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Interested to know peoples view - are next years top tax rises counterproductive?

Im in a fortunate position, attained by many years hard work and sacrifice. I have a nice house with no mortgage - and im a 'bear' unlike some of the bulls lower down the foodchain. i paid off my mortgage as soon as i could afford it and never funded my lifestyle by borrowing against my house. i have no intention of ever trading down and there see no advantage in excessive hpi - i cant spend any increase in my house value unless i sell it and any bigger nicer house than mine is gonna cost me more!!!!

Next year, i will find myself having to pay 50% tax and 8%NI on my hard earned income. i CAN afford it - but its not the point. As i see it, i will be paying extra tax to bail out banks who lent money to the feckless, speculators and those who thought it would be a good idea to take out more debt than they could ever hope to pay back.

Will i pay the tax- like F..K i will. Ill just employ the wife, pay her a salary below the threshold which we will live on - and put the rest in our tax free, pensions, investments etc. I suspect there are many more like me and tax revenues are gonna decline dramatically. This country is going bankrupt like many bulls who over-leveraged themselves.

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Interested to know peoples view - are next years top tax rises counterproductive?

Yes. We already had a thread on the subject.

Im in a fortunate position, attained by many years hard work and sacrifice.

Lucky you![1]

Next year, i will find myself having to pay 50% tax and 8%NI on my hard earned income.

8%? Is that a self-employed rate?

i CAN afford it - but its not the point. As i see it, i will be paying extra tax to bail out banks who lent money to the feckless, speculators and those who thought it would be a good idea to take out more debt than they could ever hope to pay back.

Ultimately that's a bailout of money that's gone into pumping house prices. So (as a property owner) you've got your share of that money, but (as you note) you don't benefit from it.

Will i pay the tax- like F..K i will. Ill just employ the wife, pay her a salary below the threshold which we will live on - and put the rest in our tax free, pensions, investments etc. I suspect there are many more like me and tax revenues are gonna decline dramatically. This country is going bankrupt like many bulls who over-leveraged themselves.

Is an over-leveraged bull bust when he has a printing press[2]?

I don't fall within the new tax band (yay!), and my big adjustment came last year when I moved from being my own boss to PAYE so I couldn't use dividends and capital gains to reduce tax. So I went through the "get your filthy hands off" moment a year earlier than you, and have recently got my substantial five-figure rebate of 2008-9 tax. I think I'll seek to increase that rebate this year.

I suspect the new rate will net more tax from a few, but very probably less tax in total. The beneficiaries will be financial services who help with tax reduction.

[1] which is not to belittle your own efforts - it is neither here nor there whether you had any breaks that would've been unavailable to AN Other of your age ...

[2] the definition of "bust" gets a bit nebulous when you can just debase the currency that easily ...

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its not 50% for 99% of th population.

its not a 50% rise either...its a 10P rise.

and yes, pay it.

many on 150K dont even pay top rate.

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All Tax rises are counterproductive.

Taxation is the forced redistribution of wealth from the productive part of society to the unproductive part of society.

It is a necessary evil, but the primary objective of every responsible government should be to minimise the tax burden.

Labour has done the opposite, by increasing the tax burden to support the unproductive benefits culture and bloated public sector.

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Interested to know peoples view - are next years top tax rises counterproductive?

Im in a fortunate position, attained by many years hard work and sacrifice. I have a nice house with no mortgage - and im a 'bear' unlike some of the bulls lower down the foodchain. i paid off my mortgage as soon as i could afford it and never funded my lifestyle by borrowing against my house. i have no intention of ever trading down and there see no advantage in excessive hpi - i cant spend any increase in my house value unless i sell it and any bigger nicer house than mine is gonna cost me more!!!!

Next year, i will find myself having to pay 50% tax and 8%NI on my hard earned income. i CAN afford it - but its not the point. As i see it, i will be paying extra tax to bail out banks who lent money to the feckless, speculators and those who thought it would be a good idea to take out more debt than they could ever hope to pay back.

