Tax system

[Cupcakes2024]

Watching some of Jamie dimon from JP Morgan and chase bank, speech's and one point he advocated is rather than tax the rich to raise taxes is instead its better to have a balanced tax system , basically is Jamie correct ?

Not sure what your point is. Mine is that NI is optional if you are a Ltd company director.
Personally I was happy to accept no furlough help if they’d left IR35 alone - but typically, as with the ridiculous fact that if inside IR35 you pay more tax than a PAYE employee but don’t get any employment rights.

My point is clear.

During furlough if you were on PAYE or paying NICs compatible with a large salary you would get furlough based on that large salary.

Whereas if you were paying minimum salary and no NICs and taking the rest as dividends then you would get furlough based on the minimum salary.

So there is a benefit to paying NICs, and the argument that there is no reason to take more salary and to avoid paying NICs is not correct.

To mitigate it you could argue covid was a once in a lifetime event. But the compensation in terms of furlough probably made up for a lot of the NICs paid by salaried people over the years.

Basically, there is always a price to be paid to be outside the "normal" system - in this case PAYE. The government looks after the majority. I have learnt that the hard way.

Income inequality and opportunity are two different things though. Take my husband and BIL, as an example. They both had the same opportunities but one earns 6 times the other. Because one was prepared to study, work away from home, train, take responsibility and seek promotion....the other just wanted an easy life.

Plenty of directors under PAYE were also excluded. Some were excluded because they didn't have a payroll in the "magic" month of February 2020.

Many paid themselves yearly to avoid the hassle of weekly/monthly filings to HMRC (perfectly allowed by the HMRC/Payroll laws, but not respected by the furlough rules). Some with "lumpy" irregular incomes paid themselves only in months when they had income to pay, and didn't pay in other months, again being excluded if they didn't pay themselves in Feb 2020. All this despite often years of "evidence" to prove that they were paid under PAYE, but just not on a weekly/monthly basis, but HMRC and The Treasury wouldn't listen to reason and wouldn't change the qualifying rules nor make any waivers/concessions.

Others couldn't meet the requirements not to work, to be eligible for furlough, i.e. where they had ongoing obligations to clients etc. and couldn't "shut down" properly which was what was required at the start of the furlough claims. So even if they were down to say 5% or 10% of working, they were ineligible because they were working. It took a few months before the rules were changed to allow for "partial" working and to claim furlough for the time they couldn't work - and of course, the furlough claims for earlier months couldn't be backdated!

It's fine looking back with hindsight and blaming directors for taking dividends and therefore not receiving full furlough, but furlough wasn't even in the UK tax system before covid, no one could have known that we'd ever even have such a system in the UK, so there certainly weren't people paying themselves fully under PAYE "just in case" of a pandemic and it's silly to think there would be. Employers can't even claim SSP anymore! And no, there will be very few directors who've now decided to pay more under PAYE "just in case" there's another pandemic so they'll be eligible for furlough!

It's such a shame that successive governments encouraged the "low salary, high dividend" method of working. They did that, especially Brown, by encouraging small businesses to be limited companies. Changing tax rules on dividends to make paying dividends more attractive from a tax point of view (now reversed), and hiking both employee and employer NIC to make paying wages far more expensive, especially for one man companies who have to pay BOTH employee and employer NIC. Make no mistake, government policies over the past 25 years caused the "low wage, high dividend" remuneration structure because they made it too expensive to go through the "high wage" alternative due to NIC hikes.

There is a great quote from Alexander Tytler (1747-1813)

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy"

Wow! Talk about hitting the nail on the head. That is so true and visionary and clearly shows why current politics and politicians are in the poor state they are.

It really is hypocracy, such as shown on threads like this, when nearly all posters identify the need to raise taxes, but want it paid for by "other people" and not themselves!

Also explains the lack of long term planning beyond the next general election, as politicians know that it's electoral suicide to try to make the fundamental, but unpopular, changes that are needed, so have to default to "little and often" changes that are usually pointless as they never go far enough and have little effect.

Unfortunately, many Western countries are in a bad way, living on debt/borrowings, but there are never any mainstream politicians brave enough to tell it how it is, so we just go limping along, much of the same, kicking the can into the long grass.

Unfortunately, many Western countries are in a bad way, living on debt/borrowings
Most countries, not just Western ones, have a level of debt/borrowing. It's not inherently bad.

Obviously. But when a country like the UK spends more on debt interest than it does on education, you've got to accept it's out of proportion!!

Will things get better? can they get better?

Spurious comparison - we could spend more on Education than debt interest and still be in the shit, or less but still be doing well - that's an utterly facile comparison.

Of course they can. It’s cyclical, always has been - hence boom and bust. The trouble is that the good times lasted so long that a large proportion of the population has never seen bust before. Some of us have been here before, albeit not with public services in tatters like they are now.

