My thanks as ever for featuring my ramblings on LC.

My original blogpost also considered Hannan’s track record of less than total honesty, including the interview with Sean Hannity (thanks to Richard Blogger for debunking the NHS waiting time claim):

http://zelo.tv/ovZAmq

Yep. The top 10% pay such a large share of income tax because they take such a large slice of national income. If they want the rest of us to pay a larger share, that’s fine by me: we simply need to increase the share of national income that’s paid as wages to the other 90% of people.

For one person on 100k to protest that he’s paying more income tax than nine people on 10k each makes about as much sense as one person with ten bags of gold protesting that he’s carrying more weight than nine people with one each. There’s a pretty obvious way to spread the burden around more evenly, but guess who doesn’t want to hear it?

Hannan thinks that if he provides a graph, then it somehow represents the ‘truth’. He and Carswell did the same thing in “The Plan” when they talk about why people don’t bother to vote. The only problem with that particular grsph is that they neglected to cite the source.

He’s a sophist who loves his straw man arguments as this paragraph shows us,

“That’s right: the richest ten per cent pay 53.3 per cent of all income tax. Now reasonable people can disagree about what constitutes a fair share, but it is difficult to avoid at least one firm conclusion: if you impoverish, exile or otherwise disincentivise the people who pay more than half our taxes, our economy will collapse”

Yeah, Dan, the rich are being “oppressed”. [/facepalm]

“most people actually pay a similar share of their income in taxes when all taxes are taken into account, even up to the top 10 per cent as a whole. ”

So what you are saying then is that they already pay their fair share? In nominal terms they are already paying a lot more? A lot lot more in fact. Are you suggesting we return to some communist/marxist model where the government can decide how much you can earn?

You also miss out the very important point that high earners get less from the state – which is NOT included in the HMRC figures above. Once accounted for it turns many low earners from net taxpayers to net recievers of taxpayer money.

How does anyone define “excessive tax”? Britain once taxed the rich at 95% and they didn’t become extinct. Its one hell of a lot easier to manage on a net income of £100,000 pa if you paid tax of 90% on an income of £1,000,000 than it is to manage on a net income of £6,000 pa if you paid tax of 40% on an income of £10,000. A vast industry exists to facillitate tax dodging by the rich in ways that are not available to the poor and tax policy is dictated by the rich who have access to politicians, or failling that can buy Dave Hartnett pie and mash.

@ Tyler

“You also miss out the very important point that high earners get less from the state”

In terms of services and benefits given directly to them as individuals, yes – they’re not claiming tax credits or (probably) using state schools. In terms of what they “get” from services and benefits provided to the general population, though, this is not at all obvious. If the state wasn’t there providing education, healthcare, pensions, childcare, income top-ups, subsidised housing etc. for their workers – not to mention national defence, a police force, the courts, transport infrastructure etc. – they’d be doing worse for themselves by some considerable margin. That’s why they stick around here and run supermarkets and PR consultancies and pharmaceutical research companies, instead of relocating to small-state havens to run mud-hut construction firms unburdened by things like roads, electricity, a legal system, secure borders, and a healthy, literate workforce.

It’s grossly simplistic to suggest that because John gets NHS treatment (say) and Jill doesn’t, John is “getting” more from the NHS than Jill is. What if Jill is John’s employer and £500 spent treating a back problem means he takes 10 fewer days off sick this year? What if £5,000 spent subsidising an apprenticeship means he does more work to a higher standard in less time throughout his working life?

What is also failed to mention is all those other taxes that are far more regressive. Like the VAT which hits poor families far more than wealthy ones and brings in only about 15% less in taxes overall than income tax. You could say wealth taxes hit the wealthy more but its a much smaller slice of the pie in comparison to VAT.

Oh, come on, I thought there were three things that everone knows about the UK system.

1) The income tax system is progressive.

2) The tax system as a whole is only mildy progressive.

3) The tax and benefit system is highly progressive.

Worth noting that in comparison with, say, Sweden, the income tax system is less progressive than the Swedish system, the overall tax system is *more* progressive than the Swedish system and the tax and benefit system less so.

@8

Readers should note that Tim W is now paying a stonking 23% VAT on his energy bills, thus demonstrating that Governments can claim not to be raising tax rates, while still raising taxes:

http://zelo.tv/rcSHFl

“Readers should note that Tim W is now paying a stonking 23% VAT on his energy bills,”

Indeed I am and very happy about it I am too. For I’ve argued in favour of exactly this for many years now.