Will i pay the tax- like F..K i will. Ill just employ the wife, pay her a salary below the threshold which we will live on - and put the rest in our tax free, pensions, investments etc. I suspect there are many more like me and tax revenues are gonna decline dramatically. This country is going bankrupt like many bulls who over-leveraged themselves.

Although I am not in the 50% tax bracket, I happen to agree. I find 40% just about intolerable and do everything that is legally possible to reduce as much of my earnings below this threshold as I possibly can. If the government needs more than 1/3rd of your earnings in direct taxation and "NI" (and all the indirect stuff and council tax etc) then, in my opinion, they just aren't being efficient. It gets to a stage where you think "it just isn't worth working any harder". In the end this 50% is a tax on the successful small business man/woman (which might just happen to sweep a few bankers into its net). Counter productive in my opinion - and this coming from someone who is generally in favour of progressive taxation.

See: http://en.wikipedia.org/wiki/Laffer_curve

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All Tax rises are counterproductive.

Taxation is the forced redistribution of wealth from the productive part of society to the unproductive part of society.

It is evil, but the primary objective of every responsible government should be to minimise the tax burden.

Labour has done the opposite, by increasing the tax burden to support the unproductive benefits culture and bloated public sector.

somethings wrong most of that was true

Edited by lowrentyieldmakessense(honest!)

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Yes - I now spend more time minimising my tax bill than I do thinking of new products to sell so that freeloaders can live off my hard work.

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All Tax rises are counterproductive.

Taxation is the forced redistribution of wealth from the productive part of society to the unproductive part of society.

It is a necessary evil, but the primary objective of every responsible government should be to minimise the tax burden.

Labour has done the opposite, by increasing the tax burden to support the unproductive benefits culture and bloated public sector.

Omg! I don't feel very well! Time to visit my NHS doctor; I completely agree with Hamish!

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Interested to know peoples view - are next years top tax rises counterproductive?

Im in a fortunate position, attained by many years hard work and sacrifice. I have a nice house with no mortgage - and im a 'bear' unlike some of the bulls lower down the foodchain. i paid off my mortgage as soon as i could afford it and never funded my lifestyle by borrowing against my house. i have no intention of ever trading down and there see no advantage in excessive hpi - i cant spend any increase in my house value unless i sell it and any bigger nicer house than mine is gonna cost me more!!!!

Next year, i will find myself having to pay 50% tax and 8%NI on my hard earned income. i CAN afford it - but its not the point. As i see it, i will be paying extra tax to bail out banks who lent money to the feckless, speculators and those who thought it would be a good idea to take out more debt than they could ever hope to pay back.

Will i pay the tax- like F..K i will. Ill just employ the wife, pay her a salary below the threshold which we will live on - and put the rest in our tax free, pensions, investments etc. I suspect there are many more like me and tax revenues are gonna decline dramatically. This country is going bankrupt like many bulls who over-leveraged themselves.

why are you paying 8% NI with a top tax rate income bracket, iisnt NI capped in the UK?

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When my earnings went over 100k, I formed a limited company and got a very good accountant. Now, my tax liability is somewhere around 18-22% in total.

This 50% tax is just a show by the government trying to please "old labour"... In reality, how many big earners are actually going to pay this?

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How many people who are the actual producers, like farmers, construction workers, manufacturing workers, logistics, researchers.. make over the highest threshold?

When the USA went to a 90% income tax on the highest bracket there was no decline whatsoever in production. Actually production increased powerfully in the years following.

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I don't believe it is especially counter productive.

I doubt many people earning 150k are in any meaningful sense productive. To produce 150k of surplus value is not easy or common (this assumes a nominal investment of capital, obviously if you are being given millions to play with making that sort of money is relatively trivial). I'd assume most are in some sort of unproductive middle-man job; law, finance etc whose claims to being productive are about as convincing as those offered by Diversity Champions and 5-a-day coordinators ('er...improving the theoretical efficiency of things that can at best be spoken about in their 2nd order form your honour'). Just because you make money on something doesn't mean you are productive (re-read your Adam Smith).

