to think that we should pay more in tax?!

[MenMust]

I am wondering whether tax rates should go up rather than public services being cut. When I first started working tax rates were around 33% and now they are down to 20% and services are being cut. More tax should be raised from large companies and from the rich but I also think that if we want to keep our services including the NHS then we all maybe need to pay more in tax. any views on this?

[smallfox2002]

One which increases with the amount earned.

I'd certainly recommend far higher taxes on rent seeking investments rather than labour.

50% over £150,000 wasn't a bad place to start, about 30% in corporation tax, with the closing of loopholes would do it.

We have a strange dichotomy in the UK ( and the USA) in that individuals want all the profits of their labour and investment to be private, but want the risks that allow them to make those profits to be socialised.

For example, Amazon fails to pay taxes here, but the risky long term investments that it needs in order to be able to operate, the roads, rail, education, health, technological research etc etc, are all taken by the government.

Essentially the way the system currently works is that your average person gets Hayek style free markets, while the wealthiest and corporations get Keynsian.

Socialised risk, private profits, that is the biggest scrounging debate we should be having.

I point you in the direction of Stiglitz and Piketty and others if you want to know more.

[merrymouse]

But the reason Amazon can avoid tax is that other countries enable it to do so. It has nothing to do with the U.K. Tax rate.

The problem with the 50% rate of tax was that it didn't really increase the tax take. On the one hand why bother earning an extra £ if you are only going to make 50p, on the other there are plenty of ways to avoid paying the 50p.

Re 17bn uncollected vat, the majority of that is not big corporations not bothering to collect VAT - it's too easy to spot. It's small to medium sized businesses, the cash in hand economy and criminal fraud (charging VAT but not paying to HMRC)

Collecting it will mean going after small shop owners and organised crime, not Amazon.

But then you go back to who really pays VAT. Small shop owners can only charge what the market will bear. You can increase the VAT rate or change the rules, but the price will still be based on what the competition is charging and what consumers can afford. You only have to look at cigarettes and the mooted sugar tax to see that sometimes the point of tax is not to increase revenue but to reduce consumption.

Tax is a blunt instrument used to collect money by the government, sometimes efficiently, sometimes less so. It will only ever have a tenuous link to fairness.

The main reason to tax rich people more is that there is no point trying to get money from people who don't have any.

[Chikara]

Stiglitz and Piketty probably a bit much for me on a Weds night but I am interested in what you have to say.

smallfox2002 - I agree with what you say about the risk v profits although to some extent the country needs to invest in the infrastructure so that the companies will take the risk there does need to be more of a payback.

The privatisation of the railways summed that up for me. The easy bit is privatised, the profits are all private and still we subsidise. And we gave the land away - which was sold off. And the selling off of Council Houses IMO was criminal.

However a high street of shops is nice to be in - whether we buy or not. Wandering through a department store, if only to use the loo, is a pleasure, private schools have educated some great men and women, private farmland is beautiful to look at and private front gardens keep our streets nice to walk down - and we don't have to pay.

The OP posed the question as a simple equation between public services and tax. ie: more tax = better service and less tax = fewer services. I think many people see it that way rather than as tax as a key factor in how an economy actually functions.

Essentially we all want to live in a nice world and somehow that has to be paid for. How we pay and how we allocate resources and who gets to use what is there is more complex than tax. (Sorry I am a bit "bleedin' obvious")

[smallfox2002]

Many of the things you mention that we don't have to pay for, we do in more ways than one, private farm land is heavily subsidised, private shops recieve the benefits of government spending through the rule of law, infrastructure that allows people to get there. Top Shop, Oxford Circus isn't the highest earning shop in the group because Phillip Green is a genius, more so that it is right next to a tube station, serviced by tens of busses per hour and is on one of the busiest streets in the world.

Amazon at the moment are allowed not to pay tax, but you can bring in regulation, by stopping the repatriation of profits off shore for example, you can AND could bring these types of laws in. in fact the EU is seeking to do something on these lines.

[smallfox2002]

"On the one hand why bother earning an extra £ if you are only going to make 50p"

See this is a massive over simplification. 50 p on earnings over £150,000 still means you get a large salary, and are able to afford far more than anyone else.

