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.

@Papyrophile you would not need 3 clinicians in the UK to rebandage a wound that has already been treated. A nurse would do it in the UK if necessary - the Dr would tell you to book another appointment with the nurse for this.

Brilliant post

There are multiple problems here. We have one of the highest state dependencies and economically inactive populations in the developed world. A messed up tax system which means that people pay marginals of 70%-100% here. The highest tax payers on PAYE are already paying their fare share when compared to the rest of the world. Other (basic rate) payers are not when you look at scandi models for example - 30%.

The ONS has already stated that tax system in this country is reducing tax take which society needs to pay for itself. We are already in debt and have to borrow every month to fund the state. Put simply not enough people are paying in. It’s also led to a brain drain and people like consultants and dentists dropping hours to stay under 100k. That’s why the pensions changed. Even Labour knows this is all a crisis hence backtracking on targeting high earners on PAYE.

MN is a great demonstration of enonomic illiteracy in this country. It shows you why our economy is in so much trouble.

Net contribution is such a simple concept, yet there are sorts of weird contortions being performed on this thread. If you have more people who take that those who pay in on a net basis, what happens? Greece happens. You run out of money. You go bankrupt. Up the creek, without a paddle. Call it what you will.

The number of net contributors in this country is shrinking fast, now down at 47%. More than half take more than they pay into the system. To the hard of thinking, what is a low enough number of net contributors that you think is acceptable? 0%? Fear not, we are heading that way, since reducing the number of net contributors has a spiral effect. More and more people either reduce their earnings to reduce tax, leave for countries with lower tax or impacted in some other way by a weaker economy - which itself is weaker due to the initial reduction in net contributors.

So if you ever wonder why the roads look shabby, why you can’t get healthcare. Or the police won’t attend a burglary. The root cause is that we have too many people taking and not enough paying into the system. But then again, the poor knowledge of basic economics in this country shouldn’t surprise anyone that this is the case.

Defence is only 6%. It's less than the interest on government debt. Also less than education or welfare, as well as health. https://en.m.wikipedia.org/wiki/Government_spending_in_the_United_Kingdom

The biggest problem isn’t economic illiteracy, it’s Tories pretending their incompetence is actually due to insufficient “net contributions”

We all know who the biggest takers are and it’s not disabled people

Calling people illiterate is rude.

I think most people grasp that if we take more from the pot than we put in then debt and bankruptcy ensue and public services fail.

Where there is disagreement is what to do about this. This is the complex issue and the answers are not clear cut.

Of course it is. You see it all the time. Those people with disabilities on their private jets with their houses dotted all over the world. Always swanning off for holidays abroad. Thinking they are hard done to if they can’t get their favourite brand of caviar. Aresholes. The lot of them!

Where there is disagreement is what to do about this. This is the complex issue and the answers are not clear cut.
Exactly - according to some the answer is to end all benefits and stop taxing the poor rich people to stop them going to Dubai the poor loves.

The first question is ‘why?’ - that’s when the ideas about how to shift it emerge.

So why has this situation emerged? What are the societal, economic, commercial, psychological, international, geo-political things that have led to this?

And that is one possible solution. Poor wealthy. They always get shitty end of the stick. Another idea might be to go back to a feudal type state. Euthanasia of those pesky people that are a burden. Workhouses. All of these might help solve the economic issue of course.

Hopefully we can do something a bit more evolved though 😉

To be honest you seem economically naive.

The reason fewer are net contributors is wages are not matching inflation. They haven’t since the conservatives started austerity. Every year people in public sector or working class jobs are kept on piss poor wages and (in many cases) subsidised by the PAYE tax payer through benefits. The reason this happens is to keep the real wealthy (sponsors of the current political party and in many cases tax avoiders and inherited wealth) happy. Those who lose out are those higher earners on PAYE as there is no appetite to go after hoarded wealth (which is where all the wealth in this country sits).

Tax take is on the up, not down - I'd love to see where you got that claim about the ONS from.

Also where you get the idea we have one of the "Highest State dependencies" - according to whom?

The real issue is that the discredited ideology of austerity destroyed public services at a time when more progressive countries like Australia were investing in their nations. Now everything is stagnating due to under investment and the only people making money are those who were able to asset grab in the post 2008 fire sales. Great for them, shit for the rest of us.

