Trickle down: To ask higher income earners...??

[venusandmars]

Following on from the budget announcements today which disproportionately benefit higher earners (particularly anyone earning over £150,000 pa), if you have a higher income and will therefore benefit from the tax changes, how will this really impact on your spending?

Will you actually spend more on local services (more coffees out in a locally owned cafe)? Will you increase what you pay your window cleaner? Will you donate more to local charities or spend more time volunteering? Will you make voluntary contributions to HMRC? What WILL you do with the extra money?

OK, I know IABU asking people to account for their choices, none of us know the financial pressures that higher earners might be under, but it seems to me that the whole 'trickle down' economic theory is completely flawed. So little of that additional money is going to be seen by lower earners - and almost none to those who cannot work.

I'm not in the +£150K bracket but I have enough when I know others are really struggling. I have increased what I pay my window cleaner. Over the next 4 months I will use my 100% of my energy payment to donate to local foodbanks. It's small stuff, nothing heroic.

I am despairing about the tax announcements today.

They say the same about doctors; the fear they’ll go abroad where they can earn more money. Sure, in some countries doctors can earn more but it’s balanced by higher litigation risks of being sued when things go wrong.

The grass isn’t always greener on the other side. Trade offs…

Singapore has very low tax - and very high cost of living too.

According to a 2014 survey conducted by Singapore Polytechnic, some of the top reasons why Singaporeans would want to leave the country were "the high costs of living, having more opportunities overseas for work and education and a slower pace of life".

The work-shy category need to be weaned off their entitlement to benefits. People need to motivation to work harder and increase their earning potential.

I’d argue it’s also about working smarter too. People doing essential jobs work very hard, but the pay isn’t as good. Not everyone is academic. But essential workers are needed.

Are you aware of automation and the risks it poses to future jobs and earning potential (and how that’s outside peoples’ control)?

What is your solution to automation?

The Financial Times: Universal basic income is best response to automation

why would anyone aspire to succeed

Success is measured in more ways than one.

@Snoozer11 this tax cut has benefited people of all income levels. Yes it seems to have benefitted the higher income more, but they put in more in the first place, at a higher proportion too.
Fyi, i do work and belong to the JAM catagory. We have gone multiplied our income through the decade, never receiving any handout. We wanted more children but could not afford it, i wanted to be sahm but could not afford it. But there are moms at school with 4+ children, living rent free, receiving free school meals, free dental, free prescription, subsidised nursery places, as long as they work at least 16 hours per week.
I work 60 hours a week and not entitled to any help. Now why cant people like me feel a bit bitter? There is a saying that only 2 types of people can afford the energy bill: those very rich and those on benefits.

Menu
General NewsGuest PostTax News
Howard Marks: The Tax System Explained

“The Tax System Explained in Beer

Suppose that every day, ten men go out for beer, and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes (by taxpayer decile), it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you’re all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six? How could they divide up the $20 windfall so that everyone would get his fair share?

The bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to suggest the new lower amounts each should now pay.

And so the fifth man, like the first four, now paid nothing (a 100% saving).
The sixth now paid $2 instead of $3 (a 33% saving).
The seventh now paid $5 instead of $7 (a 29% saving).
The eighth now paid $9 instead of $12 (a 25% saving).
The ninth now paid $14 instead of $18 (a 22% saving).
The tenth now paid $50 instead of $59 (a 15% saving).

The first four continued to drink for free, and the latter six were all better off than before. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the fifth man. He pointed to the tenth man, “But he got $9!”

“Yeah, that’s right,” exclaimed the sixth man. “I only saved a dollar, too. It’s unfair that he saved nine times more than me!”

“That’s true!” shouted the seventh man. “Why should he get $9 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next day, the tenth man didn’t show up, so the other nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important: They didn’t have enough money between all of them for even half of the bill!

And that is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is friendlier.

What most people on this thread don’t seem to realise us that Kwartang et al want the economy to fail , as far as I can see. The pound is predicted to fall below the $1 mark , most of the ERG with money have long held the majority of their wealth outside the U.K. in dollars and euros. The pound falling makes U.K. assets really really cheap if you are buying in dollars, it’s a fire sale, asset stripping at its finest. Crispin Odey , Kwatengs boss made a fortune yesterday betting against the pound. This lot know the next election is lost so they are just making as much personal money as possible and Truss is in hock to them because they got her elected and she’s too stupid to realise they are tuning rings around her.

interest rates are predicted to be 5.5% by Xmas , anyone with any debt is going to suffer and anyone buying anything imported will pay a lot more because of the low pound pushing inflation higher. Of course what do we import a lot of and pay in dollars for …. Energy . What a mess .

I think the budget is shockingly unethical. I want to live in a country that works: where strikes aren’t halting business all the time etc, and where the nhs can function.

It will make my family a few thousand richer a year. Unless we holiday abroad, as the pound is crashing (as investors look at this budget and realise that our government is stupid) so holidays abroad will cost a lot more.

Trickle down economics has been disproved. But, that said, despite being high earners we’ve never had a cleaner. Yesterday I thought sod it the budget tax change will cover it and hired a weekly cleaner. So make what you will of that 🤷‍♀️

whats the point of having lots of money if you are surrounded by people who are struggling and driving to work on roads with potholes with polluted beaches, a poorly funded education system and two tier healthcare . Surely we all want to live in a happy, healthy and productive society.

The more inequality you have the more fragile the social eco system is. Some people will always earn more than others but in a mature society there should be a level below which you cannot fall. I wouldn’t want to be the only rich person in a miserable and impoverished place , where’s the enjoyment and fulfilment in that . I want to feel proud of the society I live in, in short I want to feel that it’s a good place to live, that’s not true in the U.K. at the moment.