It is true there may be entrepreneurs in this bracket but, at the present time, I'm not convinced that encouraging them to keep their money in the business is counterproductive to be honest. Its illiberal to implicitly compel this but others will make greater sacrifices than the deferment of future riches before all this over.

Finally, there is a simple minded argument that taxes discourage earning. I think this may be true lower down the pay scale, but at the 150k level I don't think it obeys quite the same rules. You are unlikely to be on piece-work rates for example and your earnings in something spivvy are not something you can necessarily easily constrain while keeping your job, indeed the whole concept of doing that is quite bizarre.

Hows that for a bit of Friday morning controversy ;)

If you have to choose, what is counterproductive is taxing people at the bottom and letting fiscal drag kick people up into the upper (now middle) rate.

Edited by Cogs

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I don't believe it is especially counter productive.

I doubt many people earning 150k are in any meaningful sense productive.

An interesting thesis, if that were the real story. But you're already mixing the notion of a productive person with a counterproductive tax. The tax is counterproductive if it nets less money, regardless of who pays or avoids it.

In any case, £150k isn't the real story. There's the 74% band at £100k. We've already heard that that'll affect our doctors, and our own drray has said he expects to reduce his hours. Repeat across the NHS, and it'll damage our healthcare provision without saving money. That's counterproductive, whether or not you regard quacks as productive individuals.

Then there's people (like myself) below but near the £100k. I've suddenly become much more wary about writing another book, lest it tip me over into 74%. Again, that's one example among many.

If you have to choose, what is counterproductive is taxing people at the bottom and letting fiscal drag kick people up into the upper (now middle) rate.

Agreed, taxing at the bottom is hugely counterproductive. The net effective tax rate as you lose means-tested benefits should IMO be firmly capped at the standard rate of tax, not allowed to rise well over 100% at various thresholds.

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Interested to know peoples view - are next years top tax rises counterproductive?

Yes, totally.

All Tax rises are counterproductive.

Taxation is the forced redistribution of wealth from the productive part of society to the unproductive part of society.

It is a necessary evil, but the primary objective of every responsible government should be to minimise the tax burden.

Labour has done the opposite, by increasing the tax burden to support the unproductive benefits culture and bloated public sector.

Yes, Hamish does say some good stuff at times. But then we get back to house prices......... :(

why are you paying 8% NI with a top tax rate income bracket, iisnt NI capped in the UK?

If you act as a director of a ltd company you have to pay both employer and employee N.I.

What we should be doing is taxing capital gains on houses. We continually concentrate on taxing people for their labour and don't tax unearned income.

I have a friend who has about £150k of unearned income (property equity, she thinks it's £250k :lol: ) from living in a house for 10 years. I think she should have to pay tax on the gain when she sells. On the other hand she sees me as a high earner and thinks I should pay more tax because 'you can afford to'.

So she does nothing for her gain and doesn't pay any tax on it whereas I flog my guts out and pay more. Doesn't seem reasonable.

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As a business owner/entrepeneur I recently and for the first time in my life committed to creative (and completely legal) tax avoidance schemes. I just draw the line at the idea that people like me should be vilified as "not otherwise taking a share of the pain" when we have spent our lives risking all our capital, working incredibly hard and incidentally creating opportunities for others. It simply isn't acceptable to me to have such a high proportion of the wealth fined in order to bail out corporations (banks, failing car firms, etc) and a government that couldn't manage itself out of a wet paper bag.

Therefore, I am not going to pay the new rate. In fact, I am now paying much less than I was prepared to pay only a year ago.

Smart move Brown, you clot.

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Interested to know peoples view - are next years top tax rises counterproductive?

Im in a fortunate position, attained by many years hard work and sacrifice. I have a nice house with no mortgage - and im a 'bear' unlike some of the bulls lower down the foodchain. i paid off my mortgage as soon as i could afford it and never funded my lifestyle by borrowing against my house. i have no intention of ever trading down and there see no advantage in excessive hpi - i cant spend any increase in my house value unless i sell it and any bigger nicer house than mine is gonna cost me more!!!!

