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 ?

it’s as if younger people think they’re never going to get old.
This is so true.

They're also the most likely group to benefit from other tax breaks, i.e. the zero rate band on interest and dividends, the personal savings allowance, tax free ISAs, etc., because statistics show that pensioners are the group with the highest average savings/investments. A worker with no savings can't benefit from any of those tax breaks, yet pensioners who've squirrelled away cash and/or taken tax free lump sums from pensions, or benefitted from various demutualisations etc in the 90s, etc., can benefit. I'd rather see those tax breaks scrapped and the personal allowance increased instead so that EVERYONE benefits rather than just those who've managed to accumulate savings and investments!

None of that justifies the lower tax paid on pensions received as against workers' wages due to NIC which is just another tax. Yes, people who've paid NICs for the requisite number of years are entitled to state pension, but there's no logic in saying it should be taxed at a lower rate!

And anyway, lots of people in receipt of state pension havn't paid NICs all their working life - lots were given "credits" by virtue of unemployment, home responsibilities relief, disability or part timers who earned enough to qualify for nic credits, but not enough to actually pay NIC. So it's not true to say that everyone claiming state pensions have paid NICs for them! (Though that's a different matter really!).

I maintain that people on the same income, regardless of age, source, etc., should pay the same tax. There's no justification for a pensioner paying less tax on their £50k income compared with a worker on the same £50k! Just as there's no justification that a BTL landlord pays less tax on his £50k income (because there's no NIC on rental income either, nor interest, nor dividends, nor foreign income, not trust funds, not capital gains). NIC is the anomaly and it's time it was applied to ALL income or scrapped and income tax increased instead.

NIC is the anomaly and it's time it was applied to ALL income or scrapped and income tax increased instead.

Then the link with pensions would need to be broken and some other way of assessing eligibility would have to be found. In any event it would be electoral suicide so don’t hold your breath.

In any event it would be electoral suicide so don’t hold your breath.

This is true. But only because those who don't currently pay it would vote to keep the status quo for their own selfish ends.

It doesn't make any logical sense the way it's currently charged.

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.

Plenty of younger people will pay 45 yrs plus of contributions. I’m an older millennial & have paid NI since 17 in my p/t job & throughout uni, back then the contributions were tiny!

Logically paying forward doesn’t work in the same manner when the pyramid is upside down.

This is true. But only because those who don't currently pay it would vote to keep the status quo for their own selfish ends.

So you think people whose retirement is imminent would vote against the status quo? Seriously?

Plenty of younger people will pay 45 yrs plus of contributions. I’m an older millennial & have paid NI since 17 in my p/t job & throughout uni, back then the contributions were tiny!

Exactly! I'm 46. I've been paying NI since I started full time work at 17 (well actually since 15 if you include my weekend jobs) and can't retire till 68. So I will have been paying for 51 years when (if?) I get to retire - 53 if you count part time. I still wouldn't have an issue with paying the same rate of tax as workers because I'm not a selfish dick!

I still wouldn't have an issue with paying the same rate of tax as workers because I'm not a selfish dick!
@Samsond I bet it will change by the time you get there & I very much doubt you’ll be entitled to free prescriptions at 60.

@shielder I don't think over 60s should get free prescriptions just because of their age though so im fine with that too.

What about a % off your average bank balance monthly?

10% flat rate on all income?

Inheritance tax is a good one. It can be avoided by giving it away before one passes though…

Not at all. We already have a system in place to give nic credits to workers earning wages/profits between the two lower nic thresholds without paying nic, plus systems to give credits to a parent of young children, the disabled and the unemployed.

So how would that work if NI was abolished? What system would you use to replace it?

That system does it already for part timers and benefit claimants so parameters can easily be changed to give nic credits for people who currently pay nic, like nic credits are given free to part timers and benefit claimants! After all, the actual amount of nic paid is completely ignored for state pension now that serps, s2p and other earnings related state pension entitlements have been scrapped.

I know how the current system works, it’s pointless to keep repeating that. For the third time of asking, if you scrapped NI, what new system would you suggest to replace it to determine eligibility for a full state pension. You must have some ideas, surely?

Going back to question of how we’ll deal with aging population @shielder

I can only see that complex care in elderly will increase and generally we are too unhealthy across the population

As those two things get more pronounced we’ll see greater strain

The NHS is a huge cost and will go up. Just looking at the tv show thread and what people expect in terms of pay and funding, not sure where it will come from

So you are suggesting that a pensioner should pay NI and have their usually relative small income reduced by 10%. But a worker, who can only be bothered to work 16 hours (lets face it their are jobs around if you want one in most places) actually gets their money topped up by the government? Surely fazing this out would save a load of money?

@BIossomtoes why would we need a new system at all? @Badbadbunny has already explained that there'd be no need for one. Just change the parameters so that credits are issued while people are accumulating enough for their pension. Once 35 years of credits have been received you're good for your pension. There's no need to stop taking it once people are no longer working. As long as they are receiving over and above whatever the threshold is they pay. Simple.

Err! The same thresholds etc would apply! So the "low income" pensioner wouldn't pay NIC under the exact same rules that a "low income" part timer doesn't pay NIC!

Are you deliberately being obtuse. I've answered the eligibility question several times - you use the existing "credits" system where people already get "credits" towards state pensions without paying any NIC. What's so hard to understand? The system is in place.

If you mean how to raise revenue, then increase income tax.

Simples.

I think the whole eligibility question is irrelevant. The only people getting a state pension in the future are those who need it. The country won’t be able to afford anything else due to demographic change and the sky high cost of an ageing population. I’m mid 40s and assuming I’ll get nothing whatsoever. You’d be a fool to do otherwise.

@Heatpumphero I totally agree with you unfortunately. The only people who will be eligible for a state pension by the time we retire (I'm a similar age) will be those who will have no other income at all. Which is a shame but I can't see any other way around it really. Too many pensioners, not enough workers. What else are they going to do?

@Heatpumphero

"The only people getting a state pension in the future are those who need it. You’d be a fool to do otherwise."

+++

Whilst I don't disagree with you on the need for future means testing of the state pension, actually having it as a political policy would be electoral suicide.

Plus there are a lot of workers who simply cannot afford to pay in to a private pension (not necessarily fools) and a lot of workers who can afford to pay in to a private pension but choose not to (fools?).

The point is means testing state pension would create a perverse incentive not to pay in to a private pension, especially when the state pension is triple locked.

So who is the fool? The person that pays into a private pension but then disqualifies themselves from a favourable state pension or the person that either spends the money or saves it in non means tested wealth so they can still qualify for a state pension.

But as you rightly point out this doesn't change the fact that economically it will still become unaffordable for the Government. But given that older people are more likely to vote than younger people no political party would dare to mean test the state pension. Look what happened to Theresa May when she wanted to means test Winter Fuel payments.

Politically it is far easier to finance the state pension by cutting spending on education (young people don't vote), although this does have a big negative impact on future economy (but hey that's another politician's problem).

But a pensioner is past working age, they have theoretically done their bit for the workforce. Someone choosing to work 16 hours could possibly work more and may do if they weren’t topped up. I’m by no means tarring everyone with the same brush here as I know there’s lots of cases where it’s not possible to work more hours, but there are lots that could

I don’t think it will ever be means tested but the age will go up in order to bring the total bill down which means if people want to retire earlier than state pension age they need to pay into private pension