To think the 'Net Contributors' argument is just wrong?

[Yetmorebeanstocount]

Just been reading about "Net Contributors" of tax and how it supposedly is a bad thing that we don't have enough in this country.
i.e. - that most people receive more, in cash benefits, social care, NHS, police, education, roads, bin collections etc. etc. than they will ever pay for via their taxes, so they are 'net recipients' of the system rather than 'net contributors'.

My reaction is - well yes of course. That is how it should be!

Take a very-over-simplified example to illustrate the maths:

Say there are 100 people who earn £1k, and one person who earns £200k. Say the 100 pay no taxes, and the one person pays tax at 50% of £100k.

That tax gets re-distributed to the 100 people in the form of services and benefits and pensions, so that the 100 now have the equivalent of £2k each and the one person still has £100k.
What is supposed to be wrong with this? It is just basic re-distribution of income, which is something that every civilised society should do.

Of course in real life people earn all sorts of amounts and receive different things, so it is not so simple, but the principle is the same - a few at the top are 'net contributors' and the rest are 'net recipients'.

And of course, those at the top still get something back as they drive on roads and have their bins collected, and have the benefit of living in a civilised society which is policed and (mostly) does not have people dying on the streets.

But you still need a decent number of people contributing more money? It needs to support ALL the infrastructure as well as providing benefits.

Not necessarily 1-1 though, you're correct there.

And companies should also be considered net contributors as well.

YANBU it is an over simplification that is used by people who agree with the Tory policies of taking from the poor and giving to the rich.

Abolutely.

So people don't get paid much.
They provide essential services to society - which enable those people on higher wages, and often with other income sources, to get their lifestyle and maintain.

If people who were deemed by the rich as not being net contributors decided to stop working, then those who see themselves as net contributors would soon realise that society needs all people to function.

I think you might be out of step with even the Labour Party on that one. We are taxing our workers hard and leaving assets alone. Restribution by tax probably only works if your ten percent too contributing class feel, and I use that word carefully, that they too get something out of the system. But the evidence is that these salaried people don't feel that way. And because of the tax system they are choosing to work less.

Both main parties know they need to do something about it, but it remains to be seen what. It has to be something like asset tax but no one will admit it, imo.

Yeah, but with your example:

"100 people who earn £1k, and one person who earns £200k"

The £200k person must have a good skill set, what if they get totally peed off with the situation, and decide to take their skills and money to a lower tax location?

You probably wouldn't want to advocate for keeping them prisoner and I doubt many people would want the reintroduction of capital controls.

Say there are 100 people who earn £1k, and one person who earns £200k. Say the 100 pay no taxes, and the one person pays tax at 50% of £100k.

I would say that it is a shame there is such an unequal distribution of income in the first place.

I'm not an economist so I'm sure I will soon be corrected but here are some points which occurred to me:

1. No representation without taxation... ie if you're not a net contributor do you really feel that you have a say in how the government spends other people's money?
2. Your example relies on a large gap between rich and poor - perhaps it would be better if the gap were smaller so more people were net contributors in the first place and so felt more "invested" in society, and
3. In your example, where is the incentive to earn £200k pa rather than leave & move to a lower tax jurisdiction eg Lux or Hong Kong?

Yabu because we only tax income which is the working class and the illusion of middle class. There's plenty of wealth but it's not the high earners with it. Although I wouldn't say no to these 100 to 200k jobs mn have, I'm lucky pushing 50k if I do lots in my second job atm!

I'd forgotten about companies. They pay taxes too.

The maths don't need a large number of 'net contributors', it can be quite a small minority, but if they are very wealthy it works out.

Which is actually what we have - a large population earning very little or 'just enough', a few more who are 'moderately wealthy' and a tiny minority earning more than most of us can imagine.

It is is long thin pointy triangle with a very very tall line on top. Imagine a triangle-shaped skyscraper with an arial about a mile high.

It would actually be better to tax wealth rather than income.

It's harder to get into a lower tax jurisdiction these days.

Brexit etc.
also Hong Kong is not doing as well as it used to, America is a mess (guns and women's rights) and you need a referendum to become Swiss.

