The Great Squeeze: Cost of Living Crisis 2022

[rob666]

Yup, scrap it on all but luxury goods.
Increase inheritance tax by 50% and the same with stamp duty on all homes over a couple of million quid.
All foreign nationals to be banned from buying any property unless it is going to be their main residence, because that has led the silly price increases for housing.
Eat the rich, feed the poor, and free coasters for all comrade.

 

[BigT]

I’m all for free coasters.

A flat rate is progressive, 30% of 100k is more than 30% of 10k, that’s seems to be forgotten.
Tax systems need to be simple then they can’t be fiddled, what could be simpler?

 

[John]

No, a flat tax is proportional, not progressive. A progressive tax is one where higher earners pay more relative to their earnings.

Conversely, VAT is regressive rather than proportional.

 

[WillPS]

That’s true but they have to start some time otherwise they will always be underfunded.

As for taxing people on £100k a year more, they already pay more tax and take less out of the system, how is it an incentive to earn more if you just pay more tax on it?
I agree NI should be scrapped altogether though and a fair level of taxation applied, that doesn’t necessarily mean a big hike for the top earners though.
The loop hole that allows SME businesses owners to use dividends to avoid the higher rate of tax should also be closed at the same time, this is where majority of the income tax revenue is lost in this country.

You make a compelling tax for all income, whether via salary, dividends or capital gains to be subject to income tax.

 

[BigT]

You make a compelling tax for all income, whether via salary, dividends or capital gains to be subject to income tax.

Thats exactly how it could work, the beauty of it is it’s simplicity.

 

[WillPS]

Thats exactly how it could work, the beauty of it is it’s simplicity.

I agree. That's not a compelling argument for having a single rate income tax though.

 

[BigT]

I agree. That's not a compelling argument for having a single rate income tax though.

But are we a million miles from that now? Add in national insurance and the tax rate is 33% below 50k and 42% over it, it’s not so different.
Add in income from dividends, investments, interest and inheritance tax and it makes a good argument for simplicity in the system.
How much is wasted on creating tax codes and then making sure people pay the correct tax?

 

[WillPS]

But are we a million miles from that now? Add in national insurance and the tax rate is 33% below 50k and 42% over it, it’s not so different.
Add in income from dividends, investments, interest and inheritance tax and it makes a good argument for simplicity in the system.
How much is wasted on creating tax codes and then making sure people pay the correct tax?

Yeah, we are a million miles away from it.

Somebody working full time on the minimum wage earns ~£17,500 currently pays ~£2000 in tax, under your scheme they would have to pay almost 3x that.

The average UK salary is ~£31,000, somebody earning that currently pays ~£6k in employment tax and under your scheme would now have to find an additional £3k a year.

You haven't solved a problem for head teachers, consultants, engineers or 'normal working people' as you refer to high earners - you're massively dicking on financially stressed hard working people, some whom are already being pushed in to poverty by the cost of living crisis by reverse robin hood'ing them in the name of simplification.

Tax codes are rows on a database somewhere. The magic of PAYE is it sorts itself out (eventually).


FWIW - here's my idea for extending PAYE and addressing the fundamental fairness of taxation issue.

Currently PAYE works like a filter through which employers pass their employees earning through, PAYE keeps a record of how much has been passed through it, and passes back running totals for the employer to fill out their employees payslips with. It also tells them how much of their earnings should go to their nominated account, and how much should be paid to HMRC.

Rather than acting like a filter, I would like to see PAYE act as an account for each and every taxpayer - employers put in to which the entirety of employees earnings (minus pretax deductions like pension and cycle2work). The employee can elect for the PAYE system to immediately pass that money on to a nominated bank account if they choose, or they can have it pay a set amount weekly or just move money in to personal accounts manually.

As well as forcing employers to pay earnings in to this new super-PAYE system, I would also insist that any transaction currently subject to CGT also must go through the system (so that includes dividend payments an major asset sales) as well as any benefits payments (and all benefits as well, state pension, universal credit, PIP, child benefits/tax credits - all of them are paid in as payments). Also, fringe benefit, you have a method of summarily paying everyone a few hundred quid to help with their utility bills.

You can now scrap employer's national insurance, capital gains tax and income tax, and replace them with an 'earnings tax' which follows a similar scheme to the present income tax but with higher rates.

How much higher? It depends which other taxes you want to remove.

You could feasibly scrap council tax, whack up income tax a few points across the board and display that as a precept - and people would contribute to their local council on the concrete known of their earnings rather than the ridiculous notional value of their property in the early 90s.

On the more progressive/expensive end of changes you could even exempt UK taxpayers from paying domestic VAT.

 

[BigT]

Why is it always a race to the bottom? The simple solution would be to put the minimum wage up to compensate for the higher tax rate so lower payed people break even.
Your system would work okay but wouldn’t massively reduce the operating costs by closing down majority of HMRC.

 

[WillPS]

Why is it always a race to the bottom? The simple solution would be to put the minimum wage up to compensate for the higher tax rate so lower payed people break even.
Your system would work okay but wouldn’t massively reduce the operating costs by closing down majority of HMRC.

Which would have the effect of pushing inflation further still and exacerbate the initial problem.

