to think a flat tax of 25% for all on everything would be much fairer?

[peapodlovescuddles]

51% is ridiculous. People shouldn't be penalised for working hard their entire life (and I know this will be controversial) and being much better than average at what they doI know the economy is in trouble but surely alienating the richest portion of society is a stupid idea?
£150,000 isn't a ridiculous salary, there are plenty of middle class professionals who aren't living a lavish lifestyle earning that much.

Swedes I am a lifelong Labour suporter and have been asking myself that question again and again.
I mean I'm self employed but if I have a good year I don't just spend every penny on the assumption it will carry on. I assume that business will go up and down.
I just cannot believe we have spent all the revenue and borrowed so much. Yes, some of it was to bail outthe banks but not all by a very long way.

Lenin - You are extrapolating.

Swedes

A flat tax does not have bands.

A personal allowance is a band.

So it's in that way that a tax with a personal allowance is not a flat tax.

You will have to explain who I have been rude to and how as it eludes me.

"It's ridiculous to conclude that anyone opposing the new higer rate of tax on high earners is opposed to a more equal society." I hope that's not directed at me, because I agree. I think the higher tax rate will be counter-productive. But I think it's only fair that, in opposing, one evidences an understanding of what one is talking about. Some people on here clearly don't and, in addition, have not thought through the implications of their arguments, which are often self-defeating (ie basic misunderstanding of how money works leading to misguided arguments that hoarded wealth is a good thing for all of us) or just deluded (the old "VAT is only incurred by choice" argument.)

MIFLAW You need this book

It is a well-respected authority on Capital Gains TAx and you will see in its precis it describes the new 18% CGT rate as a "new CGT flat rate". But then Tolleys probably didn't go to Oxford.

Perhaps minimum tax rates are the answer.

There isn't a flat rate though really is there as it's 10% for shares in your own company on £1m of lifetime gains, 18% above that.

Why is it better if everyone has the same income though? That's what I've never understood. Human beings, rotten things that they are, tend to feel happier if someone is worse off than they are.

Xenia ... progressive taxation doesn't give everyone the same income (and once again I'll post the 2005 OECD figures that illustrate the UK is a LOW TAX country.

Let's put it another way: why is it better if a small number of people earn a lot more than everyone else?

Xenia - well that 10% rate is the entrepreneur CGT rate. If I sold shares or property (not my principal private residence) realising a capital gain over £9,600 then I would pay CGT at a flat rate of 18%.

AFD I'm not sure that your graph shows that the UK is a low tax country. It shows that for workers on average wages - they are on low tax. But it is silent for workers on higher wages ....

I thought we were not 6th highest on some chart now for personal tax, on a par with Sweden but without the state subsidies they get over there.

Why is it better a small number of people arn more than others> Because that reflects that a small group of people are exceptionally talented and are reward for taht - like Beckham with a ball etc It shows markets are working properly and it gives the others something to aspire to.

Jesus.

A flat rate is not the same as a flat tax.

A truly flat tax does not have exemptions. It starts from the first pound and keeps on going to the last pound. As Wikipedia puts it (admittedly not Tolleys, but they do have a lovely turn of phrase) "any flat tax with an initial threshold deduction is inherently progressive."

Perhaps you (and the OP) meant something other than a flat tax - ie a tax with an initial exemption and then a single rate thereafter. But that's banding. That exemption has to be set somewhere. If you set it too low, not only are the poor (who, desperately unfairly, still get a vote each even though they don't pay in as much) unhappy - but they can't afford to live. Poverty (which costs public money to remedy) goes up, the workforce becomes less internationally competitive, and bottom end tax evasion and avoidance increase (black markets, cash in hand, squatting etc). But if you set it too high, you give people an easy ride, then you miss out on valuable tax revenue - remember, though one per cent of earners are paying the 50% rate, nearly 100% are paying 20% and that money adds up.

So what's it to be? Most governments choose to tax on stepped bands so that it hurts everyone, but no one gets hurt more than they can take.

