Are taxes too high?!?

[RedneckStumpy]

As a Brit living in the US I often get asked about life in the UK. Last night I Went through the usual discussion, then was asked what the taxes were like. So I outlined income tax and sales tax and was challenged with a question that stumped me.

Why would you bother trying to better yourself?

Hmm. I have 33 years experience at working at the coalface at HMRC, 1975 to 2008. Have seen it all from different Governments.

I would like to see the Personal Allowance increased to £20k pa. With the proviso that the following year all the working tax credits are scrapped entirely.

The upper tax rate band should be 50% on taxable income over £200k

Holiday/second homes should have an annual charge of 10% their market value.

Profits from letting should be taxed at the 50% rate, regardless of value, location or whatever.

Re. the difference between low and high salaries - Being on a low salary affects your access to credit which makes a big difference I find. So eg. doing home improvements to my house which would make it worth more and I’d eventually profit from = very hard. That’s easier to do if you have a high salary and can take out a loan. You also get better interest rates on savings, can fill Isas and come back to them and what have you - you’re in a much better position for financial planning and long term benefits with a high salary.

singletomingle I would happily pay MPs more, I don't really want them doing two jobs and a lot of people aren't going to be able to afford to take the pay cut being an MP would involve.
I would tax rented homes/holiday lets/second homes more, I am surprised even following some changes how many tax breaks we get for renting out our house as opposed to living in it.
I think 50% over 200k is reasonable. I would also look hard at inheritance tax. I wouldn't take 60% of anyone's pay. I would look an land tax in more detail and unearned incomes.

Raising income tax above 40% means a reduced income to the state. That is why most governments keep it at this (optimal revenue producing) rate. I don’t understand why anyone would want to increase the rate to get less revenue? We need the government to get more tax from amazon, Starbucks etc rather than focus on income tax in my humble opinion?

@Fleetwoodmacfan there are other taxes the government can increase or reform which people can't escape from, but they don't because they know how the meedja will portray any government who tries that.

In regards to taxing Starbucks and the like - good luck. Multinationals happily pay tax lawyers and accountants to ensure they can find loopholes in our complex tax regulations. It doesn't work so well in other European countries as their tax regulations don't run into volumes.

On a previous point! I feel Paying tax on unearned income is so unfair.. I’ve lived so frugally all my life as I want to pass on my hardworked earnings to my kids and grandchildren. That’s my choice. My neighbour on the other hand frittered through her earnings, choosing to spend them on herself going on amazing holidays and eating out, totally her choice that I respect. But why do my kids have to pay tax because I didn’t waste my money ?

Arethere - you believe a 75% increase in take home pay isn't much? Bearing in mind as well that the first 2k would have paid most essential bills such rent/mortgage etc, so most of that increase would either be used for lifestyle improvements, spending/saving, or optional increased bills in return for a better standard of living.

BMW6 You have interesting ideas. I would support them, even though the 50% tax rate would hurt.

I honestly would not mind paying higher taxes to bring us more in line with Scandanivian countries if I had any faith the money would actually be spent for the people's benefit.

I pay £1000 in council tax pa, £245 to tax my car, vat to MOT it, pay 57.95 pence per litre for every litre of fuel I fill up my car with (around £35 a month or £350 a year). I pay tax to insure my car, pay tax on my utilities, pay tax on the TV licence which in essence is another form of tax.

I then pay 20% VAT on any purchases I make (except children's clothing) out of my salary that has already had NI deductions taken from it.

You weight it up, and good portion of your income, perhaps the majority, is spent in paying stealth taxes. In exchange for all the money you get less police officers, and police stations closing, a failing NHS with longer waiting times and operations cancelled, roads riddled with pot holes, schools being critically underfunded, rubbish bins being downsized and collections extended to every three weeks.

Raise taxes? They're already robbing us blind in broad daylight.

I haven't read the thread but I just wanted to introduce the concept of the Laffer Curve www.investopedia.com/terms/l/laffercurve.asp

This states that there is a tax-rate place which is optimal - in that it doesn't disincentivise people from working (which would reduce the tax take) and still collects the right amount of tax

If tax rates become too high and penal the high earners just either stop working or emigrate. At one point we had tax rates that were around 97% at the very top end. Which had a very negative impact, as you can imagine

The top rate of income tax is currently 45%. That's around about the tipping point on the Laffer curve - most people think. For me it still feels a bit gruesome, but it's not discouraging our entrepreneurs and its reasonable

I don't know if the OP has much experience of US taxation which is more complicated and rules-based than ours but the top rates are not dissimilar.