My household will be 2.5k better off. We had just bite the bullet and booked a sleeper train holiday to scotland for summer ..
I suppose some does trickle down..
Having said that, if we are 10s of k better off , we might just stash most of it away

We will get about 30k per year from this and I expect it will balance out the additional work we need to do on our foreign second home. We will not help the U.K. at all with this money. Nice to have but totally irrelevant on our budget.

Ah yes, this old 'model' for explaining why to do tax cuts on the rich. Believe its usually trotted out when the Republicans are in charge in the US.

What it fails to take into account is that there may not actually BE a bar to drink in if its closed due to unseen Man 10, who stashes his cash offshore, raises the rents too high for the business to continue. Or Man 9 and 8 decide to move to another country that actually uses his taxes efficiently to provide good services and a good level of society and optimism for future growth and development.

Where has dyson gone? Singapore

I am just in that bucket, and there will probably be an increase in spending in my household. Not necessarily as a direct result of tax changes, but it will certainly help. In terms of specific purchases, will get braces for one of the kids, and a second instrument tuition for another - something wanted before but was just out of the budget.

Not sure if it counts as trickle down. We definitely won't be spending more in terms of general consumption (food, transport, clothes etc).

Even if high earners would have had to cut services and now will keep those services, lower earners will now be forced to cut services instead due to these tax cuts going nowhere near the rising cost of living.

I am on a low wage and have a window cleaner, only as a quarterly service, but I will have to stop that soon. I am also thinking about stopping going to the barber six weekly and buying clippers instead. I will no longer be able to afford the occasional takeaway either. So services are likely to still suffer as a result.

But surely even if you were utterly selfish you would still want higher taxes for the very rich?

Surely very rich people, if they have any sense at all, quite like the idea that if they fall on hard times their kids won't die due to a lack of NHS? It's really nice not to have your mansion broken into by desperate thieves. It's nice not tripping over homeless people on your way to the opera. It's nice not to have to spend £3k on new suspension for your porsche after hitting some massive pothole. It' nice to know that an ambulance will turn up fast if you have a heart attack. It is nice to think "I'm a little bit caring, not completely selfish". Srely these things are worth so much more than the tax cuts?

Obviously some money trickles down. The whole point though is that ordinary people tend to spend most or even all of any extra money they get, because they need to. Rich people tend to save a much higher proportion.

It is not that some money doesn't trickle down, it is that it trickles ACROSS from ordinary people to other ordicary people much more, AND the net effect of tax cuts for the rich is for wealth to flow up not trickle down.

Actually, this is the first time I've thought of it this way. Trickle down is not a lie, but with trickle down you also get "flow up" and the net result is the rich getting much richer.

Dear god, some of the comments on this thread about valeters, cleaners, gardeners, foreign second homes...I think the issue is a fair few people (not all!) in this income bracket have absolutely no idea what it's like living in the real world!

I earn a “good” salary, DH is a very high earner.

We are both disgusted by yesterday’s event. We do not need a tax break! We’d far rather the money went towards our crippled public services, and to the poorest people.

We said exactly this last night- no, we won’t be spending our tax break money- because energy bills are going up, interest rates are going up (big mortgage), we’re still paying childcare (nearly £1k a month) and we can’t afford to save. So the whole premise of his mini budget is pointless.

I agree to a point but ‘real world’ is relative, isn’t it? Like it or not, that is some people’s real world.

I don’t think it’s fair to say the problem is that people in this bracket don’t live in “the real world”.

for one thing, my world is just as real as yours.

for another, as this thread shows, the vast vast majority of people in this bracket don’t want these tax cuts exactly because we think we don’t need the help and people with less money do.

But those valets, cleaners, gardeners, dog walkers and nannies are paid and they put the money back into the economy. They epitomise trickle down in action. If you’re going to be pissed off with people in this income bracket, you’re choosing the wrong ones - the ones who stash the money away so it benefits only themselves are the ones who annoy me.

Good point @Blossomtoes, but how will trickle down work when some high earners buy expensive foreign properties or stash it away for themselves, as you quite rightly said? Many do, so I just can't see it working.

I don't know, I just find it so crazy that some people have all these 'staff' while others are queuing up at food banks. It doesn't sit right with me.

I just find it so crazy that some people have all these 'staff' while others are queuing up at food banks

They’re providing jobs so the people they employ don’t have to queue at foodbanks. They’re also recycling the money back to the Treasury through the tax those people pay if they don’t pay them cash in hand. Theoretically people who pay for childcare have “staff”, does that upset you?

We will benefit from this tax cut but what is the point of increased personal income when public services are being decimated. DH and I are getting older, our parents are getting older, no one knows how their health will pan out. At this rate I truly fear for the NHS, the education sector and all the valuable and necessary public services we all rely upon.

I currently earn a decent salary and DH falls into top tax bracket. But I have a life limiting illness and require regular hospital treatment. Not even on our salaries can we afford to replicate the treatment provided by the NHS. For the first time in my life I feel fearful of the future and powerless to effect change.

I just find it so crazy that some people have all these 'staff' while others are queuing up at food banks

You find the idea that someone can have a job as a window cleaner or car cleaner or nanny ‘crazy’ because other people in the country are low earners?

Is it also ‘crazy’ that some people work in 5* hotels or Harrods?

No I just mean in terms of inequality, that's all.

The gap between rich and poor has become crazy in the last ten years or so, I agree.