For it’s very, very, stupid indeed to be taxing energy because of the naughty emissions then offering a concessionary tax rate on energy.

“. For I’ve argued in favour of exactly this for many years now.”

What is your view on social tarrifs?

Social tariffs? Slightly complicated.

1) Water. The system here in P is I think very good. The unit price for water rises as you consume more. There’s a (low, it’s a low wage place) standard tariff which is enough to run a household on. Set fee per month. Certainly we very rarely breach that set monthly usage and price. Then if you start watering the garden (above a minimal amount, you know, trying to keep a lawn green throughout the summer), filling up a swimming pool, you’ll get into hte next level where you’re charged a higher rate per unit. Then, on top of that, at about the sort of level of trying to irrigate a half acre garden twise a day, you’ll do into a third and penal rate. We got caught with that when a pipe broke and believe me, a €600 euro monthly water bill makes you check things thereafter.

All of this I think is a very good thing. Low price for the essentials, limit usage by price thereafter.

2) A social tariff in the sense of “you’re poor here’s a special rate for you” I think a very bad thing. For it just deepens the poverty trap, increases the marginal tax/withdrawal rate and that’s steep enough as it is.

But I’m absolutely convinced that taxing energy because of emissions and then offering energy a special low tax rate is nuts.

“A social tariff in the sense of “you’re poor here’s a special rate for you” I think a very bad thing. For it just deepens the poverty trap, increases the marginal tax/withdrawal rate and that’s steep enough as it is.”

You’ve made the assumption here that people in fuel poverty are capable of getting work should they want to (and hence where a marginal tax/withdrawl rate would be useful). The problem is that a significant proportion of those in fuel poverty, and those who qualify for social tarrifs in the UK, are actually elderly people, or people with serious health problems (cancer patients need warmer houses for example). As you don’t work for ATOS, you’d have to therefore except that neither of these groups is going to be getting a job anytime soon and hence marginal tax/withdrawl rates are irrelevant.

“So what you are saying then is that they already pay their fair share?”

Such a subjective term really. If we simply look at things as a “percentage of the income I earn” then you could argue they pay their fair share.

But when you start to look at disposable income values versus tax it gets a whole lot more unfair. Someone on £20k may pay somewhere around 20% in taxes from the wage, but only have enough money to pay the bills thanks to tax credits or some other benefits.

This person, as part of a collective “people” are as important to the capitalist system as those getting taxed nearer to 40% of their wage yet those same high earners get the privilege of taking away significant percentages of money in real disposable income.

Equality has to be measured in percentages (hence why Hannan is, as usual, a joke) and the fact is that as a percentage of income the rich have far too much money to spare by comparison to the rest of society.

Individual benefits to greater responsibility, and harder work, is extra money in absolute terms…this doesn’t have to mean such significantly higher percentages. In a fair society everyone that worked would have comparable levels of disposable income as a percentage, the £20k earner maybe 10%, and the £100k earner perhaps closer to 20%. You’re still much better off for having £10-20k to blow however you want as a high earner, but not relatively and unequally better off by comparison.

Completely unworkable in this global society, of course, but another perspective of how those in the top 10% simply do not pay their fair share…or rather (more accurately) why those in the bottom 50% do not get their fair share for ultimately vital contributions to the global economy and to keep those 10% in their luxury they are so accustomed to.

“Once accounted for it turns many low earners from net taxpayers to net recievers of taxpayer money.”

Exactly, and long may it continue.

@ Lee

Do you think it is somehow unfair that high earners get to walk away with more of their money? Apart from a few super rich people, the “rich” aren’t really that rich in real terms. Only 7% of people in the UK earn of 50k a year. Whilst that is good money, it isn’t so much that they are disproportionally wealthy. Not to mention the more important point that these “rich” people work hard for their money. I certainly do.

Another point is that the tax base relies so heavily on a quite small number of people. It’s not that hard for those people to move away if the tax regime gets too pernicious. I did, as have several of my friends as well as my brother now too.

Hmm… if the top 1% were taking ALL of national income they’d be complaining about having to pay ALL of the income tax.

The size of your tax bill is a barometer or your wealth – they should be boasting about it!

Tyler @15
‘ not to mention the more important point that these rich people work hard for their money, i certainly do ‘ well big round of applause to you and the rest of the hard working ‘ rich ‘ people, good on ya where would we all be with out your hard work ethic. Still applauding….

