Tax rates

[CheltenhamHacker]

An interesting point arose from teh General Election thread, that goes beyond the current year politicking, and made me wonder how everyone feels.

Should everyone pay the same tax rate, or should the rate rise as your income rises? If so, where would you stop? As far as West Germany (I believe, but don't quote me that it got as high as 90% to help fund the country)? If you think it should be marginal, I would love to hear what brackets you would put in, and whether the bracket you fall into impacts your decision!

 

[Hacker Khan]

I could buy an argument to get rid of income tax and put it all on VAT.

Otherwise I think you need to ensure those earning more contribute more to society, whilst at the same time not overly penalising people who have worked hard to earn a decent wage packet.

 

[GreiginFife]

Personally I think that tax rates should be gradiated based on earnings. However I am not sure that leaving the levels unadjusted is right. The 40% bracket has been largely untouched since introduction, from an era where earning £40k was considered high, the same era where you could get half a tank of petrol for a tenner...

The counter argument is that people who work their way up the chain get punished by paying more tax. Some say thats not pubishment but two people earning £25k each will take home a combined £3260 per month yet someone on £50k solely takes home £3020.
There is something not quite right about it.

 

[Val]

People who work hard to get into a position to earn in the 40% bracket shouldn't be penalised by paying a higher percentage of their earnings than someone on the low tax threshold. It's not right that should just because they can potentially afford to.

 

[Rooter]

I think the % rate should remain flat across the board. Why should success and hard work be penalized?

 

[Rooter]

The counter argument is that people who work their way up the chain get punished by paying more tax. Some say thats not pubishment but two people earning £25k each will take home a combined £3260 per month yet someone on £50k solely takes home £3020.
There is something not quite right about it.

Spot on Greig, I raised this point with my MP when he knocked on my door last week.

It goes even further though, lets assume your 2 examples above both have 2 kids under 16. Family 1 both working and earning a combined 50k get child tax credits, family 2 where lets assume one parent stays home and the single person earns 50k get nothing. Now I am not saying the single working family should get tax credits, however i think the system should be fair. Either both get it, or both not.

The explanation was it was too difficult to police means testing and wouldn't change.

I would just like things to be fair for all.

 

[SwingsitlikeHogan]

People who work hard to get into a position to earn in the 40% bracket shouldn't be penalised by paying a higher percentage of their earnings than someone on the low tax threshold. It's not right that should just because they can potentially afford to.

Higher earners contribute more to the common pot because they can afford to. And obviously earning enough to pay tax at 40% does not necessarily come about as a result of working hard.

 

[Rooter]

Higher earners contribute more to the common pot because they can afford to. And obviously earning enough to pay tax at 40% does not necessarily come about as a result of working hard.

OK maybe not working hard in the 9-5 sense, but at some point some hard work has been done, either with a degree, qualification or previous work experience. Not any old lazy muppet can walk into a 40k a year job.

 

[GreiginFife]

Higher earners contribute more to the common pot because they can afford to. And obviously earning enough to pay tax at 40% does not necessarily come about as a result of working hard.

Not always so you then penalise those that have, probably the majority. Personally I work very hard. Its 9-5 but its exactly that, 9-5. 20 years I have spent building up my skill base and career.
Its like people complaining about housing prices in the South East for example, they should stop complaining in that case as they can obviously afford to live there...

 

[Spuddy]

Remember it's only the earnings above the higher rate threshold that's taxed at 40%. I know some folk who seem to think that the whole lot is taxed at the higher rate once your annual salary passes the limit. The first £40k of someones salary who earns double that generates the same tax as someone who earns £40k in total. You dont start to pay more until you hit £100k and start to lose the personal allowance (creating an effective 60% bracket between £100k and about £120k).

 

[GreiginFife]

Remember it's only the earnings above the higher rate threshold that's taxed at 40%. I know some folk who seem to think that the whole lot is taxed at the higher rate once your annual salary passes the limit. The first £40k of someones salary who earns double that generates the same tax as someone who earns £40k in total. You dont start to pay more until you hit £100k and start to lose the personal allowance (creating an effective 60% bracket between £100k and about £120k).

Which was why I used a comparative nett earning example. Yes its above a certain point, it still creates a difference overall in comparison.
I do still believe that flat rate is probably not the answer but the current levels are reflective of the wrong time IMO.

According to Gov.uk the higher rate kicks in at £31,866 so a bit off that £40k point.

 

[jp5]

Working hard != higher salary.

If you earn a shed load of money then congratulations, but I think it's right that you pay a higher percentage back into the system to help others.

 

[Rooter]

Working hard != higher salary.

If you earn a shed load of money then congratulations, but I think it's right that you pay a higher percentage back into the system to help others.

Why should they? Where is the incentive to over achieve if you have to give almost half of your extra (well deserved) earnings away?

 

[jp5]

According to Gov.uk the higher rate kicks in at £31,866 so a bit off that £40k point.

Add in ~£10k personal allowance which takes the 40% threshold up to ~£40k

 

[MegaSteve]

As PAYE man I wouldn't mind the chance of some tax avoidance....
As everyone does so apparently...
According to those that get caught...

 

[Spuddy]

Which was why I used a comparative nett earning example. Yes its above a certain point, it still creates a difference overall in comparison.
I do still believe that flat rate is probably not the answer but the current levels are reflective of the wrong time IMO.

According to Gov.uk the higher rate kicks in at £31,866 so a bit off that £40k point.

If you get the standard personal allowance then you don't pay the higher rate until you earn over £42385 (not that I actually said 40k was the threshold anyway....)

 

[GreiginFife]

If you get the standard personal allowance then you don't pay the higher rate until you earn over £42385 (not that I actually said 40k was the threshold anyway....)

Yes, again why I used nett examples.
I am in favour of gradiated tax, just think where the thresholds sit need reviewed.

 

[Rooter]

ignore me! Had a moment!

 

[jp5]

Why should they? Where is the incentive to over achieve if you have to give almost half of your extra (well deserved) earnings away?

If 50% of those well deserved earnings is not sufficient then the answer is simple - stick to a job with a tax threshold you are comfortable with.

If you are in a position to be giving away 50% of your earnings in tax then you are doing very well for yourself already. Sure, some of life's frivolities may take a little longer to save up for, but those at the top should pay more, as each additional pound becomes less necessary for their continued existence.

 

[Rooter]

If 50% of those well deserved earnings is not sufficient then the answer is simple - stick to a job with a tax threshold you are comfortable with.

If you are in a position to be giving away 50% of your earnings in tax then you are doing very well for yourself already. Sure, some of life's frivolities may take a little longer to save up for, but those at the top should pay more, as each additional pound becomes less necessary for their continued existence.

I'm sorry but i completely disagree, no wonder we are a nation of losers with attitudes like that. Why win when you could settle for second or third... Don't work harder or smarter, why bother?