I’ve been rendered almost speechless because I’ve run out. Against my will, I was subjected to the BBC’s Any Questions this evening. I had to make my excuses and leave after twenty minutes. That shit must violate some convention or other. I was never a rugby player at school, but the drop-kick I was about to deliver to the radio would have attracted admiring looks from the blokes gathering in New Zealand for the forthcoming professional ruck-fest.
Some daft bint in the audience asked if it was “moral” to consider reducing the top rate of tax from 50% (“consider”, mark you; it hasn’t even been done). Fifteen minutes they argued the toss - Stephen Dorrell, Simon Jenkins, Shami Wossname from Liberty, and some Labour low-life - and by the time I could take no more, the words “Laffer curve” hadn’t passed the lips of anyone in the hall. Nor was any mention made of these interesting figures from yesterday’s City AM:
The top one per cent of taxpayers (roughly speaking, those on £150k and above) will pay a record 27.7 per cent of the total income tax take in 2011-12, according to HMRC (they earned 12.6 per cent of total income, down from 13.4 per cent five years ago). This has increased from 26.6 per cent the previous year, 21.3 per cent in 1999-2000, 14 per cent in 1986-87 and 11 per cent in 1981-2.
And Eyebrows Healy thought he was squeezing them till the pips squeaked. Amateur.
Another astonishing statistic is that the 14,000 people on £1m a year or more will pay £14.2bn in income tax this year.
The Labourer actually brought this up, to illustrate how “effective” the 50% rate was. The government ploughs its way through £14.2bn in about a week (I’m mulling over a post about the progress of Savage Tory Cuts™ in my own patch of dear old Glasgow toon to illustrate in some small way how it manages this feat). And, as I say, the Laffer curve doesn’t exist on Planet BBC, so nobody asked whether a 40% rate might actually raise more. The way it, you know, did before.
Oh, and point of information, whoever you are (I really don’t care): the government doesn’t “have £2bn to give away” to anybody. It’s borrowing that much every week.
They will contribute almost as much to the exchequer as the total paid by the 13.93m people earning up to £20,000 a year, who will fork out £14.9bn.
So you want the “rich to pay their share”, to “shoulder their part of the burden”. Okay. I’ve done some back-of-an-envelope sums here. For the record, £1m is 50 times greater than £20,000 (even my mental arithmetic is good enough to work that out). The average person earning more than £1m is worth… how many times more to the exchequer than those poor saps on less than £20k? 50? Don’t be daft. They aren’t paying their fair share, remember? So, 20? 25? Try 993.
Forget the practicalities of Laffer for a moment; the question was about morality. Where is the morality in asking ordering someone to pay up to a thousand times more simply because he has over fifty times more? ‘Cos I’m struggling to see it. Yes, I realise that these are averages for people above and below these thresholds, and someone earning exactly £1m isn’t paying exactly 993 times as much as somone earning exactly £20,000. But thanks to “progressive” taxation (50% rate or no 50% rate) he’s still paying well over 50 times the tax. They don’t need that much? It’s “unearned”? Says who? The bloke jangling the jailor’s keys, flanked by burly coppers. Hand it over or else. Oh yes, very bloody moral. Nice pile of cash you’ve got there… it’d be a pity if anything were to happen to it. Or you. The epitome of fucking virtue, that is.
Chakra-batty claimed that she hadn’t seen any evidence of high rates of taxation causing business leaders to make more amenable arrangements. Give it time, love, you will…
Yup, me and some of the boys and girls from the UK’s accountancy firms have been arguing this very point over at AccountingWeb.
http://www.accountingweb.co.uk/anyanswers/question/fate-50p-income-tax-rate
Funnily enough although things like the “Laffer Curve” and tax incidence have been getting a mention (phew!), you’d be surprised how many of the professionals who should know better have a streak of “it’s about equality” in them, which is a disguised form of “Bash the bankers” / “Eat the Rich”.
Sad really. In the end the argument has pretty much petered out. The biggest point being that it’s easy for the majority to pass laws saying that the minority (those earning more than 150k) should pay more tax.
D’oh!
Someone on benefits pays no income tax but still has to fork out around 80p for a litre of milk, pays 20% VAT on most other things they buy, and pays the same for petrol/diesel/gas/electricity as someone on minimum wage or a £million a year.
The fairness of a higher tax rate for those on £150,000 plus per year has not been thought through to its full extent. Everyone should be issued with a card detailing income which must be shown everytime any goods or food of any description is purchased, and this will enable the seller to increase the cost of the purchase in line with the income of the buyer. It’s only fair! You earn more, you pay more.
On the other hand it is possible that if person A is paying say 25p income tax on an income of £150,000 they are already paying more than person B who is paying 25p on an income of £20,000. However, this is obviously too complicated for a certain section of the community to understand, so perhaps the whole issue should be left with those who know better. Not.
Sam,
You remind me of a conversation from my youth. Maggie had some sort of tax cut or something and the argument presented to me by some numpty went along these lines…
Is it fair that a fat-cat on 100,000 pays the same *rate* of tax as a nurse on 20,000.