Also your "why bother" kind of goes back to the now discredited Laffer Curve. People earning high salaries aren't just motivated by money, there is prestige, job satisfaction and many other reasons for wanting to do a high level well paid job.

Ask yourself this, if the higher rate of tax is raised by 5p in the pound, how much do you have to be earning for that 5p to make a difference to your lifestyle or to what you now can't afford.

At the same time it should also be made illegal to bring forward or manipulate income to avoid tax. The way things are, the richest pay the highest level of income tax, 1% pay 11% , but they pay an over all lower proportion of their income in tax, when you include purchase taxes.

This is because the wealthiest have a lower propensity to consume, as pointed out, how much worse does your lifestyle get from 5p in the pound more from every £1 over £150,000?

How else could we spend the billions raised, assuming we cut the loopholes, it brings in more than the £350m a week so beloved of the right when they wanted to leave the EU.

[Chikara]

True smallfox2002 - I know it isn't a simple private v public. I was trying to illustrate that whilst private enterprise needs public investment to survive so public life can benefit from private companies in an indirect way too.

I am also not an economist but I value hearing what others think.
I'll come back to this thread in the morning after work.

[merrymouse]

high powered jobs also mean more stress and longer hours. £150,000 is, as you say, a high salary so why earn more? You are both demonising people with well paid jobs and expecting them to work more. However the bigger point is that the more money you earn, the more power you have to make choices to avoid paying tax.

The way things are, the richest pay the highest level of income tax, 1% pay 11% , but they pay an over all lower proportion of their income in tax, when you include purchase taxes.

that is all based on a vague idea of 'the rich' and assumptions about their purchases. According to a Mr J Corbyn of Islington a salary of over £150k does not bring wealth.

[smallfox2002]

How am I demonising people with well paid jobs? What I'm saying is in order to improve the economy, and society as a whole we need to step away from thinking that trickle down economics works. It doesn't.

Over £150k doesn't bring you wealth but it means that you are in the top 5% of earners.

The problem with taxation is everyone wants the benefits of living in a society, but only those that have to pay for it will, those in the middle and the bottom, where as those at the top benefit far more.

[Floods123]

Angry that big multi nationals don't pay enough. Equally angry that the public sector is hopelessly inefficient! I pay 51% Inc NI. I would actively avoid if I was asked to pay more. Government needs to collect the right taxes and public sector needs to behave like a business in as much as it needs to stop ludicrous practices of procurement. Just get the best for the right price!

[smallfox2002]

I bet you don't pay 51% as well as NI, not on your entire income :)

That's another thing, people saying "I pay XYZ" when you certainly don't!

[smallfox2002]

BTW the UN thinks the NHS is extremely efficient. Also after years and years of cuts, how much more do you think can be "saved" from the public sector. Bet you don't work there.

I currently work in both in two different roles, the largesse in the private sector and some of the working practices could certainly learn a thing or two from the public.

[HyacinthFuckit]

Also your "why bother" kind of goes back to the now discredited Laffer Curve. People earning high salaries aren't just motivated by money, there is prestige, job satisfaction and many other reasons for wanting to do a high level well paid job.

There are, but my admittedly non-expert understanding is that higher tax rates have varying impacts depending on the individual. They motivate some people to try and earn more because they want a particular level of after tax income, some not to bother because it's not worth the extra effort, and for still others they're irrelevant because the money isn't why they're there in the first place.

So I think it would be quite naive to think the 'why bother' attitude is simply not going to occur. Indeed, I've done it myself. I was invited to apply for relatively well paid locum work for a few hours a week recently, but decided not to as I don't need the money and once I'd paid tax, NI, student loan repayments and childcare it was worth less to me than I value my non-working time at. Granted, not everyone pays childcare, but then I'm only a 20% taxpayer so the amount I'd be left with would be similar to a 40%er. I have no interest in being paid a HR tax rate salary unless I can get it with no extra effort whatsoever. The person who got the role is less experienced than me, so I reckon I'd have got it, but no regrets here.

My views aren't universally held, but there are others like me. The more pertinent question, I think, is whether it matters that tax rates will discourage some people from trying to earn more.