@BIossomtoes I disagree on the cyclical element as we never really recovered from 08. Why do you think productivity will start to improve? Do you not foresee the demographic shift impacting the economy?

Boom and bust doesn't magically happen though. Brown/Blair created an illusionary boom, financed by borrowing and spending. It wasn't created from an increase in production. We need a government to actually encourage productivity to grow the economy genuinely and to reduce the balance of payments deficit (i.e. increase exports, reduce imports).

@taxguru as you say productivity is a real issue & look at wage stagnation.

Real wages grew by an average of 33% each decade from 1970 to 2007; but they are now back at the level they were at in 2005, according to data from the Office for National Statistics, ONS (Times, 2023).

Some of us have been here before, albeit not with public services in tatters like they are now.

So what’s it going to look like when the demands of an ageing population put more pressure on those tattered public services?

Yes plus it was clearly the upward swing of a global boom pre bust driven by debt and high risk exposure

Hence the 2008 crash on the other side

So a combo of high risk and credit

It won’t be the same context for the next decade

All people, well employees, do already pay the same amount of tax. Everybody pays the basic rate on taxable income up to £37,700, the higher rate at taxable income between £37,701 and £125,140 and the additional rate on taxable income over £125,140. The rates are the same for all employees. There isn't one rule for the poor and another for the rich.

Except rich people don't tend to be employees - except a few and usually as a side hustle to their immense wealth - eg Rishi, who pays about 20% overall.

Actually no. When taxes first started, they were levied on landowners (at a rate of something like 1%) for the purpose of funding war. There were no pensions, no NHS, no free schools, no benefits, no social housing, no asylum support.

I think you’ll find the last Labour government was a model of fiscal probity compared with its successor.

"But they tend not to have huge outgoings such as childcare and mortgage. Much more disposable income than a young couple trying to work and look after young children."

This quote was by @HFJ, apologies for poor cut , copying and pasting, can't seem to do it at the moment.

I hear what you're saying but do you not think that pensioners have already had their sacrifices and struggles?
Women in the 60s and even 70s were almost co-erred into leaving their jobs/careers as it was deemed vulgar to carry on working after marriage or motherhood.
Wraparound care is a relatively recent phenomenon .

I gave up working in the mid 90s as there were only a handful of prohibitively expensive nurseries where I lived and there was no family help due to long distances.
So we went without holidays for quite a number of years, had second ( or fifth hand) rust buckets for our only car, only had new clothes at Christmas or for birthdays and our children's clothes, books and toys were generally second hand.
Most of our friends were in the same boat but we considered ourselves to be much luckier than our parents.
Yet here we are now, with our pensions after decades or hard work and sacrifices yet you would like to penalise us even more?
Don't forget that private pensions get reduced when state pensions kick in, despite forty odd years of contributions ( in my husband's case) and thirty odd year's in mine.

I'll be sure to mention to my mum ( in a housing association flat on pension credits as she was one of the 50s women who lost out but who also couldn't accumulate NI contributions) how luck she is to not have to fund the childcare that she was never even entitled to in the fucking first place!

This analysis only really works if you have an anti-Labour agenda.

It’s more about global climate at the time which was the upwards part of the hill, then the crash

That was down to excess risk, plus there was putting stuff on credit but off gov books

Neither of those things are in place now so it’ll be interesting to see how funding happens

"do you not think that pensioners have already had their sacrifices and struggles?
Women in the 60s and even 70s were almost co-erred into leaving their jobs/careers as it was deemed vulgar to carry on working after marriage or motherhood.
Wraparound care is a relatively recent phenomenon .

I gave up working in the mid 90s as there were only a handful of prohibitively expensive nurseries where I lived and there was no family help due to long distances.
So we went without holidays for quite a number of years, had second ( or fifth hand) rust buckets for our only car, only had new clothes at Christmas or for birthdays and our children's clothes, books and toys were generally second hand.
Most of our friends were in the same boat but we considered ourselves to be much luckier than our parents.
Yet here we are now, with our pensions after decades or hard work and sacrifices yet you would like to penalise us even more?"

It's not about "penalising pensioners even more" though is it? Pensioners pay less tax than working people because of not having to pay NI. There is no real logic or indeed fairness to this. Pensioners should pay the same rate as everyone else. I am aware that not all pensioners are well off and for those that aren't then there should be concessions made, in the same way as there are for low earners of working age. But the fact is that as a group, pensioners are the wealthiest and pay the lowest tax rate.

The logic is that NI is linked to pension entitlement. The requirement to qualify for a full state pension is 35 years. Most of us have exceeded this by around a decade before we claim our pensions. The fairness is that we uncomplainingly paid the pensions of two generations who didn’t pay NI, now it’s our turn. I read posts like that and it’s as if younger people think they’re never going to get old.