Reply to: Labour would re-introduce the 50p tax rate

[d000hg]

What matters (to people with brain) is overall amount of tax paid on employment

No, it isn't. Your overheads are your business. You also typically pay fees to recruitment agencies for finding permies, insurance policies in case of workplace death/injury, etc, etc. That's your problem as an employer. Company tax isn't an employee's interest either - better to group CT and employer's NI together, and PAYE+employee NI.

[Zero Liability]

It doesn't matter to employees to the extent that they don't see it but employer's NICs undoubtedly are a tax on working and hiring.

Everybody who pays tax most likely paying at high rate - 20% income + around 25% NI (inc employers) - so 45% tax on everybody who got half decent job.

Cons said they'd unify NICs and income tax which would have nice side effect of dealing with lots of tax dodges whose purpose is to shake off NICs. They said they'll create commission near end of Parliament, ffs - you got elected so do things, don't create meetings before next elections.

It'd also end the whole IR35 debacle. Part of the problem is that the overall tax burden is simply too high and people don't feel they're getting value for money. True, the 'rich' bear a big portion of it but if you're a skilled professional, virtually 50% of what you produce goes to the government before you even see it. The politicos in turn bitch - sanctimoniously and often hypocritically, since they are net tax consumers - about people not paying their "fair" share but it's a rotten system to begin with.

I didn't say it was hard to do (although it can be depending where you want to go), I said it was a big step. I don't believe the majority of people would normally consider moving country at all - although possibly the kind of people earning this much might be a demographic who would consider it more easily?

The majority of people aren't on that income, either. It's problematic on two levels. On the one hand you're dissuading people who are considering moving to the UK (or staying here after their studies; remember, this may include British students too, who haven't set down any roots yet) and who have the potential to become skilled professionals, i.e. an increasingly globally mobile portion of the population. I'm not talking so much about entrepreneurs and capitalists, as taxes on high income earners don't tend to hit them as hard as there are other loopholes in the tax system they can avail themselves of to reduce their tax burden. The government is wise enough to know that it would cripple itself if it chased away this demographic, which is the most globally mobile of all. Instead, they think they can force high skilled labour to pick the tab up.

On the other hand, you have people who see less and less of their earnings in their own pocket. The money could easily matter to them if they have plans of founding a business, building wealth to tide their grandkids over, or any number of other personal motives. Yes, there's people who probably would see it easier to stay here and either just reduce their working hours and make do with less, or work the same or more to meet their aspirations. If they were planning on retiring in some sunny location, some day in the future, why not research doing that now, in a place where they may well pay less tax too? Even somewhere like New Zealand, you'd pay much less tax.

My point is that this is a tax on work no matter how it is sliced, and at the bands it applies, high value work. Some people may make do, accepting a reduction in their leisure time (which economic indicators like GDP or tax pelf won't pick up) and remain as productive or more, to continue supporting the same lifestyle, but this comes at a definite cost to them. To assess how they choose to respond to it, you would have to study it over a longer period of time than just a year, to allow for decisions like those to emigrate, to have their effect. The Laffer curve is well known in economics with regard to how at certain levels of taxation the government actually shoots itself in the foot by taxing more. I would wager it is well below 50%. You could also apply this to IR35, i.e. cast aspersions on HMRC's rather dubious estimates of how much money it 'protects' by factoring in the cost to the economy and the government of losing labour market flexibility and reducing the options available to highly productive segments of the economy, to keep their tax burden at levels that actually border on being reasonable.

[AtW]

It doesn't matter one jot to an employee what their employer has to pay the government. What matters is what % of their salary they receive.

What matters (to people with brain) is overall amount of tax paid on employment and splitting it between "company" and "employee" makes zero material difference to the fact that it is another tax on employment.

[d000hg]

Yes I can and yes it is - it's part of the employee cost to the business and represents true tax on employment.

It doesn't matter one jot to an employee what their employer has to pay the government. What matters is what % of their salary they receive.

Besides, employer's NI is offset against company tax anyway.

