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?

I don’t think taxes are too high in uk
I think the problem is everything the government does takes from poor and rich are getting more and more perks
They have the lowest mortgage interest rates ever
They have the lowest high salary taxes ever
They have the most generous landlord amount they can earn before paying tax ever
They have the highest inheritance tax threshold ever
They have lots of loopholes to avoid tax
They are making more profits than ever before tax free on assets such as the houses they buy ever

Poor are having wages frozen and lower than ever
Welfare top ups are the lowest ever
Rent to pay now highest ever as private rent to landlords
VAT highest ever
Saving interest is lowest it’s ever been
State pension oldest ever to claim hence the poor nor rich will end up paying taxes much longer and working most of their shot lives (rich will live longer too).

On top of this you have corporate tax the lowest it's ever been and companies like Amazon manage to pay peanuts yet make huge profits. It doesn't benefit employers who earn very low salaries (often on zero hour contracts) and have to claim benefits to top up their earnings.
This is another problem with many high profit making companies/corporations, paying low tax and paying low salaries to employers who then their employers are not only earning such low salaries to have to pay tax they also have to take benefits to top up their money.
Then often these low paid employers are also putting their money straight back into the system that supports this circle of wealth to the richer and poverty for the poorer eg paying most of their money to landlords to rent to pay the mortgages off for someone else with money.

Ethics and capitalism has gone too far now and rich still complain that tax is too high.
Overall you have all over the world the top few percentage not only hoarding most of the wealth but also the earths resources.
They don't like to share 'their toys' and have an entitled attitude yet we are at times now when inequality is too extreme and the world is changing and attitudes need too to keep up.

It is about right I think but benefit system is too generous and abused.

@BMW6 totally agree

I haven't rtft yet, but on the first 3 pages everyone appears to be squabbling about the amount of tax paid in reference to the OP. However, no amount of extra tax paid will make up for the utter waste of money going on in public and government services that doesn't happen on that scale in other countries I have lived in. Where I have worked in the past, I have seen plenty of money wasted on pointless:

-consultations
-IT systems, which were redundant after a few uses/ turned out to be incompatible with existing soft-/ hardware
-management where leadership was more important
-provision of free 'stuff' that ought to be bought by the public
-time. When you total up the amount of time wasted in pointless meetings and multiply it by the hourly wages people in that meeting get, you often end up paying more in wasted wages than the item you squabble about would have cost.

Our government and public services are far too inefficient and no amount of tax increase is going to make up for the shocking levels of waste I have seen.

By the way, I did have more take-home pay a few years back as a single parent on half the money I am on now. I paid far less childcare (70% paid for through CTC), got WTC top-ups, 25% CT reduction, lower income tax, lower pension payments, lower insurance and less time-poverty that comes with my levels of responsibility now, necessitating other paid-for services or items, e.g. the car I now need (with all its associated costs) for my job whereas beforehand lower levels of responsibility made using public transport the better option.

In fact, everything required to be seen to do my job well now comes with extra cost: I have to stay longer for extra meetings, meaning paying extra childcare, I need to be able to drive to different locations now, need to have access to more equipment at home and I cannot for the life of me get away without looking the part either, so more expensive clothing, regular hairdressing appointments etc. High-earning lawyers I know have to employ cleaners, because the amount of work they do would otherwise not enable them to spend any time with their children. Or pay accountants, as above a certain workload not doing so when you're self-employed leaves you in serious danger of making mistakes in your self-assessment.

I expect that this is what others mean by less take-home pay; your outgoings, which are necessary, but not included when people look purely at tax paid, are completely different once you reach a certain money threshold. And I did have to live a better-off life to understand why all this was necessary and not just an excuse.

And the usual disclaimer: yes, this does not apply to everyone...

To go back to the OP the culture In the U.K. is very different on this and that probably answers your main question. This is a far more socialist country and taxes being too high aren’t really a big topic of conversation. People get on and pay them, the tax system is well enforced and relatively simple and the rules are established which makes them harder to circumvent.

People enjoy the safety net provided by our tax regime and for the most part understand they have to pay for it. It’s just not part of the narrative the way it is in the US

I totally agree wormzy. I would add to that people either having extremely small workloads or extremely high, with little middle ground. My first government job out of university I had no tasks to complete. None. I was hired and didn’t have anything to do. Me and the 7 other people in my team fought over the 3 tasks that team was responsible for day after day just to have something to do. Then someone like a social worker/ police officer/ A&E consultant are rushed off their feet

The difference between a high and low tax economy is whether voters prefer money to be spent collectively by politicians (on things that may or may not benefit them directly) or whether they think people should have direct control over where there money goes.

In theory neither high nor low is intrinsically better, and if everyone paid tax it would be OK to go either way. In reality, half the voters don't earn enough to be bothered much by the tax system, so it's in their self-interest to vote for politicians who will deliver higher taxes, and spend it on things that benefit them. Of course this means the other half of the voters know that any money is going to come from them and mostly not benefit them, so there self-interest is in opposing.