Next year, i will find myself having to pay 50% tax and 8%NI on my hard earned income. i CAN afford it - but its not the point. As i see it, i will be paying extra tax to bail out banks who lent money to the feckless, speculators and those who thought it would be a good idea to take out more debt than they could ever hope to pay back.

Will i pay the tax- like F..K i will. Ill just employ the wife, pay her a salary below the threshold which we will live on - and put the rest in our tax free, pensions, investments etc. I suspect there are many more like me and tax revenues are gonna decline dramatically. This country is going bankrupt like many bulls who over-leveraged themselves.

I'm in a similar position to you, except I kicked back at the end of the 90s, partly due to IR35 and partly because I'd just had enough. So I don't have to personally worry about 50% tax ;)

What I will say, though, is that though the over-leveraged caused this crash, the benefits of the preceding boom were spread widely. STRs are a prime example. And for those who simply worked/saved ... the boom made it easy to do so because of all the money (debt) sloshing around. One of the drivers of high government spending is the desire to stop most of this money/debt from vanishing as borrowers default ... i.e. savers are materially benefiting from the bank bailouts.

It's even arguable that the natural course of events in a free market would be for borrowers to default (no cost to them apart from a ruined credit rating) and savers to lose their money ... so borrowers should be whining about paying higher taxes to bail out the savers :P

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Finally, there is a simple minded argument that taxes discourage earning. I think this may be true lower down the pay scale, but at the 150k level I don't think it obeys quite the same rules. You are unlikely to be on piece-work rates for example and your earnings in something spivvy are not something you can necessarily easily constrain while keeping your job, indeed the whole concept of doing that is quite bizarre.

I agree with your point, but not with the idea that wishing to constrain earnings is bizarre. It would be entirely just and healthy for a high earner to say, "I've reached the x% threshold so I'm taking the rest of the tax year off" ... the problem is one of practicality, of the willingness of the employer to arrange things so that it's possible.

And the "system" discourages such choices because everyone's supposed to stay at the grindstone, maximising earnings and thus tax-paying and debt-carrying capacity.

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As a business owner/entrepeneur I recently and for the first time in my life committed to creative (and completely legal) tax avoidance schemes. I just draw the line at the idea that people like me should be vilified as "not otherwise taking a share of the pain" when we have spent our lives risking all our capital, working incredibly hard and incidentally creating opportunities for others. It simply isn't acceptable to me to have such a high proportion of the wealth fined in order to bail out corporations (banks, failing car firms, etc) and a government that couldn't manage itself out of a wet paper bag.

Therefore, I am not going to pay the new rate. In fact, I am now paying much less than I was prepared to pay only a year ago.

Smart move Brown, you clot.

No. This isn't happening. People wouldn't do this. It would be simple minded to think that taxes discourage earning. It says so in The Guardian.

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An interesting thesis, if that were the real story. But you're already mixing the notion of a productive person with a counterproductive tax. The tax is counterproductive if it nets less money, regardless of who pays or avoids it.

In any case, £150k isn't the real story. There's the 74% band at £100k. We've already heard that that'll affect our doctors, and our own drray has said he expects to reduce his hours. Repeat across the NHS, and it'll damage our healthcare provision without saving money. That's counterproductive, whether or not you regard quacks as productive individuals.

Then there's people (like myself) below but near the £100k. I've suddenly become much more wary about writing another book, lest it tip me over into 74%. Again, that's one example among many.

Agreed, taxing at the bottom is hugely counterproductive. The net effective tax rate as you lose means-tested benefits should IMO be firmly capped at the standard rate of tax, not allowed to rise well over 100% at various thresholds.

Quite right nig.

I have just heard over lunch that our oncologist is cutting his NHS work to 3 days a week and I'm sure it is because of the 74% marginal tax rate at between about 100-113K pa. There is a shortage of oncologists in this country already.

The tax increase is part of Browns "scorched earth" policy for Cameron.

There is no question taxes for everyone will need to go up and public services cut after the next election.