I don't agree that a unified account for benefits and taxation would be result in a race to the bottom. On the contrary I believe it would cut complexity (self assessments in particular) and increase productivity.

 

[BigT]

I don’t disagree with you on combining all income into a unified account.
The point on the race to the bottom was around wages and I don’t see why it would push up inflation as disposable income wouldn’t rise, the increase in salary would be to cover the shortfall in taxation.

 

[delta79]

I don’t disagree with you on combining all income into a unified account.
The point on the race to the bottom was around wages and I don’t see why it would push up inflation as disposable income wouldn’t rise, the increase in salary would be to cover the shortfall in taxation.

Then the companies would increase product cost to buyer to cover the loss of profits due to rise in wages.

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[WillPS]

Then the companies would increase product cost to buyer to cover the loss of profits due to rise in wages.

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Exactly this. Bear in mind too that the minimum wage has (rightly) gone up outpacing inflation for the last 12 years. Businesses have taken almost all the low hanging fruit they can to drive efficiencies - this is why Tesco no longer have a night shift and even during the day there are far few people on the shop floor now than there were a decade ago.

There is nowhere for that wage increase to go other than on to the prices customers pay.

 

[Tom]

There will never be a settled harmony on tax, it will always be one of the biggest political footballs during election campaigns. One of the many problems with democracy.

 

[BigT]

Exactly this. Bear in mind too that the minimum wage has (rightly) gone up outpacing inflation for the last 12 years. Businesses have taken almost all the low hanging fruit they can to drive efficiencies - this is why Tesco no longer have a night shift and even during the day there are far few people on the shop floor now than there were a decade ago.

There is nowhere for that wage increase to go other than on to the prices customers pay.

Ah yes Tesco the company that has made how many Billion in the last couple of years?
Lack of staff is to do with they can’t get staff not pay.

 

[WillPS]

Ah yes Tesco the company that has made how many Billion in the last couple of years?
Lack of staff is to do with they can’t get staff not pay.

No it isn't. I'm not talking about the last 2 years, I'm talking about the last 10.

There are no vacancies for supervisors or bakers in Tesco stores nationwide because those roles mostly simply don't exist any longer. There are far less positions for most departments which still operate too - some of which is down to automation (self-checkouts), some is accountable to reduction in store standards (stock is dumped on high shelves rather than stored away), and some is down to working the remaining roles harder - which in part has caused exactly what you describe.

If you believe that Tesco (and every other business in that sector and every other sector which relies on an hourly-paid workforce) would just take a matching hit to their bottom line without passing any cost on to the consumer... well frankly there's probably not much point continuing this debate as I think that nicely encapsulates the argument that you're not being realistic.

 

[rob666]

...and don't forget the butchers.
Used to be a skilled well paid trade, then Tesco came along...wiped out my two local butchers with special offers at the local "Express"... all offers vanished when the local butchers went...together with the skilled mans rate of pay in the supermarket.

Next question.

Hasn't the private sector done a fantastic job in providing us with a secure energy provision system for the years to come?
Lots of already rich people have made an awful lot of extra money, and an awful lot of already poor people now have a fantastic free choice between basic food or basic heating.
What a glorious celebration of the privatisation of the nations state industries, where we were sold shares in companies we already owned.
.
Closed season, one week to go.
Please God, let the first coaster bring back my sense of humour.

 

[delta79]

Closed season, one week to go.
Please God, let the first coaster bring back my sense of humour.

I am hoping to make it to AT this year, however its not looking good.

I wonder what the financial squeeze will do to AT and merlin group?

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[rob666]

Just filled the car, going to be a busy week.
Won the ninety nine quid jackpot on the funny one armed bandit outside Tesco, gauge only just in the red, two notches off a full tank when filled.
Nearly put my card back in to fill it up.
Then it doesn't print the reciept.

 

[BigT]

No it isn't. I'm not talking about the last 2 years, I'm talking about the last 10.

There are no vacancies for supervisors or bakers in Tesco stores nationwide because those roles mostly simply don't exist any longer. There are far less positions for most departments which still operate too - some of which is down to automation (self-checkouts), some is accountable to reduction in store standards (stock is dumped on high shelves rather than stored away), and some is down to working the remaining roles harder - which in part has caused exactly what you describe.

If you believe that Tesco (and every other business in that sector and every other sector which relies on an hourly-paid workforce) would just take a matching hit to their bottom line without passing any cost on to the consumer... well frankly there's probably not much point continuing this debate as I think that nicely encapsulates the argument that you're not being realistic.

Of course I wouldn’t be surprised to see businesses passing on costs to keep the bottom line heathy, part of the reason for inflation rising so fast now is companies profiteering from the current situation, petrol forecourt’s have been profiteering for the last 6-12 months to make up for lost revenue due to lockdowns, it’s been well reported.

I don’t take your point on not being realistic though, was it last year (or maybe the year before) that the Labour Party voted through increasing minimum wage to £15 per hour at conference? If employers NI was abolished and this added to wages then a minimum wage of £15 per hour is not unrealistic or necessarily going to lead to a huge jump in inflation even if costs were passed on to the end customer.