[AtW]

And you can't include Employer's NI because this is not part of the salary to start with.

Yes I can and yes it is - it's part of the employee cost to the business and represents true tax on employment.

[d000hg]

Everybody who pays tax most likely paying at high rate - 20% income + around 25% NI (inc employers) - so 45% tax on everybody who got half decent job.

Are you deliberately mis-representing the figures to support your argument, or is this a genuine mistake?

Let's take a fairly experienced teacher (since I know what they earn and it's public record). On payscale point 6 you earn £31,500 which neatly fits your description of "half decent job" - by national standards this is a fairly decent salary for someone in their early 30s.

According to The Salary Calculator - 2013 / 2014 Tax Calculator on £31500 salary you would take home 77%, paying 14% on tax and 9% on NI.. Such a person is paying 23% in total 'tax' not 45% as you suggest.

And you can't include Employer's NI because this is not part of the salary to start with. Even if that was legitimate, you can't say someone on £31k salary is paying X% employer's NI on their salary unless you increase their salary to include that NI to start with.

[AtW]

Ah. Thanks.

So people with the broadest shoulders are already paying more tax on more of their income.

What the mob don't seem to understand is how much more.

Everybody who pays tax most likely paying at high rate - 20% income + around 25% NI (inc employers) - so 45% tax on everybody who got half decent job.

Cons said they'd unify NICs and income tax which would have nice side effect of dealing with lots of tax dodges whose purpose is to shake off NICs. They said they'll create commission near end of Parliament, ffs - you got elected so do things, don't create meetings before next elections.

[Platypus]

Ah. Thanks.

So people with the broadest shoulders are already paying more tax on more of their income.

What the mob don't seem to understand is how much more.

Bloody hell, Guardian link that explains this!
How many people pay the top rate of income tax? | News | theguardian.com

[AtW]

Explain. The personal allowance has gone up massively since the coalition came to power, thanks to the Libs

Personal Allowance - If you were born before 6 April 1948 and your income is between £26,100 and £100,000

If your 'adjusted net income' - read more below - is over £26,100 (the income limit for higher allowances) but not more than £100,000, your higher Personal Allowance is reduced by half of the amount - £1 for every £2 - you have over the £26,100 limit, until the basic allowance is reached. So if, for example, you're born after 5 April 1938 but before 6 April 1948 and have income of £26,600 - £500 over the limit - your higher Personal Allowance is reduced by £250 to £10,250.

HM Revenue & Customs: Personal Allowance

So people on 40% tax rate with salary above 100k get shafted even more, totally wrong to remove personal allowance that should be available to all taxpayers.

[Platypus]

What's interesting in all this 50% debacle is that very little is said about personal allowance robbed by Labour at the same time (before 50% tax band is even reached) - that I actually consider more unfair than higher tax, yet not even Osborne talks about changing this.

Explain.

The personal allowance has gone up massively since the coalition came to power, thanks to the Libs

[AtW]

What's interesting in all this 50% debacle is that very little is said about personal allowance robbed by Labour at the same time (before 50% tax band is even reached) - that I actually consider more unfair than higher tax, yet not even Osborne talks about changing this.

[Mich the Tester]

seriously? No they didn't get away with it. Labour still bring it up at every opportunity and I've absolutely heard people taking about the cut and how it shows that Tories are elitist scum who only care about the rich.

They'd say that about the tories anyway. May as well let them whine and enjoy the tax cut.

[Platypus]

they already reduced it and (I think) got away with it

seriously? No they didn't get away with it. Labour still bring it up at every opportunity and I've absolutely heard people taking about the cut and how it shows that Tories are elitist scum who only care about the rich.

[AtW]

But they haven't made any statement about changing it so far?

There is fairly clear statement that they'd do it, with Balls he isn't even saying if he'd put tax back to 45% or 40% after he magically produces budget proficit.

[d000hg]

But they haven't made any statement about changing it so far? They'll have to choose a position to take as the election draws nearer.