If Cameron reverses the 50% (nominal) tax rate because it it counter productive while increasing taxes on the lower paid (which would raise revenue because there are so many more of them) and cutting public services he would be seen as siding with the likes of Fred the Shred (who I understand has moved to France and will not be taxed anyway).

If he doesn't reverse the tax increase he will anger the media folk and chattering classes (as Brown has done- hence his current discomfort) and his honeymoon will be short and the country will suffer as people do everything possible to avoid the tax.

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Quite right nig.

I have just heard over lunch that our oncologist is cutting his NHS work to 3 days a week and I'm sure it is because of the 74% marginal tax rate at between about 100-113K pa. There is a shortage of oncologists in this country already.

The tax increase is part of Browns "scorched earth" policy for Cameron.

There is no question taxes for everyone will need to go up and public services cut after the next election.

If Cameron reverses the 50% (nominal) tax rate because it it counter productive while increasing taxes on the lower paid (which would raise revenue because there are so many more of them) and cutting public services he would be seen as siding with the likes of Fred the Shred (who I understand has moved to France and will not be taxed anyway).

If he doesn't reverse the tax increase he will anger the media folk and chattering classes (as Brown has done- hence his current discomfort) and his honeymoon will be short and the country will suffer as people do everything possible to avoid the tax.

I think Cameron has a "middle way" that'll work: keep the 50% nominal, but reverse the more pusillanimous measures that accompanied it: the 74% rate and the pensions contributions cap. The latter won't even affect the real rich, 'cos the lifetime limit will kick in first if you earn £150k for very much of your working life - so it's heavily targeted on the real entrepreneur with highly variable income.

He should also radically revamp the tax system overall[1] (and NOT raise income tax). But I fear he won't.

[1] http://bahumbug.wordpress.com/2006/10/30/green-taxes/

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its not 50% for 99% of th population.

its not a 50% rise either...its a 10P rise.

and yes, pay it.

many on 150K dont even pay top rate.

It's a rise from 40p in the pund to 50p in the pound makeing it a 10p rise from 40p which is an increase of 25%.

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I think Cameron has a "middle way" that'll work: keep the 50% nominal, but reverse the more pusillanimous measures that accompanied it: the 74% rate and the pensions contributions cap. The latter won't even affect the real rich, 'cos the lifetime limit will kick in first if you earn £150k for very much of your working life - so it's heavily targeted on the real entrepreneur with highly variable income.

He should also radically revamp the tax system overall[1] (and NOT raise income tax). But I fear he won't.

[1] http://bahumbug.wordpress.com/2006/10/30/green-taxes/

Hey- just noticed we joined at almost the same time and have almost the same posting rate!

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As a business owner/entrepeneur I recently and for the first time in my life committed to creative (and completely legal) tax avoidance schemes.

The correct term is tax minimisation avoidance is not a good term, brother.

The other thing that sucks with tax is this notion that the battlers work hard and the wealthy deserve it. The majority of wealthy people I have met work far harder than the battlers and are taxed far higher. Urban Myth that the hard working families desreve tax breaks while the rich dont. I also dont belive in any tax for anyone while I am at it.

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The correct term is tax minimisation avoidance is not a good term, brother.

The other thing that sucks with tax is this notion that the battlers work hard and the wealthy deserve it. The majority of wealthy people I have met work far harder than the battlers and are taxed far higher. Urban Myth that the hard working families desreve tax breaks while the rich dont. I also dont belive in any tax for anyone while I am at it.

Actually, tax avoidance is fine, tax evasion is illegal. I know, because that's what I do.

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The correct term is tax minimisation avoidance is not a good term, brother.

The other thing that sucks with tax is this notion that the battlers work hard and the wealthy deserve it. The majority of wealthy people I have met work far harder than the battlers and are taxed far higher. Urban Myth that the hard working families desreve tax breaks while the rich dont. I also dont belive in any tax for anyone while I am at it.

Nope. I tried squinting. I tilted my head either way. This still doesn't make any sense at all.

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