Don't tax you, don't tax me, tax the fella behind the tree.

I believe taxes are too high. High earners pay twice over: once through taxes, the second time by using private education, private healthcare and dental care. If taxes are too high, it either encourages high earners to leave the country or to stop striving to earn above a certain level, which is a lose-lose either way. What will lower income people do if the higher income cash cows opt out of subsidising them?

Personal taxation is way too low for what people expect back.

Maybe people should lower their expectations?

PurpleTigerLove

I wouldn’t move home if you paid me

Yes tax should increase to aid funding for health care and so on. The benefit system should also be looked into.

fleet one reason I would look at unearned income is that it reinforces generational inequalities and helps to distort areas like the housing market. The second reason is more practical and just that your neighbor who has spent her money on holidays and meals out has paid tax while doing so and your money is very unlikely to have been taxed at that level.

And which countries would you like the weapons to be sold to?

Whichever wants to buy them, at the end of the day it’s a product.

I know that Starbucks Amazon et al get a bad press for having tax-optimised structures but you cannot blame them for doing what is lawful. Their CEO's answer to their shareholders and they have an obligation to maximise shareholder value.

The rules are changing although the principles that will govern taxation of the digital economy are still not clear. Things will improve on that front.

By the way I should add that the big US companies named are not the only multinational corporations running tax-advantaged structures. All the tech companies do it (Apple, Microsoft, Facebook, Snapchat you name it they all do it. There's a reason for that but if I go into this in more detail my post will become a really long essay). But it's not just the tech stocks. The Life Sciences businesses all run tax-advantaged structures too. And it's not just limited to the tech stocks and the life sciences businesses ....

Meanwhile, one of the biggest losses to the UK taxation system is the black economy. The sex industry, the people working cash in hand all the rest of it. The solution Sweden has come up with to counter the black economy is to go entirely cashless so that receipts and payments can be tracked. It's an interesting idea and it's one that will eventually happen here.

Just to correct the point about the oil industry raised below

The oil industry is on it's knees frankly (a trade war between OPEC and the US shale-oil producers). There's some signs of the price of oil recovering but all my oil and gas clients have decreased their numbers of employees by approximately 1/3.

As for handsome taxation revenues coming from North Sea Oil? Very unlikely. The problem is that the North Sea is very inhospitable, companies will (and have) flocked to places where oil can be more easily extracted. It was a bonanza but it's coming to an end.

It's interesting because every citizen of Norway is technically a millionaire because the Norwegian government put all its oil wealth into a sovereign wealth fund. Whereas here in the UK we just spent all our oil money.

What will lower income people do if the higher income cash cows opt out of subsidising them

What would higher income people do if all the childminders and care workers quit to go for better paid jobs because they got sick of being denigrated and looked down on.

And like i said earlier you can always pay more for childcare so they dont have to claim in work benefits.

"The solution Sweden has come up with to counter the black economy is to go entirely cashless so that receipts and payments can be tracked. It's an interesting idea and it's one that will eventually happen here"

yep Because people have short memories and have already forgotten the TSB debacle which occured earlier this year.

Yes there is a whole lot of muddle around lower income workers

The minimum wage is not a living wage and it should be ramped up to be a living wage. I don't know what vested interests are preventing this from happening.

An integrated and simplified tax and benefits policy would be good as well

I don't think taxes ARE too high, but they should separate the payslip taxes into what it goes to, how much to NHS and Police force etc. So we could see what we were paying for

I loathe libertarianism so right there we aren't on same page. Go have a dance with Scott Adams.
--American preferring to live in UK.

Christ OP you really are clueless. There’s a level of poverty in the US that is utterly shameful for such a developed economy and don’t get me started on the personal and national debt levels.

Taxes are higher in other countries:

(Source The Guardian www.theguardian.com/money/2017/may/27/tax-britons-pay-europe-australia-us)

"A comparison of personal tax rates across Europe, Australia and the US by Guardian Money reveals how average earners in Britain on salaries of £25,000, or “middle-class” individuals on £40,000, enjoy among the lowest personal tax rates of the advanced countries, while high earners on £100,000 see less of their income taken in tax than almost anywhere else in Europe.

Our survey found that someone earning £100,000 in the UK in effect loses about 34.3% of their pay to HM Revenue & Customs once personal allowances, income tax and national insurance are taken into account. The one-third reduction is roughly the same as the US, Australia and Spain, but a long way behind the 38% in Germany, 41% in Ireland, 45% in Sweden and up to 59% in France (though the French figures include very large pension contributions). "