To think the Tories are clever?

[ClassicLib]

They are introducing a massive pension tax cuts for their rich mates in the city, and selling it by claiming that it might also persuade a few rich NHS consultants to delay their retirement to their second homes in France for a couple of years.
And who is paying for this? Why you & me, of course, because our basic rate & higher rate tax allowances are being frozen until 2028. This is actually a massive income tax increase for ordinary working people, of course. And the media have fallen for their spin.
That’s smart politics…

Ok.

You do just keep moving the goalposts.

The original exchange was about tax and your incorrect assertion that someone earning £20k pays a larger proportion of their income as tax than someone on £100k.

Now you seem to be saying that it is bad to have someone earning £100k because they have a higher mortgage and therefore contribute less to the local economy. I just don’t know whether that’s right or not as it’s just a bald assertion, but it’s so far off the original point that it is pointless to continue.

Even if they have a big mortgage they are of course contributing more to the economy, just from the tax they pay alone let alone their other spending. It's a nonsense argument. We need to remove the obstacles disincentiving people at all levels of earnings. These arguments often seem to descend into envy instead of focusing on the economics that will create more productivity qnd therefore raise more tax revenue and benefit everyone.

@GertrudeBell The answer is for the economy to grow and everyone to earn more than to penalise high earners further and stultify growth.

Very well said. Labour seems fixated on dividing the pie equally like there is a fixed amount of wealth and everyone deserves (or even wants) exactly the same. I don’t agree with a lot of conservative stances, but I do think Sunak and Hunt have the right focus on growth as a must achieve objective.

If they did then Hunt would have sorted out the tax thresholds that are stifling it as part of this budget! He'd even commissioned research which clearly stated what needed to be done then did nothing about it. Labour obviously wouldn't be any better - in her interview with Mumsnet Rachel Reeves scoffed when asked what she'd do about the issues with higher rate tax and withdrawal of child benefit at £50k and it all being based on individual incomes not household income - but the Conservatives aren't doing anything about it either even though the problem is staring them in the face. In fact Hunt's proposed childcare changes actually make the effective tax rate over 100% for anybody earning £100k who has a young child. Insanity.

@ScruffyGiraffes i totally agree that needs addressing, but the Truss fiasco and budget commitments make that near impossible at the moment. I would love to see Hunt (with or without Sunak) win the next GE and hopefully be in a position to make more radical changes to the tax code.

Labour is of course completely hopeless on that front, and would likely further increase burden on higher earners, which they seem to define as anyone above £50k

That argument doesn't make any sense though: this is a large part of the reason why productivity is so low and there are budget constraints. The budget position won't improve significantly until this is fixed. It needs doing now and it would more than pay for itself because it would increase tax revenue. Even the IFS has stated that he's mad for not having sorted it out.

As you say Labour is hopeless. But these idiots have had 13 years to sort this out. In fact they implemented many of the policies that exacerbated the problem like the withdrawal of child benefit and personal allowance, on top of not having made the obvious necessary reforms to levy tax on a household basis, and having deliberately trashed the economy with Brexit. So if they were suddenly pledge to sort all of this out in their election manifesto, would we be expected to believe them? He had an opportunity to do it this week. He said the budget was about growth and getting people to work more. Then ignored the obvious reforms needed to make that happen. Laughable.

Look at the graph! We really are led by complete idiots. What incentive is there to work more?

£34.5k that would be taxed at over 100%.

VAT, fuel tax - basically any tax based on consumption. I’d have thought that was blindingly obvious

People with higher incomes will pay more of those as well though. There's absolutely no way that those on £20k, who also get a large negative effect on their tax rate by receiving universal credit, are paying anything like the proportion of their salary in tax that higher rate tax payers do. It's the super rich that avoid tax. PAYE employees on salaries of £100k to £120k pay a higher percentage than anybody else, even those with seven figure incomes. It's a ridiculous system.

The assertion is not in correct, just because it does not fit with your world view, and is perhaps rather surprising.
Lower earners pay a higher proportion of their income as tax than those on lower incomes.

