making some sense (USA but applies to UK)

[mitsuru]

[youtube]http://www.youtube.com/watch?v=bBx2Y5HhplI&feature=youtube_gdata_player[/youtube]

http://www.youtube.com/watch?feature=player_embedded&v=bBx2Y5HhplI

[Renrut]

Some good points.

He doesn't really go into the issues regarding where you draw the line between taxing the rich person and taxing the rich company that they own which certainly in the UK a lot of 'rich' people aren't directly paid as they're taxed heavily for it, instead they do weird things like stuff it into pension funds, shares of companies, perks (co cars, jets etc), pay their relatives as employees but ones who don't really work. They also do things like move the work abroad because then they're taxed less. And then you suggest taxing imports but everyone complains that they can't then afford a car/computer/tv/ipod.

The biggest problem with taxing very rich people is they are the most mobile, they can move country quite easily to a lower tax location and can afford to pay someone to find all those loopholes for them. There isn't really anything stopping the average bloke on the street from using those loopholes but they don't because they don't know about them and don't have the time to learn. I have a lad working for me, he was technically self-employed until 2 months ago. This meant he could claim against his income tax for things like a new laptop, a car, limited petrol expenses all under the banner of 'for work'. But then he couldn't get a mortgage for a house which him and his gf have been trying to do for about 3 years. Tbh most self employed people do make use of some of those loopholes but most people aren't self employed and assume these things only apply to 'rich people'.


Here's the paraphrased classic economics using beer on taxing rich people:

The Tax System - Explained With Beer

Suppose that every day, 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.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20."Drinks for the ten 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 the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 ( 25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20,"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 dollar, too. It's unfair that he got ten times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $10 back then I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had 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 for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may 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.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

Now I'm not sure I 100% agree with that as it doesn't go into how much income any have but either way everyone can't be rich, at best everyone can the same. But IMO I want to be rewarded for my efforts so the last thing I want is to get the same as someone who sits around all day eating wotsits and watching porn.

Tax is like friction in an engine, the more of it you have the less economical the engine. If the friction gets too much the engine doesn't run, if the air filter is stuffed so full of crap you can't get the air in it will stop running. Similarly things like the NHS, teachers, police, MOD, benefits for disability, etc are like ancillaries on the engine. If your engine is strangled by a crappy filter and a restrictive emissions friendly exhaust so its running flat out just to keep the ancillaries going and the car moving at a steady speed when you hit a hill (a recession) you will start to slow down. Now you can accept the slow down if its a little hill but if its a big long one and if the engine falls below its torque peak you'll have to either turn off the a/c or suffer the effects of the engine eventually stalling, or remove the emissions crap to free up a bit more power. The bits no one knows for sure is where that torque peak is and how steep the hill ahead is until we've passed it.

Personally I say tax everyone at X% and have done with it. No loop holes no clever expenses crap, which means no dodges and a very simple and easy to enforce system. Probably a bit too simplistic a view but the current system is horrendously complex and gives both the top end and the bottom end far too much complication to enforce or administer properly that some at either end get cheated but equally some are cheats.

My I seem to have waffled a lot and drifted way off point.

[OilyFingers]

The issue with tax and scaremongering headlines is down to how it is portrayed. For example: Someone earning 25k per year will pay around 30% tax and NI per year or £7,500. Now the CEO of his company will have various ways of distributing his salary of £250,000 and an annual bonus of say £1,000,000. He/She will earn 1.25 million but only pay 20% tax and NI.

Of the million pound bonus a quarter will be paid as money so attracts tax as income, a quarter will be paid as shares so only attracts stamp duty, a quarter will be paids as stock options and they will get 1.3 shares per share bought at the option price but will only be taxed when the shares are bought and the remaining quarter will be paid into a trust with the spouse as beneficiary and the CEO as trustee, it therefore attracts no tax.

All this diverts from the fact that the CEO has paid 20% of 1.25 million or £250,000 so they have effectively paid 100% of salary in tax.

I'm not condoning some of the practices used but when you look at it in monetary terms not percentages the rich pay much more than the likes of us. Yes Vodaphone use sharp practices via lichtenstien ans suchlike but that is the company not the staff or board in personal tax (although for Vodaphone and Goldman Sachs you'd think they would).

The issue with tax is that it will never be completely fair. The Victorians had some parity with donations and privately funded civic activities. Factory owners built affordable homes for thier staff, Museums and art galleries were built completely by the rich (most are named after their main donor), Hospitals were built and funded by them before the NHS (Longbridge had its own hospital up until it closed in 2005), Schools were funded by endowments, Becasue the Government are now responsible for so many civic activities like healthcare and pensions etc people now take them for granted. It wasn't always like this. If we went back now to how it was the bottom 40% of the population would have nothing and that is how it would stay for a long time.

What I'm trying to get at is that there would be no anger at tax avoidance if there was more philanthropy. Why begrudge someone a multi-million pound bonus if they use some of it to build an extension to a hospital or set up a fund to kit out schools with new equiptment or solve the most potent issue of the moment and set up a housing association to build thousands of affordable homes.

There is a huge vacuum of issues that the Government is either loathe to, or powerless to act upon. That is where the rich should be directing their energies but they either don't. The anger is not about tax or pay, its about greed.

[Renrut]

Well said.

The Victorians had a lot of good ideas. They had some horrendous ones too but a lot of good ones.

I do remember the CEO of my previous employer announcing via email how he would be going on to 'lead synergies' across the company group. It was all written in a 'you should be happy for me way', and people might have been, if it hadn't been for the fact he'd just decided a week before to axe 25% of the jobs on the site. People dug up his info from companies house and discovered that year he'd had a £150k payrise - to about £400k. I'm not against people earning a lot but I would love to have been a fly on the wall for his pay discussions that year bearing in mind the company had made something like a £10M loss hence the redundancies. I don't understand how shareholders stomach it.

[ACE]

Syn·er·gy ('sin-ər-jē) n. interaction of discrete agents (such as drugs) such that the total effect is greater than the sum of the individual effects, eg alcohol plus certain antibiotics*.
Buzzwords, don't you just love 'em!


*Antibiotics such as metronidazole, tinidazole, cephamandole, latamoxef, cefoperazone, cefmenoxime, furazolidone and others (I believe).

[fha772]

I have a simple solution, but it would be political suicide for any party that implemented it.

Raise the tax threshold to about £15,000, then EVERYONE pays 25% income tax.
From what I've read, the government would get more tax, because the taxation system would be simpler, so would take less admin to run.
Lower income people would be better off, due to the higher threshold, and the rich would be better off due to the lower percentage, they would also be less inclined to look for tax loopholes, simply because they wouldn't save enough, and it would bring business and industry to the country because of the lower tax rate.

I just don't understand why should you have to pay a higher percentage of your income when you earn more, it seems to me that the better you do in life, the more you get penalised.
I'm not saying this as somebody who earns mega bucks, believe me, I'm miles away from that.

But all you would see in the papers would be "Monster tax cut for the rich!!", not "Monster tax break for the poor!!"