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.

The issue is lack of productivity. UK firms have not invested in technology and the government has done little to encourage this. We are lagging behind. It is why wages have fallen in real terms.

https://www.lse.ac.uk/research/research-for-the-world/economics/how-much-tax-do-the-rich-really-pay

What have the relative populations got to do with it?

“the average rate of tax paid by people who received one million pounds in taxable income and gains was just 35 per cent: the same as someone earning £100,000. But one in four of these paid 45 per cent – close to the top rate – whilst another quarter paid less than 30 per cent overall. One in ten paid just 11 per cent—the same as someone earning £15,000. The rich, it seems, are not all in it together.”

But what is the % each person pays? Yes they will collectively pay 60% of all income tax, because they are earning more.

If each person is taxed under the same system of tax bands and rates, of course the top X% will pay more than Y% of all income tax. That's how the maths is supposed to work.

The issue is lack of productivity. UK firms have not invested in technology and the government has done little to encourage this. We are lagging behind. It is why wages have fallen in real terms.

nit helped by yrs of low interest rates which encouraged a lack of investment both by companies & the gov & inflated assets

But the people being ‘subsidised’ often aren’t on benefits.

They are hardworking people in a variety of necessary and important jobs ( nursing, teaching). If you earn less than 41k you cost more than you earn. They are also junior members of staff ( young graduates) who will potentially become net contributors in the future, but in the meantime, businesses take advantage of their skills to make a fortune.

Also, the people who benefit most from taxes are families with school age children who use facilities like roads, gyms, refuse collection, libraries etc. That’s a lot of people on MN!

there will be many people earning a lot less than 41k who don’t have kids, make use of facilities, don’t drive.

Most people do pay tax. The poor pay a higher proportion of their earnings on fuel and other purchase taxes. Plus national insurance is paid from quite a low level.

Then if you count the benefit that low paid workers actually provide to society, it's clear that rich people who begrudge sharing some of their money are just being really selfish. I do get the frustration with feeling like you pay a lot and still get non functioning services. That however is due to corruption and incompetence at the top brought about by the class system. Nothing to do with tax as such.

@jesterdourt I agree. And made worse by housing being the place people invest in. Renting out housing may make an individual well off, but it does very little for the wider economy.

I won’t repeat all of my post on the other thread here. I’ll just say:

1). Most of the people in the UK who aren’t “net contributors” aren’t idle. They’re either pensioners or receiving in-work benefits. For the latter group, the Treasury is actually subsidising their employers, by enabling them to pay less than a genuine living wage.

2). The economy would grind to a halt without the work of these “net takers”, because the work itself generates value. You can’t get the full picture by focusing solely on income tax.

My point is there are a lot of people on modest incomes paying a huge slice of the tax take.

I agree, the income tax bands should be raised.

50k today is akin to 28k in the early 00s!

And made worse by housing being the place people invest in. Renting out housing may make an individual well off, but it does very little for the wider economy.

Absolutely & then there’s the intergenerational inequality issue due to housing, it’s all a mess.

Someone said be more like Denmark but culturally we are so different.

@Yetmorebeanstocount yes that is what I am suggesting and I'm not the first to do do. Quoting from the article I linked: "Second, taxes engage citizens. Taxpayers want to know what is happening to their. money. Many are prepared to organise in attempts to hold governments to account. The knowledge that their government is funded from oil or aid does not engage citizens in the same way."
Or to put it another way, people care more when it's their money the government is spending.

Economy wise we never really recovered properly from the crash (low rates masked this) & then along came Brexit & covid.

Land tax, paid by the landlord not the tenant, would help. At present council tax is paid by the tenant.

Although I suppose the landlords would just put the rent up to cover the land tax. The only solutions would be a) a law against owing more than two properties (two to allow for situations like inheritance or couples moving in together for trial periods), or b) build so many new houses that the price crashes.
The latter would obviously be a very good thing, but it won't happen - who would build them and where?

A big problem is that - yes - the super wealthy are internationally mobile and have effective tax arrangements, but the squeezed middle (£40k single / £100k for a couple) just pay a shed load of tax while not getting any support or exemptions, nor being financially able to have all the children they would like.

Okay I see your point.
But not that many people pay no tax at all. Even so, perhaps the lowest tax band should be about 8 hours of minimum wage, but with a really low rate like 3%. The purpose being not to actually raise much money but to give the engagement.

depends on who has the better accountants

Thing is…there are loads of houses outside the south east.

Streets of terraced houses in places like Liverpool lying empty, but the exact same house in Chiswick would cost 3/4 of a million!

I’d like to see tax revenue spent on better railways, and better public transport anywhere outside London. That would make it more desirable for people and businesses to spread out and take advantage of cheaper housing and business costs.

I agree with this @Statementdress

Rather than further hammer landlords or high earners in the south east, we should invest in the rest of the country's infrastructure so empty homes can be used

as jamie dimon said from Jp morgan and chase, we need the philosophy of a balanced tax system not just everyone a small group is rich, lets tax the rich etc.

Good lord this thread is like Tory bingo

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?

Because you would still likely get more than stashing it in a bank savings account.

But you don't at the moment. My pension is in shares and is decreasing in value every day. Shares often go down in value. Just look the ftse graph.

The 2022 median household UK income was £32,300. Single people earning £40k barely count as 'the middle'.

Average household income, UK - Office for National Statistics (ons.gov.uk)

I realise this is skewed by housing - you have more chance of earning £40k in a higher-housing-cost area. But if you are a couple on £100k and think of yourselves as 'the middle' you are sadly mistaken.

Besides which a lot of the 'squeezing' is done by childcare costs (temporary), mortgages, and higher expectations of lifestyle. It is not mainly due to tax.

Does anybody know the salary level where somebody becomes a net contributor?