Now 50k a year is not a massive amount of money, still it’s a fine wage to get and if some one earning this kind of money can not live and provide for their family then they are doing some thing wrong. Maybe they should be looking at their own lives and what they are doing with that money instead of turning their anger on those who recieve £57 a week unemployment because they have paid their stamps and are entitled to it and any other welfare benifit going.

But still, if they had just worked that bit harder they maybe not have been made unemployed eh? You keep working hard now……where ever you are with your other tax avoiders,

“Do you think it is somehow unfair that high earners get to walk away with more of their money? ”

That’s what I just said. Within margins of course. It’s not unreasonable for those who are richer to take slightly more disposable income, that’s more a factor of the margins at the very lower end of the wage scale than anything else though.

“Whilst that is good money, it isn’t so much that they are disproportionally wealthy.”

Yes they are, when you look at how much money they get to use freely. Take someone on minimum wage. Assuming they’re lucky enough to not have any dependents, a job that requires minimal commuting, a good houseshare…they’ll have maybe 15% of their wage as disposable income. Someone on £50k in a similar situation, or even if they just live on their own in a nice house with considerable mortgage, will have closer to 45% of their wage as disposable income.

I’d say that’s pretty disproportional.

“Not to mention the more important point that these “rich” people work hard for their money. I certainly do.”

Spurious statement, and anecdotal. Show me evidence that these “rich” people work any more “hard” for their money than those getting a lower wage.

“Another point is that the tax base relies so heavily on a quite small number of people. It’s not that hard for those people to move away if the tax regime gets too pernicious. I did, as have several of my friends as well as my brother now too.”

As I said, my desire is not workable in the current global environment, I’m very realistic in this. My point stands, however, that those on good wages get an unfair amount more money than those on low wages. This isn’t just about tax, it’s also about wage inequality in a workforce that all have their part to play in the success of the economy, from the cleaner to the executive director.

Why you should be getting over £50k for “working hard” while someone gets £12k for “working hard” is absolutely beyond me though. Responsibility, expertise and the cost of gaining that expertise, additional dangers…they’re real arguments; “working hard” is not.

Lets make it plain – we tax our wealthiest income earners at one of the highest rates in the western world – 50% over £150k and another 11 (or is it 12!) % national insurance. Most people who live and work in the UK and earn that sort of salary are not able to get it paid to their wife in Monaco – nor move abroad. They pay it. So can we please have a mature debate about this and stop throwing around comments about the rich “not paying their way”. For one thing £150k a year won’t make you rich – it will make you comfortably off. Secondly the “poor” are going to be helped only by creating a system where employment is widely available at fair rates of pay – and where a safety net exists that will help the people who fall off the bottom rung. People always will. Its life.

Like it or not we live in a deeply materialistic society – one where a couple can win £100m on the lottery (to me just as obscene as a bankers bonus) and a thuggish footballer can earn £150 grand a week – and try and avoid tax on that by setting himself up as a company. Where rich vapid celebrities lives are played out in the mainstream media. Yet they are regarded as heroes and something to aspire to. People who work hard and succeed at their careers – and sometimes make a lot of money as a result of hard work – are not. Its all gone horribly wrong. Mostly under a Labour government of course…….

Mark Roper: No one here has said that the rich do not pay their way, so take your strawmen somewhere else thankyouverymuch

@4 – No. Why? Because the wealthiest in society generate a far smaller percentage of their income from the salary (unless they’re footballers) than the middle and lower classes. They make a lot of money from Capital Gains…which is taxed, for them, at *28%*.

If we were to merge the two “income” types into one type (with one tax-free allowance), and then drop the 50% tax rate and the two “normal” tax rates by…oh…2% each, things would be considerably fairer.

@12 – And what about shared houses of poorer people? Oh right, they’re screwed. And maisonettes? Well, minimum price per month! One-size-fits-all models suit only middle-class families.

@ Mark Roper

“£150k a year won’t make you rich – it will make you comfortably off”

So in your view, only 1% of earners are ‘comfortably off’? God, things are even worse than I thought. There was me thinking people on, say, £40,000 or £60,000 a year were generally pretty comfortable – given that they earn, y’know, at least 2-3 times as much as 50% of the population.