I think income tax should be much higher. It is the fairest tax.

I would like there to be an overriding rule that everyone gets to take home at least 50% of each marginal pound their employer pays out, in salary and employer NI on it. I think having a cap of 50% will settle any claims about incentives.

Note that employment income falling in the basic rate band is currently taxed at nearly 40%, once you take into account all NI in the way I suggested. So if we merged NI with tax and had a single flat rate between 40% and 50% on all income over the personal allowance, the change for most people would not be as big as they think.

Having a single rate that everyone knew applied to them would simplify discussion when it came to talking about whether taxes should be higher or lower.

Perhaps benefit levels are too high - tax credits have just enabled employers to pay lower wages.

You would have to increase lower wages before a tax rise

As any tax rise would impact business, business needs the money back so an increase it goes round in circles

It’s very well saying well I would be happy paying X amount more it doesn’t quite work like that you would be paying more elsewhere and this might be ok for those on higher wages or have fewer costs but for many it isn’t at the moment

We can’t keep looking to Sweden their population is much smaller average household debt is also very high in Sweden. We have allowed business to grow big and lower pay to remain stagnant for 10 years now that has to change before tax rises

And millions of £’s are wasted in the NHS that needs to be looked

You can’t just look at income

Wormzy hits the nail on the head. The mismanagement is disgraceful. And how can a council leader earns multiple of a prime minister given the scale of responsibility? It is utterly bonkers.

Completely agree with the waste & inefficiencies in the public sector. I’m sure I read that a high proportion of our council tax goes on pensions.

There are far too many workers getting rubbish pay & far too much middle management on high salaries that I don’t believe they could get in the private sector.

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.

The Swedes are beginning to realise that this is not a good idea, and that they do need some cash in the economy, especially given their proximity to Russia, and the current cyber threat. If there weren't some form of cash, then there would be problems. Just being at Fleet services for 45 minutes in June, when no card payments could be taken, cash only, highlighted that one.

Agree Dundee. Income is only a part of the picture.

So if the USA pay similar levels of tax to us in the UK. Where does their taxes go. As they have low state assistance for the poor and no health provision. The police? Defence?

Yes I think people would be happy to pay more in national insurance say as this can be ring fenced potentially for NHS but first the wastage issues would need to be sorted. Perhaps these extra ring fenced contributions could be used towards social services too.

why would you bother trying to better yourself?

What a weird question. Because you're ambitious? You're greedy? You're smart/successful? This kind of argument ignores the fact that, even paying the higher rate of tax, the more you earn, the more you take home. It's called progressive for a reason.

Also, as others have said, social solidarity is important to Europeans. There are still actual US towns where you get a plaque for the house IF you choose to py for the local fire service. If you don't have the plaque, they let your house burn down. Healthcare, much the same. That strikes me as medieval.

We should actually be paying MORE tax than we do in order to get fully functioning public services.

Incidentally, the truly well-off treat income tax as optional via offshore tax havens, trusts and other clever wheezes. That is a scandal that we really should put to bed.

@Michele.

It may surprise you to know the US government has the biggest health budget per person in the world, they just spend it stupidly paying the insurance of the poor etc, when they could have a five star public health service.

They also do spend massive amounts on defence etc

@Defrack

no, they really don't. The total spend as a proportion of GDP is disproportionately huge, but that mainly comprises private contributions.

In 2016, the US spent about 8.5% of its GDP on health out of public funds –
private spending in the U.S. is much higher than any comparable country; 8.8% of GDP in the U.S., compared to 2.7% on average for other nations.

So the US does have one massive healthcare budget, that is public money.
So technically the US could easily run it's healthcare system without private spending.

As I understand it, what the research shows is that people react quite differently to higher tax rates, once basic needs have been met. And obviously definitions of 'basic needs' aren't uniform either.

Some will take it as an incentive to work harder, as in I need to bring home another 10k per annum to have the lifestyle I want so that means I'll need two promotions instead of one. Others will take the view that it isn't worth me working more if I can't bring home at least 58p in the pound. This is before taking into account greater costs of earning that some people have like childcare and commuting, and the need to work more in some societies to privately purchase things that are provided through tax in others. With that in mind, seems daft to generalise about bothering to better oneself.

We do also have some bottlenecks in the UK system, I don't know how that works in the US.

....8.5%. And the UK spends almost 10% (still less than European neighbours).

The waste in the US system is endemic, I agree. Profiteering, corruption, excessive bureaucracy and over-treatment everywhere you turn.

I'd like to pay PAYE, but they raised the threshold so low earners don't pay it.
I avoid tax avoiding companies (amazon) and try and spend with those who have a good record of paying tax.

MicheleWeinberger

Police, fire, education, are primarily paid for out of The US equivalent of council tax