I can't see how that could be possible @jgw1 given that the lowest earners lay no income tax whatsoever, so only pay VAT and Council tax and a bit of NI, which are all also paid by higher earners. Unless the calculation is misleading and distorted by failing to factor in the huge redistribution of money from higher earners through tax to fund universal credit and other benefits for lower earners, which obviously has a substantial effect in lowering the real tax rates of lower earners on their actual earnings, as many pay negative amounts of tax when all income is considered. Particularly as the universal credit is tax free so to earn that money yourself you'd have to earn far more as a gross amount. Do you have a calculation? Genuinely interested.

People with higher incomes will pay more of those as well though.

They may, they may not, there don’t appear to be any stats either way. It’s indisputable that eg a litre of petrol represents a much higher proportion of the income of someone earning £10k a year than of someone earning £150k. Income tax raises less than indirect taxes which fall disproportionately heavily on those on low incomes.

Of course it does. But it doesn't follow from that at all that they pay a higher proportion of their earnings in tax. Particularly when their incomes include a large amount of negative tax through universal credit. The PP stated it as though it was a fact so I want to see whether that claim is backed up by evidence as it seems likely to be spuriois.

The vast majority of indirect taxes are also paid by higher earners in absolute value terms, so again this doesn't provide any evidence that lower earners pay a higher percentage tax rate on overall earnings.

But it doesn't follow from that at all that they pay a higher proportion of their earnings in tax.

Of course it does. It really isn’t that difficult to understand.

Not this tedious claptrap again.

The effective tax rate at 100k if you have children is 100%. Absolutely hilarious that people think this is proportionate and people should pay even more. People on 100k have nice choices sure, they aren’t living it up on yachts and holidays to the Maldives every school holiday. The people on 100k on PAYE literally cannot be taxed more. It’s a total bottleneck which stops many highly skilled people from working behind that threshold. That’s a major issue and one of the reasons our economy is stagnant. You want these people working as they pay the most tax £ note wise.

It really doesn't. It's a completely false deduction that because purchase of X quantity of a highly taxed product costs a smaller proportion of person A's total salary than person B's total salary, that this means person B pays more in tax as a proportion of overall salary. Particularly if person B's salary has a large negative tax rate in some cases as high as -50% or even more as a starting point before indirect taxes are applied because it is supplemented by universal credit. It's not "difficult to understand", it's wildly unlikely to be the case, hence me asking for the calculations backing up the claim.

It's ridiculous. It's more than 100% in many cases!! That's why everyone cuts their hours at this earning threshold, or puts everything into pension. People need more net pay to manage the inflationary pressure but the tax system makes it literally impossible to increase it at all so what's the point bothering? Hunt was told this because - unbelievably - he had to launch an enquiry to find out why the most productive workers were working less. They told him. And he ignored them. Massive face palm.

You’re being quite rude about this but it would be great to have some calculations / evidence to back up these claims.

Someone earning £100k will pay around 34% of their income on tax and NI. Out of their net income they will then pay further taxes on eg VAT and fuel etc so their overall percentage will be higher.

Someone earning £20k will pay around 12% of their income on income tax etc. Yes they will also pay VAT and fuel tax, but does that get them above the 34%++ paid by the higher earner? Taking into account any universal credit or other benefits received?

I’m happy to admit I’m wrong but nothing you’ve said so far gets close to making a credible argument on this point.

Sorry that was @Blossomtoes

Yes I know - all the way up until about 135k. These earners pay the most £ note wise in taxes (the ultra high earners don’t). Yet people actively avoid cutting down to not hit the 100k barrier as they are sometimes hit with a negative on the “extra.” These are people like dentists, doctors, engineers, IT trade, technicians and other similar and important professions. The tax system is designed to keep professional workers below 100k. Turns out that’s crap for the economy and tax take. Who knew?

Totally agreed.

We should be encouraging aspiration and productivity - at the moment we have a combination of a tax system designed to penalise those at around £100k and left wing politics which seems to promote the notion that those earners are living the high life, benefiting from tax perks and deserve to be brought back down. Totally nuts.