Come on. If you’re earning double what Mr 60k is earning, with his nice house and car and foreign holiday and savings account, plus another 30k for luck, you’re rather more than ‘comfortable’. You can think very seriously about buying that Spanish villa and/or Rolls, employing that housekeeper, sending your children to Eton, retiring at 50, etc. You might not look ‘rich’ next to Bill Gates, but you look rich next to the 95% of the population who earn less than half what you do, which is surely what counts.

The ONS currently produce a useful document that is essential to debunking right-wing taxation myths (I’m sure it will be culled soon though due to the “war on bureaucracy” as it tells us little that is helpful if you are a government by the rich for the rich). See http://www.ons.gov.uk:80/ons/rel/household-income/the-effects-of-taxes-and-benefits-on-household-income/2009-2010/the-effects-of-taxes-and-benefits-on-household-income-2009-10.pdf

1. The top 10% earn 28% of all income and the top quintile earn 43% (page 49). Is it any wonder they pay more income tax?

2. Thanks to the regressive nature of our tax system, the bottom quintile pay 35.5% of their income in tax and the top quintile pay 33.7% of their income in tax (page 50). The rich can hardly argue that the tax system is unfair on them, unless they argue for a poll tax rather than one proportionate to income.

Effectively most of the comments on this blog revolve around people arguing that the “rich” don’t pay enough tax, and should pay more, from people who wouldn’t end up paying more tax but would like to see more of other people’s money spent on them directly or indirectly.

Wow, there’s a surprise, especially on this website.

@ Tyler

Gosh, I never thought of it like that. I guess we should all be more like bankers and corporate CEOs, who are of course determined to stand on their own two feet, proudly shun any form of taxpayer-funded state assistance (bailouts, subsidies, loans, underwriting of debts, government contracts etc.), and have never been heard to demand that the net tax burden on them should be lowered (through cuts to capital gains tax, the 50p tax rate, corporation tax etc.) while being raised for other people (through VAT hikes and cuts to tax credits etc.).

FFS, obviously the bottom 90% would like it if either (a) the top 10% paid a bigger share of tax, or (b) the top 10% took a smaller slice of pre-tax national income, or both. And the top 10% would like it if either a) the bottom 90% paid a bigger share of tax, or b) the bottom 90% took a smaller share of pre-tax national income, or both. So what?

@25 G.O.

You make the assumption that if the top 10% took less of the national income the bottom 90% would somehow get more….

In reality, the top 10% are generating income, and were they to generate less, the total pool of national income would decrease. Proportionally the top 10% would get less, but the bottom 90% would likely get less in real terms as well.

Of course, you are only arguing this in proportional terms. Which in the real world are immaterial.

@26 – Ah, trickle-down economics. Heh.

@trickle down economics: is that where they piss on you and tell you the reason you’re poor is because it’s raining?

@28 – Not a bad description at all

Why you should be getting over £50k for “working hard” while someone gets £12k for “working hard” is absolutely beyond me though.

Seriously? You don’t understand why some jobs pay more than others? Why a partner in a law firm (say) earns more than a paralegal, even though the hours worked are often similar?

Tyler: “You make the assumption that if the top 10% took less of the national income the bottom 90% would somehow get more….”

Yeah, I would argue that’s true. Generally if companies kept their total salary budget the same, but paid less to their “top talent” and more to the bulk of their workforce, this would happen. I fail to see why this would result in net money vanishing.

“In reality, the top 10% are generating income”

Without the average consumer, there is no market. Without the average worker, there are no products.

@31 Jungle

The top talent as you call it can easily vanish because many jobs in today’s world simply need not be done in any one place, for example.

You also miss the point that these top earners only get paid within their companies but pay tax outside them, to the government. So if a company’s pay pool is fixed, a few top performers taking the lion’s share is as you say bad for the remaining few staff in terms of their wages, but really good for the government as they take more money from higher rate taxpayers…..and this is what this whole argument is about deep down isn’t it? People wanting more money for the government to spend on them.

The other thing you miss is that many jobs can be done from anywhere, and don’t have to be based in the UK. That replacement is a permanent cost to the UK in jobs, GDP and tax revenue. I know several people (including myself) whose jobs have moved out of the country, mostly for tax reasons. For high earners the top tax rate here is 50%, but after NI you pay 62%. In Geneva the same top tax rate is 37% all in. Is it any wonder that a lot of richer people are moving over there when it makes so much financial sense for them to do so?