This why people voted Brexit though. As the third highest contributor in 28 counteries.
The inequality is the killer. There shouldn’t be a few at the top and the masses relying on them. Life is better when everyone has a crack of the whip.

Yeah only I don't get anything back at all. I can't even book a GP appointment for my kids. And I can't go private because the referral has to be from GP for certain things. The roads are potholed, the trains are so bad my commute has turned into a nightmare, but despite being a net contributor for over ten years, I can't really afford to buy a house in London. You can't just endlessly squeeze the top earners, otherwise what's the point of earning more? It just gets taken away. There are some very serious macro issues facing the UK, principally driven by the lack of growth over the last decade. And no, not driven by "rich people".

The original phrase was "no taxation without representation", when the American colonies were complaining about being taxed but had no influence on the UK parliament. So you have it the wrong way round.
There will always be vast numbers of adults who don't pay tax (because low income) - do you think they should have no right to vote?

My example has a very large gap between the richest and poorest, which reflects reality. Of course it would be better, for the whole of society, if the gap were smaller.

The person earning £200k in my example may well decide to go abroad, but maybe their job is here? Or they like it here? Or have family here?
Yes with higher tax rates at the top some do go elsewhere, but enough stay. Besides which, making the country more equal is a good thing to do in itself.

I think wealth should be taxed not income.

Totally agree. There should be a land-tax, and dividend taxes at the same rate as income taxes, just for starters.

My husband is now at the point where there is no point him earning anymore as he’ll have nothing to show for it whatsoever. This is frustrating when you get nothing out of the system - including decent, running public services. He says he’d happily lose the money he does in tax each month if he could just get a train, or if schools weren’t pushed to their limits.

While some undoubtedly would/will stay, it is the case that there is a new outflow of the wealthy. This is a problem.

https://www.bloomberg.com/news/articles/2023-01-20/millionaires-continued-to-flee-post-brexit-britain-in-2022?leadSource=uverify%20wall

Capital is mobile, and while Brexit may make emigration more difficult for some, there are countries actively looking to attract the wealthy, and are welcoming them.

The other thing that is happening in the UK is that graduate salaries are stagnating. That's a massive issue because it means that a) the taxpayer is also paying the tuition for millions of students who never reach the repayment threshold, b) the economy does not grow. In other rich countries (we're swiftly approaching middle income), there are as many graduates as % of the cohort, but more graduate jobs, so the salaries rise as a result of competition for graduates. This is good for everyone, including non graduates, because it tends to expand the number of companies, range of infrastructure and size of operations. This in turn generates a large volume of good non graduate jobs.

You're not altogether wrong that redistribution is always needed, but you can't slice the salami forever. Look up the resolution foundation, Torsten Bell has lots of interesting things to say.

There are. It's not the tax take that's the issue. Fiscal drag means if anything the opposite is the case.

and it isn’t slowing down in 2023:

https://www.hubbis.com/news/uk-set-to-suffer-bigger-net-exodus-of-millionaires-than-russia-in-2023

The UK has one of the highest rates of wealth exodus in the world, only behind China and India.

@Yetmorebeanstocount I know full well what the original quote was. I put it deliberately the wrong way round, as others more eloquent than me have done, to make the point that if people do not (economically) contribute to society there is a risk that people may feel disenfranchised by it.

But if you tax dividends at the same rate as income, why would anybody invest in shares, and provide investment to business? Why take the risk?
Also a land tax is not easy to keep collecting because it is a pretty illiquid asset. If my house is a small run down cottage that happens to sit on an acre plot which has no value other than as garden, and I am a modest earner, where will the cash come from to pay a land tax?

Agree.

I think a lot of ‘net contributors’ forget how much they depend on lower paid people to do all the grunt work so they can focus on lucrative work.

not much time to play the stock market when you’ve got to plant and grow your own food, clean and cook, make your own clothes…from the fabric you made on the loom, from the wool from the sheep you tend…etc etc

@Yetmorebeanstocount assets.publishing.service.gov.uk/media/57a08bf1ed915d622c000ffb/DCarteng.pdf etc etc - I'm certainly not the first to invert the quote to make this point!