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UK taxation policy.

R

rob666

TS Member
When I was a lad, all those years ago, the top earners paid 80% tax on their high earnings, as they should.
Didn't mean our cleverest business minds all ran off abroad, a few did, they weren't missed.
Would be very nice if they returned to those rates, to pay for all those energy payouts to the less well off, wouldn't it.
Could even consider it a real attempt at levelling up.

Team Edit: These posts have been moved from the Brexit topic
 
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rob666 said:
When I was a lad, all those years ago, the top earners paid 80% tax on their high earnings, as they should.
Didn't mean our cleverest business minds all ran off abroad, a few did, they weren't missed.
Would be very nice if they returned to those rates, to pay for all those energy payouts to the less well off, wouldn't it.
Could even consider it a real attempt at levelling up.
Click to expand...
It’s an old one but still an interesting explanation of the tax system and why an 80% tax system just doesn’t work any more.

Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.　
So, that's what they decided to do.

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20." Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realized that £20 divided by six is £3.33 but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.　

So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).　
Each of the last six was better off than before with the first four continuing to drink for free.　

But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10!"　
"Yeah, that's right," exclaimed the fifth man. "I only saved a £1 too. It's unfair that he got ten times more benefit than me!"　

"That's true!" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks!"　

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.　

The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill!　

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.　

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
 
BigT said:
It’s an old one but still an interesting explanation of the tax system and why an 80% tax system just doesn’t work any more.

Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.　
So, that's what they decided to do.

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20." Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realized that £20 divided by six is £3.33 but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.　

So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).　
Each of the last six was better off than before with the first four continuing to drink for free.　

But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10!"　
"Yeah, that's right," exclaimed the fifth man. "I only saved a £1 too. It's unfair that he got ten times more benefit than me!"　

"That's true!" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks!"　

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.　

The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill!　

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.　

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
Click to expand...
I’m sorry, I think taxation and the economy is a little more complex than this analogy. I don’t even know where to begin with picking it apart.

(And please don’t attempt to patronise me by dismissing me as not understanding, I very much do understand but it is far too simplistic and lacking in developed motivations for fiscal and taxation decisions.)
 
I try and stay out of these threads as I don't observe it as a balanced environment.

One thing I would say though is very few people that earn serous money do so through PAYE. Aggressive progressive taxes hit hard working honest folk trying to achieve social migration more than anything. They can't though, they have the tax system putting a ceiling on their earning power and the heel snappers behind them trying to pull them back down through jealousy and spite.

At some point they realise the only way to achieve social migration is by escaping the system. At which point they "earn" as much as they tell you they do 😜
 
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BigT said:
It’s an old one but still an interesting explanation of the tax system and why an 80% tax system just doesn’t work any more.

Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.　
So, that's what they decided to do.

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20." Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realized that £20 divided by six is £3.33 but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.　

So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).　
Each of the last six was better off than before with the first four continuing to drink for free.　

But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10!"　
"Yeah, that's right," exclaimed the fifth man. "I only saved a £1 too. It's unfair that he got ten times more benefit than me!"　

"That's true!" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks!"　

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.　

The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill!　

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.　

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
Click to expand...

I mean that’s all well and good but in reality the 10th man is actually drinking 4 pints whilst saying they only had a half and demanding that the bar man pay him money as he is boosting the value of his pub just by being there.
 
khalichanan said:
I’m sorry, I think taxation and the economy is a little more complex than this analogy. I don’t even know where to begin with picking it apart.

(And please don’t attempt to patronise me by dismissing me as not understanding, I very much do understand but it is far too simplistic and lacking in developed motivations for fiscal and taxation decisions.)
Click to expand...
Okay I won’t patronise you and of course the tax system is complex, too complex in fact so I employ an accountant, however the figures in the analogy are in fact roughly correct, 40% of the adult population don’t pay any income tax and around 59% of the tax paid is paid by the top 10% of earners.
I think it’s quite a good analogy to explain how tax cuts will always benefit higher earners disproportionately, and what would happen if those higher earners move abroad and stop paying.
Of course it’s simplistic but what it highlights is largely true.

Maybe it’s the circles I hang around in but I actually know quite a few people that have had enough and are moving to Portugal or other places far and wide.
I wouldn’t consider myself wealthy, I left school with three GCSE’s did an apprenticeship as an engineer, set up my own company, sold it, worked as a consultant for a few years and then started another small business that’s going quite well.
I live in a nice house in the country near AT, my daughter goes to private school and I have a floating hole in the water that I continue to empty money into otherwise known as a motorboat and money in the bank so I’m doing well for a thicko.
However my energy bill will this year be £6.5k even with the cap, my tax bill will be somewhere around 35k as will my wife’s, everything is going up by 10% plus so even I’m starting to consider the wisdom of staying in this wonderful land.
In the end an aggressive progressive tax system doesn’t just drive the really wealthy to leave our shores, it drives people like me to consider leaving as well.
 
BigT said:
Okay I won’t patronise you and of course the tax system is complex, too complex in fact so I employ an accountant, however the figures in the analogy are in fact roughly correct, 40% of the adult population don’t pay any income tax and around 59% of the tax paid is paid by the top 10% of earners.
I think it’s quite a good analogy to explain how tax cuts will always benefit higher earners disproportionately, and what would happen if those higher earners move abroad and stop paying.
Of course it’s simplistic but what it highlights is largely true.