The rest of your post shows you have fallen 100% for the Tory line that the nation's finances are like a household with an overdraft and a credit card etc - that is utter bollocks. Pretty much every developed nation borrows, unlike every household. The idea we have to "pay it all back" is a massive over simplification that just suits the Tories as it is always an excuse for shifting the burden of tax onto poorer people.

And right there is the definition of communism.

Where?

To those that argue we need to cut benefits:

Trigger warning for child abuse and trauma mentions.*

It’s long but I make no apology for that, I don’t mind if you don’t read it. Your choice.

I work in health care and have done for many years. I’m going to tell you a story that is an amalgamation of several different peoples stories to maintain confidentiality but this is absolutely the reality, for many - to varying degrees;

A baby is born to parents who have limited intellectual capacity and were abused and neglected as children. This was never picked up and they never had chance to resolve this trauma. They are, as a consequence, repeating those patterns.

They have several children already, they are self medicating with drugs and alcohol and are neglectful and physically abusive to their children. He is in and out of prison. When he is home there is serious domestic violence. Social Services are involved but don’t yet know the extent of it. This all comes to light later down the line.

So back to the new, innocent baby born into this family through no choice of their own. It’s a boy.

His first three years, when his neural pathways are forming, are spent in fear. His nervous system is already set to be very reactive due to his mothers stressed state when he was in the womb. He learns from the neglect, abuse and violence that he is unloveable, that others are scary and the world is unpredictable and frightening. His brain and body are now set up for this reality because as a small child he has no ability to comprehend that this is about his parents unresolved trauma.

He goes to school. It’s ok but then Social Services learn of a domestic violence incident, investigate and rightly remove all the children. Suddenly he’s lost everything familiar as he had to move school as well as join a new family. He is placed without his siblings.

Foster carers do their best but he’s not easy to care for. His mistrust makes him push people away. He lashes out and has learned that physical aggression is ok. He struggles to manage and regulate his over sensitive fight flight system. It’s like the theme tune to jaws is playing in his mind constantly and he can’t run as he has no power so he fights the threats he perceives.

The parents engage with Social Services and it looks ‘good enough’ and the children are returned home. The parents haven’t had trauma input. Haven’t resolved their own psychological issues because those services are sparse or non existent. So the stress of parenting builds up and sets off the self medicating behaviours and it all starts again.

This boy is now middle childhood and is getting bullied for always being scruffy and unkempt. He struggles to make friends as he trusts no one and is physically and verbally aggressive at times when triggered. He doesn’t understand this about himself and can’t verbalise any of it. The adults don’t understand this either. He is failing academically because he is too busy being hyper-vigilant of threat to learn. jaws music is his backdrop.

He responds one day to the bully in the same way his dad deals with anger. Except nobody remembers the DV at home and that children learn what they see. So they all see him as a ‘problem child’ with bad behaviour. He is expelled and ends up moving from school to school. Every time losing any good relationships he’s formed. Adding to that sense that he is unloveable, people are at worst dangerous and at best unreliable and the world is an unpredictable and scary place. He believes : ‘I am a bad child.’

Fast forward to his 17th birthday. He is now an adolescent with raging hormones and like all adolescents his brain is doing some serious rearranging and his emotional part of his brain and where his fight or flight system is, is in the driving seat. He’s been in and out of foster homes and is now in a residential home. His childhood has been all about fear, loss, change, failure and he hasn’t had a single adult that’s stuck it out with him and supported him and made him feel like he was worth loving. He’s full
of fear and anger. He has never experienced feeling fully relaxed until he tries drugs. Oh what a relief for him to feel that.

He goes out with his mates, gets into a fight and he is unable to regulate himself to stop - it goes too far and he seriously injures someone. He, rightly, goes to a secure residential home for offenders and meets people very similar to him with similar stories. It’s a high octane frightening place. More fear. More loss. More signs that he is ‘bad’ and unloveable. Something that when triggered is so painful he struggles not to lash out like his dad did.

Fast forward to his mid twenties. He has no qualifications. A criminal record. A child of his own with a woman who, herself, has unresolved childhood trauma. This new baby is called Charlie. Without input history is highly likely to repeat itself.

If you have read this far I’m both surprised and grateful. Now, if you want to; really reflect on the following questions:

What do we do as a society here? Charlie is a baby, he can’t vote or complain so unless a significant issue comes up will we assume he is fine? His parents aren’t actively looking for work and have lost several jobs through their erratic behaviour so we will will dock their benefits?

There is no money so we won’t provide things like Sure Start or Flying Start.

