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George Osborne Told To Bring In Flat Tax To Help Middle Income Families

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http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/10359226/George-Osborne-told-to-bring-in-flat-tax-to-help-middle-income-families.html

Simon Walker, the director general of the Institute of Directors, said that such large “marginal” tax rates on hard pressed families who are struggling to make ends meet “degrades the motivation to work”.

The Chancellor of the Exchequer scrapped child benefit for households where the highest earner has a salary of £60,000 or more in last year’s Budget.

Households with someone earning between £50,000 and £60,000 lost an increasing proportion of the benefit under the change that came in on January 7 this year. Higher earners who have recieved it had until last Saturday to register with HMRC or face a fine.

Experts said the withdrawal of the benefit means that a single earner in a family of six earning within these two sums with a “marginal tax rate” of 73 per cent.

And still it's not enough to bring the deficit under control. Needs to be higher.

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

What do you mean "ever get to"? It's been thus for at least 5 decades.

Where have you been hiding?

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

Because people have somehow come to think that income tax is natural and just and progressive, while asset taxes are unfair, greedy and regressive. Especially land value tax, the most iniquitous, socially destructive and impossible to implement of all possible taxes.

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It's a load of nonsense tbh. They are trying to make it seem as if a flat tax is the only "fair" way to do it.

But there are also a lot of exceedingly regressive taxes with respect to how much they take of a poor or average earners income. For example the wealthiest in society lose a relatively small proportion of their income via VAT relative to me or you.

So are they going to propose that VAT on luxury goods be set at 50% or whatever is needed, so the same percentage of the wealthiest's income as mine is taken as VAT? Because if a flat 30% income tax rate is "fair" then why not arrange VAT rates so the same percentage of our incomes are taken in VAT?

If one is fair why not the other?

And after VAT lets do the same for sin taxes and council tax shall we?

Edited by alexw

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

Strictly speaking they don't. As you get richer they also reduce the amount of someone else's labour that you are entitled to claim in benefits and tax credits.

The whole system is such a mess that it would surely be easier if they just cut taxes and left the benefit / credits system only for the genuinely poor. Hundreds of thousands of higher rate taxpayers now either have to forfeit child benefit in full or register for self assessment to receive any remaining entitlement. If they do neither, they will be fined.

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

Where are your assumptions for this figure? You have to work out what part of the rewards are due to someone's labour and what part of the rewards are only possible due to the communal efforts of the society in which those rewards are earned. At the most fundamental level if you can own more resources than you can physically defend against all comers, it's only because as a society we generally agree not to stove each other's heads in with spades and nick each other's stuff. It's not illogical to suggest that most of the stuff you own is as a consequence of everyone else's not stoving your head in, and is not therefore solely "the reward of your labour" but also of other people's actions. It's not illogical to therefore conclude that you are not the only one who should have a say in the usage of such rewards.

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

85% top rate plus 13% surcharge for unearned income. Basic income tax was 33% iirc.Changed to 60% top rate and no surcharge by Maggie. In real terms, basic allowance was a LOT higher than now.

Wasn't income tax introduced as a 'temporary' measure to finance the Crimean war at 2.5%? :)

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http://www.telegraph...e-families.html

And still it's not enough to bring the deficit under control. Needs to be higher.

no problem; people will just earn less than £42k pa to keep all tax credits and benefits; or they will work cash in hand and pay zero income tax; problem solved

nobody should be really surprised that there are no volunteers to pay 40% income tax

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Simon Walker, the director general of the Institute of Directors, said that such large “marginal” tax rates on hard pressed families who are struggling to make ends meet “degrades the motivation to work”.

....

Experts said the withdrawal of the benefit means that a single earner in a family of six earning within these two sums with a “marginal tax rate” of 73 per cent.

I've posted on here before that I worked out my marginal rate was 63% when including the effect of child benefit. So I keep my income fixed at £49,999. When I get a payrise/bonus, it goes into pension and I hope to be reunited with it one day.

The odds of getting something back via a pension are probably better than the guaranteed loss of 63% now. By getting the 25% tax-free lump sum at age 55 means every £75 in pension fund only costs me a net £12. That £75 gets returned over the years at zero/basic rate and without paying national insurance.

Note that working for myself such as extending the house results in returns which are taxed at 0%.

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How did we ever get to the point where it is acceptable to confiscate over half of the rewards of someone's labour?

.. in return for healthcare provision, education, a basic pension, (some) unemployment insurance, etc..

Depicting it as confiscation is a little OTT.

Of course, if the optimists are right and we continue to see the elimination of jobs by automation, then by definition taxes will have to rise on those with jobs..

Personally, if the chancellor was so determined to reduce the 50p rate to 45p, he could have just put higher rate tax up to 45% and forgotten all about the cap on child benefit, and student tuition fees, thus making the tax system flatter and simplifying a lot of people's affairs.

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85% top rate plus 13% surcharge for unearned income. Basic income tax was 33% iirc.Changed to 60% top rate and no surcharge by Maggie. In real terms, basic allowance was a LOT higher than now.

Wasn't income tax introduced as a 'temporary' measure to finance the Crimean war at 2.5%? :)

Napoleonic wars.

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Strictly speaking they don't. As you get richer they also reduce the amount of someone else's labour that you are entitled to claim in benefits and tax credits.

The whole system is such a mess that it would surely be easier if they just cut taxes and left the benefit / credits system only for the genuinely poor. Hundreds of thousands of higher rate taxpayers now either have to forfeit child benefit in full or register for self assessment to receive any remaining entitlement. If they do neither, they will be fined.

Child Benefit should have been scrapped when Children's Tax Credit was brought in, but of course doing things like simplifying tax and benefits was completely beyond Brown's intelligence.

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Dont forget that there is also Employers NI which is 13.8% on earnings over £7k a year. As an employee this is in practice funded by you in the form of a lower gross salary.

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...bit like a 5% payrise for someone earning £10k is quite different to a 5% payrise for someone earning £50k.

The poor always pay the most, both in interest rates on loans to price paid for energy...a larger proportion of tax is paid by the working poor......is tax paid on expenses? can the poor claim back their VAT? ;)

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