You don't need to be an economist or to read Tolleys to understand this. You just need to watch "Scum". Ray Winstone's character has a conversation with a sidekick about the taxation of other inmates' income. They are operating a genuine flat tax - 50p in the pound. They realise that if they set it too high people won't pay and, implicitly, will allow another "daddy" to take Winstone's place.

One of the many things I didn't learn at Oxford ...

I think it is fair that if you earn more you pay more. People who earn very little money do work as hard as those who earn lots.

What I'd like to see done is to cut the benefit handouts people get. Some have worked and contributed but so many have not. You should only be entitled to handouts if you've worked or have a medical reason why you can't workimho.

Mybox

What about people who are very very stupid? Would you penalise them for being unfit for the workplace?

Of course, there are lots of people, many of them very clever, who cannot get jobs - but I want you to answer the question about stupid people because otherwise we risk getting into the sterile argument of "they could find work if they wanted to" or "it's their fault for making the wrong choices when they were 14".

BTW by very very stupid I just mean very low intelligence - not with any identifiable condition that goes with low IQ. Unless you think that stupidity is itself "a medical reason why you can't work"?

YAbu a lot of us work hard and do not earn any wgere near £150,000.

Xenia ... I'm sorry. "Because it shows the markets are working properly" isn't a good enough reason for grotesque inequality. Nor are your other reasons. The thing is, of course, that no one here has proposed that everyone earn the same. So to demand reasons why it would be fair is a ludicrous canard. Grotesque inequalities are so plainly not a good thing that I am staggered that anyone can claim they are, and can only presume they say so out of selfishness.

As for the tax figures: they're from 2005, and the most reason global comparisons I could find. Britain is (and remains) a low tax society. Other countries with lower headline rates of income tax (such as France) often have many more and far higher subsidiary taxes (such as road tolls). So income tax headline figures are an unreliable guide to the tax burden. Even now, the proportion of income claimed in tax in the UK is lower than in all but one of the years Margaret Thatcher was in power.

MIFLAW - "CGT is marginal in the sense that there is a de minimis level. That's not a flat rate." Make your mind up, dear.

The trouble is actually that the UK tax system is too redistributative. Lower paid earners pay hardly any income tax relative to other European countries, and higher rate earners pay too much income tax (again relative to other European countries). Our top rate is now I think the highest in Europe, barring Denmark and also now one of the highest in the world.

Before PW comes galloping in on her favourite horse (Reducing Inequality) may I say that I do not believe that the tax system is a desirable way of reducing inequality in the UK.

I think we should look to equalising opportunities in education, then training, then pay and conditions, then promotions, then healthcare etc. Class-snobbery is endemic in our society, as is class-envy. Taxing the rich til the pips squeak will not fix any of that, and might conceivably make things worse.

Quattrocento: you are just wrong. The UK is a low tax country and, if anything, our tax system has not been redistributative enough in recent years, which is why such gaps have opened between the poor and rich,

Once again, here are the most recent OECD figures on comparative tax regimes. You will notice the UK at the low end of the scale.

It's simply no use people coming here and asserting we have an oppressive, redistributative tax regime, because it JUST ISN'T TRUE!

AFD, as I said previously, that is a table for people on average incomes, who do pay a low rate of tax relative to European countries. If you look at the narrative "The 'Personal rate' is the average rate of income tax for a worker on the average income in that country."

We do tax the wealthier quite punitively in the UK.Look at your own wiki list. There are only three countries with higher headline rates for income tax. I'm not sure the list is entirely accurate but it's your list.

Isn't that a circular argument Quattro - ie, the reason the poorest pay so little and the richest pay so much is that our poor are (in the North European context) poorer and our rich are richer - or, at least, the gap between the two is considerably greater here than it is in most N Euro countries? So, there is a need for a higher rate on the richest because they are, relatively speaking, so much richer?

This all comes down to a pretty basic right-left difference, doesn't it? Right-leaning people are happy to consider equality of opportunity; they just don't want the redistribution of assets. Left-leaners think you can't have equality of opportunity without redistribution of assets. The graphs I posted below support the latter line of thinking.