Is it that we say; Things are as they are and he’s just an unlucky one. ‘Rich man in his castle, poor man at his gate, god made them high and lowly and ordered their Estate’

What impact will less benefits have on Charlie and his ability to grow and develop into an adult that is capable of a happy settled life and becoming a net contributor? What will that poverty do to him? What will that poverty do to their diet and his physical health now and in his future.

Likely scenario (from decades of working with families) is the stress of not enough money will make it far more likely that history repeats itself.

Is that fair on him? Is a society that doesn’t care about that a civil society?

This is just one pathway that can lead to people needing benefits. There are many. We could all end up needing benefits. We are all only a few significant traumatic events away from losing our previous good mental health if we are lucky enough to enjoy good mental health.

Not just retail, restaurant chains have suffered the same fate too.

But this is what happens when you let the financial services industry become the dominant "industry". The spivs in suits are just playing, playing at betting on shares going up or down, playing at betting on commodity prices going up or down, playing with other peoples' money buying and selling shares/businesses to take a punt - if they "win", they get shedloads of cash, if they "lose", someone else loses their money. It's literally all just a game to them.

No.

The number of people paying in is irrelevant.

The amount raised is what matters.

Taxing billionaires, oligarchs and multinational corporations who want to do business here appropriately can cover the under 18, student, disabled, ill, and carer populations so that it doesn't matter that they don't pay income tax.

Don't you think it's a problem that we, as a country, are paying more in interest on the huge national debt, than we spend on education?

That's the reality of borrowing too much for too long.

A few years ago, people were saying how stupid we were, as a country, not borrowing more because interest rates were so low. That's exactly why we're in deep shit now, because interest rates have risen!

You say we can't compare to household finances, but in some ways we can. Take an example of a family who took out a huge mortgage a few years ago when interest rates were low and the repayments were affordable. That family have now come to the end of their "fix" and a new mortgage or revert to variable rates has tripled their monthly repayments. They're screwed. In a similar way, that's what's happened to the UK! The money we've borrowed over the past 25 years hasn't been paid back, not even started to be paid back, and we are still needing to borrow more, in fact we're borrowing to pay the interest on previous borrowings.

Except that for each billionaire who leaves the UK, every multinational who moves their HQ from UK to Ireland, that leaves a massive "hole" in the nation's finances if we've been relying too much on them and the tax they pay!

The whole "net contributor" framing is designed to make the bottom 99% of us pay a higher percentage of our wealth and income in taxes and the top 1% pay an even smaller fraction of a percent of theirs.

The problem isn't that the very poorest in society get too much help or pay too little tax.

It's that the dragons sitting on giant piles of gold want even bigger piles of gold to sit on.

@user1497207191

If they want to own property here or do business here they should pay appropriate tax here.

It shouldn't be possible for a multinational like Starbucks to have hundreds of outlets in the U.K. and be building more and also claim not to make any profit in the U.K. so not pay tax here.

Why are they here? Why are they expanding, why are their shareholders allowing them to if not to make money?It was farcical.

Then they will neither live nor do business here, leaving an even bigger gap to plug, and no means of plugging it.

If a measure is likely to result in the opposite of what you’re aiming for, then what is the point of pursuing the measure? To satisfy your ideological ideas as to how things should work, regardless of how they actually do?

Transfer pricing problems apply to the entire Western World and are being worked on by various countries to come to a mutual agreement how to avoid abuse. But with it being a global problem, it's taking time to sort out an answer. It's not something a single country can do unilaterally.

It's partly why we've had so much emphasis on spending and employment taxes rather than taxes on profits (which can be manipulated by transfer pricing). So, 20% VAT on the price of the coffee, 13.8% NIC on the wages paid to the counter staff, business rates on their premises, landfill tax on their trade waste etc.

Even if, say, Vodafone have an office in the UK but transfer-price their profits offshore, they are employing people in the UK, those employees are buying stuff elsewhere, money circulating in the economy etc. To some extent, it doesn't matter than Vodafone may not pay corporation tax on their "profits" because a lot of tax is being generated along with employment and spending, by virtue of them having staff sat in an office in the UK rather than in, say, Spain.

After all, we constantly hear the argument that increasing benefits, increasing public sector wages, etc is good for the economy because of the spending it generates and tax revenues from the employment, spending, etc., so the same argument should apply to multinationals who want to base themselves here and employ people in the UK!