(I’m inventing the numbers but that was the gist)
My gaster was flabbered. Someone hadn’t paid attention the day we did percentages.
I also saw on TV something about how expensive childcare for working parents is. Now thing is apparently it’s almost 3 times the EU average in Britain. All manner of cockamamie schemes were suggested - mainly involving “tax credits”. Nobody seriously suggested looking into why it’s so expensive in the first place.
PS. The Official CCinZ nickname for Shami Chakrabarti is “The Civil Rights Pixie”.
PPS. I saw George Osborne on TV yesterday. It’s beyond a joke. He clearly had no idea what he was on about. It looked like his speech-writer had taken “Economics for Dummies” a blind-fold and a pin.
Nobody seriously suggested looking into why it’s so expensive in the first place.
So why is it so expensive in the first place? My guess would be too much state intrusion +PAYE +NI +Registration Bollox for something that used to be a handful of cash every week to Mrs. Miggins for looking after little Jimmy.
As well as good old Baumol’s cost disease (as frequently cited by Timmy W.) http://en.wikipedia.org/wiki/Baumol’s_cost_disease
Question Time = Leftie wankfest
Lefties = ignorant about economics
So, you are surprised?
Didn’t we learn that excessive taxation on wealthy people was a bad idea in the nineteen-sixties? I believe that it led to an effect that became known as the ‘brain drain’. Penalising people for being successfull meant that all the successfull people left and you then had a country full of unsuccessfull people. I seem to recall that the successfull Kinks and the successfull Beatles wrote songs about it.
Didn’t we learn that excessive taxation on wealthy people was a bad idea in the nineteen-sixties? I believe that it led to an effect that became known as the ‘brain drain’.
Apparently not. Although we are nowhere near the heights of 1974 when the top rate of tax was 83% and up to 98% if you had the temerity to have this income from ‘unearned’ wealth in the form of investment income.
The ‘brain drain’ of the 1960’s was slightly different from what we see today. That was primarily about engineers and scientists realizing that they could get much better money and research facilities by emigrating, primarily to the US, Canada and to a lesser extent Australia.
For those earning more than 150k in PAYE with no ability to route the income through dividends or capital gains (as an owner / manager may be able to do), this acts as a barrier against highly skilled people coming into the UK, but also means that where people can they are looking to leave the UK for a less harsh tax climate such as Switzerland or Singapore.
However, we should not kid ourselves. While lots of people say “That’s enough - tax is too high, so I’m leaving”, this is easier said than done as people like Guy Hands have found out. Moving is one thing, but taking your job with you is another.
Most of the reasons why people don’t leave are family and social reasons:
- Wife doesn’t want to go
- No social life in Geneva / Zurich
- Can’t leave parents, wife, children, etc.
- Work is well paid, but UK based, etc.
For this reason there may well be lots of complaining from those affected, but there is very little that can actually be done until the Chancellor finds his manhood and repeals it.
“Chakra-batty claimed that she hadn’t seen any evidence of high rates of taxation causing business leaders to make more amenable arrangements.”
Apart from the increasing number of vacant store fronts on the High Street and decreasing tax take. Oh no, couldn’t be anything to do with the bloated leech of the State sucking the life blood out of everything else now, could it?
None so blind, etcetera.
@John Galt
Many thanks for the clarifications it is always good to learn more and correct one’s errors. I was only a kid in the sixties so I suppose I can excuse myself for getting it a bit wrong.
Socialism is hollowing out economies around the world while in Guardianistan the debate is whether taxation should be confiscatory or merely punitive. This is what it feels like to be handcuffed to someone who has decided to jump off a cliff.
A thing I find curious is that it is never mentioned that many of those affected by the 50p tax rate are high ranking commissars. Presumably their salaries are just quietly adjusted to compensate? It is not as if it costs government anything to do so.
Re the brain drain, I recall working with IT colleagues in the 70s who had done a stint in the US. Stories of being able to buy a reasonable secondhand car with the first month’s salary after having paid all the bills were commonplace. Sadly those days are long gone. The 70s weren’t all bad, though. There was no shortage of material for trouser bottoms, lapels or ties, as my wedding photos confirm, but barbers seem to have been in prohibitively expensive
One thing I would like to know more about is tax incidence.
David Friedman had a piece about it on his blog. Basically, the idea is that gross salaries adjust so that net, post tax, salaries are representative of productivity. E.g. if you are 5 times more productive than somebody else, your salary will adjust so that it is 5 times greater than that of that somebody else, after tax. The overall effect on society must be hard to judge, but progressive taxation may not be as progressive as it seems. Indeed, many of the poorest may be worse off for it, as highly skilled professionals that do work with significant positive externalities, choose to work in relatively less productive occupations - or simply work less.
Don’t expect a sophisticated discussion about this coming to prime time tv anytime soon.
p.s. I know a few civil servants in HMT. It is fascinating how they live in their little world.