Income tax - is this a good idea or am I massively missing something

[Phonicshaskilledmeoff]

So much bad feeling regarding who pays the most tax etc. when in actuality salaries aren’t always linked to who works the hardest, and I find the question of ‘who’s worth more’ even more uncomfortable.

What if they removed the concept of income tax away from the individual entirely. Instead, the employer would pay all the tax. Still based on the individuals salary, but would not appear in their pay packet. (No extra cost to the employer).

your net pay would stay the same but become your gross pay. Any position £££ advertised would reflect the amount actually received by the employee.

I think it could boost employment, with companies encouraged to hire more role staff into lower paying junior roles, in addition to taking away the animosity around who’s paying what tax.

Thoughts?

So from a higher earners perspective. You’ve applied for a job and received the advertised rate.

Any tax is paid by the business. They pay more tax to pay you more.

Policies that higher earners should be paying more tax doesn’t change the individuals pay in the moment. It would however influence hiring decisions going forward.

There would be less conversation about I’ve paid this into the system, I’ve got X out of it. ‘Worth’ to society would be less linked to salary.

In the context of an underwater budget that will require tax rises from somewhere, who exactly will be contributing to make up that shortfall?

unfortunately our creditors do not accept unquantifiable societal benefit as payment on debts owed.

Why is it infantilising?

Also wouldn’t it encourage you to climb the ladder. You apply for a better job - you actually get the rate rather than 60% taken away?

I don’t think it’s to do with sticks or carrots in this instance.

I don’t think this would create a shortfall.

There IS a shortfall.

But your first post said that there'd be no additional cost to the employer. Now you're saying the opposite.

Presently yes, but your post seemed to suggest this would create further shortfall, or did I misread?

No. They pay more tax to have a higher earner than they would a lower earner because we have a tiered tax system. Same as presently.

It doesn't make a difference to the company - they still pay out the same amount of money out of their bank account.

What you propose is already true for employer NICs today. The employee never "sees" them but the employer still pays them out out of the total budget they have allocated for that employee.

(Personally I'd do the opposite and abolish the concept of employer NICs and just bundle it all in, so workers can see how much is really being taken from them...)

So, if everything is the same, why would it incentivize them to higher more lower paid people than they do now?

“Society” means what exactly in quite a global capitalist world? A lot of very smart educated people have the world as their oyster and can justify anything to themselves really.

It's infantilising because it suggests that if only the poor workers didn't know how much tax they paid, they'd feel better.

Your suggestion doesn't do anything to improve productivity because people will still know that the more they work, the more their employer has to pay in tax on their behalf. And their salary will be impacted by this.

Carrots and sticks are exactly the problem. If Labour opened their eyes to the possibilities of simpler taxation, they might not need to have to hit everyone over the head.

It wouldn't. As a company director, I hire based on projected business needs and current strategic focus. Whether income tax is paid by the company or by the employee is totally irrelevant.

There are lots of variables that affect net pay! One of my staff opts to pay a little more, than the compulsory, into their pension pot. Another staff member has 2 jobs so has a tax code which reflects this so, if they leave, a new employee doing the same job would take home more net.
One staff member has money taken for their student loan payment.
So what the OP is suggesting would be unworkable.

DH and I worked in the same area, Higher education. I actually turned down promotion because I didn’t want to be in charge of people. They were quite taken aback. He ended up being a head of dept and the buck stopped with him. That was responsibility for around a thousand souls, there were laboratories with lots of dangerous chemicals that could kill or seriously injure you and stuff that could blow up. Combine this with students with hangovers. No thanks.

People could still easily calculate what tax had been paid on their behalf. You could still easily work out where you are in the chain of earners by looking online, if you were in the top 10%, 5% or whatever. Places like The Institute of Fiscal Studies would just tweak their online tools to reflect that. Plus your employment may not be your only source of income such as paying tax on savings if you need to pay tax, plus professional subs as deductions.

Well that’s the theory but it is BS that the top paid people have all the responsibility- unless “taking the hit” involves going to jail, people lower down the chain are often held to account and driven to work harder when senior leaders make mistakes.

At the very top senior leaders gang up to support each other, they blame anyone but themselves, claim their massive bonuses and go off to either retire on their massive fortunes or take a job again elsewhere .

My dh is semi-senior professional management and he has to have liability insurance so if he effs up then it doesn’t impact him personal or his employer corporately. The worst that happens is he gets sacked - but likely he would simply resign first and easily get a new job.

However the op is wrong, her solution won’t work. But the current disparity of effort and pay is not at all sensible

Don’t understand this at all.
Mike/Mary is a high earner so the company pays more tax for them due to their higher ‘net’ pay, which is now their visible ‘gross’ pay.

Barry/Barbara is a lower earner so the company pays less tax for them due to their lower ‘net’ pay, which is now their visible ‘gross’ pay.

You are saying that Mike/Mary/Barry/Barbara are all thick as mince as they can’t conceptualise that their employment is resulting in the company paying either more or less tax for them? So, Mike/Mary now have no idea that the company would be paying more tax to the taxman for their position than it is paying for Barry/Barbara’s position, and so they will never throw out the ‘I contribute more to tax’ line as they do now? Seems like a deluded fantasy that will not match with real life.

Because the business would have the ability to influence how much tax they are paying in accordance with tax bands wouldn’t they.

Present System
they hire 1 person on 100k gross (with tax deducted post payment)

or

2 people on 50k gross (with tax deducted post payment that they cannot influence)

The option makes no difference to them financially.

Proposed
They could hire the same higher rate person person on 70k and pay 30k direct to government. Total cost 100k

Or they could hire two people on 43k, and pay 2*7k directly to the government. Total cost £100k

Lower tax burden would encourage hiring the lower paid worker and more of them.

Having done the calculations though- maybe there would be a tax shortfall. Or maybe as unemployment could be lower, this would offset by reducing reliance on the start and increasing output and VAT.

Probably very difficult to unpick what has already been created. Tax is ridiculous.

Again, you keep contradicting yourself. Either it changes the cost to the employer (as you say it does here) or it doesn’t (as you’ve said in previous posts).

You've clearly never run a business. Such naivety. 😂

We’ve all clearly not done lots of things….. but I’m also not running for government. Let’s stay friendly.

Lower tax burden would encourage hiring the lower paid worker and more of them

How is that different now? Most staffing structures are pyramid like with the more experienced and higher skill sets at the top ending with 1 CEO, which is why you get paid more the higher you progress in the pyramid. Why would people be incentivised to gain experience and further/deepen skill sets if there is essentially nowhere to progress to, as the aim is to only employ lower experienced/skilled staff?

If they kept the same workers if would have not cost difference. However they could influence how much tax they pay by the future hiring decisions that they make.

You're suggesting that business owners base their hiring decisions on how many employees they can get for a fixed pot of money. I'm honestly incredulous.