at the moment is a shambles. We are all too highly taxed, which would be fine if we got high quality public services, but we don't. If the tax system was fairer, or we got enough in return for the amount we pay, then higher earners wouldn't feel the need to find a way to reduce their tax burden.

cogito i agree re CGT, a loophole that desperately needs closing (rather than widening by the tories)

sleep I read somewhere there is talk of moving to the US system. All income gained in a country by it's citizens should be taxed where they are, no more non doms and moving to avoid tax.

I just don't buy the entrpreneurs argument. Sweden and Japan have very high top rates but don't seem to do badly by the entrpreneurial spirit.

outraged you are falling into the age old UK problem. We have always wanted continental quality of service for US tax. It's not going to happen.

The other great thing about a flat rate is that most loopholes would be removed, it is very straightforward. I also think that because people (higher rate taxpayers at least) would perceive the system to be fair, they would stop looking and paying tax advisers to find ways not to pay. It would be very interesting to see how the figures would likely work out if this were applied to current national declared income plus the income that the government believe is "tax avoided".

No, it probably isn't going to happen. But then people stopping trying to pay les tax is never going to happen either.

"reallytired I am strongly opposed to tax promoting philanthropy. The us system disgusts me. "

Complusory ways to attempt to extract money from the rich don't work. They just go abroad and the country gets none of their wealth. Its easy to forget that wealthy people often pay a lot of tax in the form of VAT as well as income tax.

I have no objection if a wealthy person wants to give some of their money to a UK charity like OXFAM that does overseas aid.

The most pressing unfairness we need to tackle is where we start taxing, not what the highest rate is. The low-paid pay too much tax.

It's unfair to everyone that pays tax IMO, the low paid as well as middle and high earners.

I think we should all pay the same rate of tax on everything after a generous personal allowance.

EldritchCleavage,

Completely agree that the low paid pay too much tax. However I think we need to look at the entire tax system and not just income tax.

EBay and Amazon are not paying their taxes. Prehaps we need to look at tax law to ensure that every transaction on the internet pays a suitable rate of tax. Prehaps this can be done on VAT for internet items.

The low paid cannot use their ISA allowances because they rarely have money to save. A lot of people on the minimum wage have no access to a pension either. Since all their income is spent on life's necessarities, low income people often pay a higher proportion of their income in VAT.

I would like to see different bands of VAT for various items. I feel that every day items should have less VAT than luxury goods. Prehaps we should look at the amount that something is being sold for and whether its a luxury or an necessity. I realise it hard to do with clothes. Prehaps items of clothing under £50 should be VAT excempt. We could balance it out by charging more VAT for luxury items. Maybe VAT could be charged on items of children's clothing that cost more than £50. A coat from Tescos will do the job as well as a coat from Boden.

Allowing the low paid to keep more of their money would inject much needed cash into the UK ecomony. It would also make it worthwhile for more women to work.

I agree with all of that, ReallyTired.

It depresses me how much of the debate concerning tax has been about a small minority of very rich people, rather than the mass of low-to average earners. It demonstrates to me how the wants of the few are allowed to skew the debate, which ought primarily to be about the needs of the many.

And I dislike and distrust the argument that the rich must be left alone or they will leave the country. Many of the super-rich give every impression of being unprincipled parasitical people with no loyalty to this country anyway and we should not place any reliance on their continued residence, which ought not to dictate tax policy.

www.hmrc.gov.uk/budget2012/excheq-income-tax-2042.pdf

This is a very interesting (if rather academic) report published by HMRC earlier this year about the effect of the 50% tax rate on tax revenues. Many people (including the media) comment freely about issues surrounding tax fairness with little understanding of the realities, a number of which are brought out in the report, playing on the politics of envy. Putting aside the notoriously difficult (at least amongst the ignorant) distinctions between planning/avoidance/evasion, there is the simple behavioural point that if individuals are going to lose 52% of their extra earnings in tax they may well decide not to sacrifice their family life for the privilege.

"if individuals are going to lose 52% of their extra earnings in tax they may well decide not to sacrifice their family life for the privilege."

But at the income level we're talking about with the 50% rate, how many hours you work doesn't have such a direct effect on your earnings.

I can't think of any job where you could up your income from, say £200k to £220k just by working extra hours? On that salary level you generally either work long hours or lose your job.
Self-employment maybe, but I'd be surprised if a self-employed person was going to be sufficiently certain of what work was coming in that tax year to make that call.

"I can't think of any job where you could up your income from, say £200k to £220k just by working extra hours? On that salary level you generally either work long hours or lose your job. "

There is not a huge difference between 200K and 220K, but there is definately an issue around the 40K mark.

Getting the rich to contribute more to the country require intelligence rather than the politics of greed. It requires careful though and prehaps advice from pychologists and ecomonists. Prehaps we also need to think laterally by giving companies tax breaks for taking on more employees and maybe larger companies (that aren't struggling) should be taxed if they choose to make someone redunant.

BoulevardofBrokenSleep you're right that the hours worked doesn't impact salary but I'm afraid the hours worked does impact bonus. [bitter City-widow emoticon] I rarely see my DH at this time of year, he is too busy putting in the hours in the hope of a bigger bonus come the new year.

My DH is a higher-earner but the tax hikes have hit us pretty hard (ok, it's all relative, we still have a roof over our heads and food). We pay our taxes in full, we don't avoid them. On DH's salary we would have been able to afford things like private school in days gone by, but that would be impossible for us at the moment. We don't live in the lap of luxury, far from it. I have to sell stuff on eBay to be able to afford Christmas.

What needs to be understood is that if my DH earns £10k less this year due to extra tax, what do we cut? We cut the cleaner, that's what. And the other multitude of things like the Ocado delivery, the garden services, tree surgeon, hairdresser, dry cleaner, window cleaner, nursery time. So now all of these lower-earners are losing jobs and/or earning less money. We still have a roof over our heads and food on our table. But do the lower-earners in these types of professions?