Maybe it’s the circles I hang around in but I actually know quite a few people that have had enough and are moving to Portugal or other places far and wide.
I wouldn’t consider myself wealthy, I left school with three GCSE’s did an apprenticeship as an engineer, set up my own company, sold it, worked as a consultant for a few years and then started another small business that’s going quite well.
I live in a nice house in the country near AT, my daughter goes to private school and I have a floating hole in the water that I continue to empty money into otherwise known as a motorboat and money in the bank so I’m doing well for a thicko.
However my energy bill will this year be £6.5k even with the cap, my tax bill will be somewhere around 35k as will my wife’s, everything is going up by 10% plus so even I’m starting to consider the wisdom of staying in this wonderful land.
In the end an aggressive progressive tax system doesn’t just drive the really wealthy to leave our shores, it drives people like me to consider leaving as well.
Click to expand...
The core of it is people who literally can’t afford to buy food are also facing tax increases while others continue to play around with their money avoiding paying their fair share (often from a boat)
 
I think you have to separate the very few super rich from the majority of higher earners.
The vast majority of high earners do pay their fair share, the point is though at what point does that become unfair and they decide to leave?
 
BigT said:
at what point does that become unfair and they decide to leave?
Click to expand...

Yawn. We've heard all these threats before. Some leave, some come back in. If tossers like James Dyson and Phil Collins want to leave the country because simply being just filthy rich as opposed to stinking rich isn't good enough for them, then see you later princesses.

Any time taxes get raised, reduced or reformed, this tired old threat gets wheeled out. It's been suggested for decades and is getting tiresome now.
 
I think what is being got at here is that celebs etc are used as a strawman. The vast majority of people paying the higher rate of tax are just normal hard working families. While, no they may not be struggling to eat, there is a question of if it is right to punish people so aggressively for working hard and making something of themselves.

We are talking about your sparks, plumbers, engineers, techies here. Just normal people.
 
BigT said:
I think you have to separate the very few super rich from the majority of higher earners.
The vast majority of high earners do pay their fair share, the point is though at what point does that become unfair and they decide to leave?
Click to expand...

I guess everyone has a different definition of high earner as well.

For me that's generally CEO's, or people earning a salary of £250k plus, yet in other people's mind a salary of £70k is high earning.
 
NickB said:
I think what is being got at here is that celebs etc are used as a strawman. The vast majority of people paying the higher rate of tax are just normal hard working families. While, no they may not be struggling to eat, there is a question of if it is right to punish people so aggressively for working hard and making something of themselves.

We are talking about your sparks, plumbers, engineers, techies here. Just normal people.
Click to expand...
We were originally talking top bankers here, before the topic was shifted, and some posts pulled.
Scrapping the limits on top bankers bonuses by the new leader of our fine nation.
Back to sod the risks, greed is good, chase the big bucks.
Back to no such thing as society, look after number one and sod the rest.
The next big crash is just one poor policy decision away.
Tax very high earners at a far higher rate than the sparks, plumbers and engineers.
But if those tradesmen work all hours to make an income double that of the average wage, then they should pay proportionately more tax, as they have a far greater disposable income, so should contribute more.
 
Good point on the bankers.

I would agree regulation there is a good thing, but not for the purposes of limiting an individuals earning power. For the purposes as you say of removing motivation to make poor decisions that put personal gain over the stability of the markets etc.

To play devils advocate - we don't know the whys behind this. One could make the case that it would benefit the country to increase our power as a financial hub. The people who have sway over where these institutions setup and stay are those on these bonuses. Its very easy to default to "people in charge are idiots" however its very likely there are far greater and wider considerations at play that we are simply not privy to.

On tradesmen etc (and its likely a bad choice 🤣) I think ultimately where people sit on that will come down to the age old human self interest. Where you sit on that is pretty much always going to be dependant on how it impacts you.
 
NickB said:
I think what is being got at here is that celebs etc are used as a strawman. The vast majority of people paying the higher rate of tax are just normal hard working families. While, no they may not be struggling to eat, there is a question of if it is right to punish people so aggressively for working hard and making something of themselves.

We are talking about your sparks, plumbers, engineers, techies here. Just normal people.
Click to expand...

I think there's certainly a sensible debate to be had about tax reform in this country if we could park aside all the ludicrous and well worn out threats of "talent leaving the country". I personally think there needs to be more of focus on taxing wealth then just focusing on income, like Super taxes on luxury goods, mansions, raising inheritance and capital gains tax etc.

When I started paying 40% income tax (so not top rate) I was surprised a little by how low it starts to creep in. But I kind of use it as badge of honour. 1. That I've managed to achieve that level and 2. That I can put my money where my mouth is with pride and help others who have less than me. That by paying more of the money I was earning in taxation, I am helping hard working people like my younger self, my parents and my grandparents, all working class people who started off poor.

Although government waste and the state of public services is a debate for another thread, it's also worth remembering what we get for that personally. Coming from a traditionally low earning family, I've enjoyed free healthcare for 40 years, received 12 years of education, drive on some of the safest and best maintained roads in the world, I have an army of paramedics, police officers and fire and rescue officers on call should I need them in an emergency. My 3 children were all born in NHS hospitals and go to excellent schools. I could go on, but what I get for my taxes I think is a bargain!

There was mention of Portugal earlier, and despite the natural beauty of the place, it's actually quite a poor country. Sure some people may pay less tax there, but I'm friends with a Portuguese couple who moved here with their kids to get away from dead end poverty, have access to better schools, better healthcare, have lower crime rates and the like.

It comes down to what's fair and what kind of country we want to live in.
 
Well...

Not sure what to make of that. The 1p basic drop helps everyone somewhat I guess but don't feel particularly impressed they are scrapping the top end but leaving the middle threshold in place. We know where their bread is buttered.
 
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