Taxing the rich is always popular with all save the few who realise they are rich. Many socialists who love higher taxes do not seriously believe Ā they themselves should be paying a lot more. I remember how much they protested when aĀ past Conservative government (against my advice)gave everyone the opportunity to make a bigger contribution to better local services through the Community Charge. Labour hadĀ continuously argued for more local spending and here was the opportunity. It soon showed that those who want more tax and spend do not usually want to pay it themselves.
Taxing the rich more right now would be especially popular. Top bankers and celebrities with enough money to issueĀ a super injunction or two, are far from popular. The question should be how do you do it?
Many think that is obvious. You raise the rate of income tax and captial gains tax. Then anyone rich has to pay more out of their income, or is caught if they try to shift it into capital. The problem with this theory is it does not work. Rich people leave the country. Rich people employ better accountants and tax advisers and find ways round the rules. They delay selling assets with gains. They refuse to invest in riskier ventures. They sit on their money or leave it abroad. Fewer rich and enterprising people come here,a nd fewer already here venture or work as hard. There is less point because the marginal tax rate has gone up.
So whatĀ is the way to tax the rich more? The answer is a paradox – set internationally competitive rates, so rich people want to come here, invest here and create jobs here. In the 1980s the then Conservative government cut the top rateĀ of tax from 98% on unearned income and 83% on earned income to 40%. The rich not only paid a lot more tax as a result, but they paid a higher proportionĀ of total income tax.
When this governmentĀ raised CGT to 28% they said anything higher would lose them revenue. I agree. Now I see that their forecast for CGT revenue shows that even with a top rate of just 28%, they expect some temporary fall in revenue. UK and US past experience suggests you collect more CGT if you keep the rate below 20%
Right now we need all the jobs, investments and growth in revenue we can get. That requires competitive rates, to tax the rich more. Tony Blair did not allow the Income Tax rate to rise above 40%, and Gordon Brown cut CGT to a very competitive 18%. The Coalition goes in for higher tax rates. They may in turn keep the growth rate down and cost the state lost revenue. We need to tax the rich more. That requires knowledge of the maximum rates to maximise the revenue.
May 30, 2011
Say what you want about Gordon Brown (and I daresay what most of us who contribute here couldn’t say it without turning the air blue) but he judged Cameron perfectly. By introducing a top rate of 50%, that he knew would constrict growth, and then saying it was only temporary, he dared Cameron to put economic good sense first and Cameron showed he isn’t up to the job, economically.
I knew the writing was on the wall just before George Osborne sat down after the emergency budget last May. He made a huge deal of shouting ‘this is a progressive budget’ a few times before he sat down and once you, what you believe, is the political argument before the economic in budgetary matters there’s only one way things are going to turn out.
I still think we haven’t seen the last VAT rise in this Parliament. There’s very little other options – NI already been hiked disgracefully over the last decade, that can’t go on forever, income tax rates can’t be raised without making a mockery of raising the lower threshold, the middle rate of 40% is already being frozen which will draw hundreds of thousands more in, the top rate of 50% is prohibitive, fuel duty is a political hot potato, alcohol and tobacco won’t go down well with inflation already ripping.
George needs to get inventive with next years tax rises, and there will be tax rises, can’t keep on increasing borrowing to record levels forever.
May 30, 2011
Once again, you are so right.
Didn’t this get proved by the Chicago school way back in Mrs Thatcher’s time?
Personally I do not think this is a time for “retrenchment” and safety. I think, myself, that this is a time for bold Thatcherite decisions.
Lowering the taxes might just do the trick.
May 30, 2011
This is such a tired and outdated argument – give rich people more money and somehow out of the goodness of their hearts this money will trickle down to the rest. What happened in the 1980’s? – the reduction in spending on essential public services that’s what. The broken Britain that the Tories endlessly referred to in the latter years of the Blair government was built on the foundations of this economic theory.
One only has to look at the way in which the banks have performed to see just how inadequately this economic theory works – the accumulation of money in the hands of the few does not lead to the improvement in society for the many.
I accept that I will be rejected as some kind of socialist dinosaur (I am most definitely not) – but it is clear to me that this ‘just give the rich more money’ answer to the economic problems which we suffer from is dangerously flawed.
May 31, 2011
It is not out of the goodness of their heats that it will trickle down. It is out of their own self interest. What can someone rich do with their money anyway – they can invest it in shares a business or something, leave it in the bank, employ staff or spend it on things. All of these help the economy and other workers.
The alternative is for the state to take it and largely to do the same same. But usually very much less efficiently particularly in the UK with its bloated and inefficient state that hardly produces anything of real substance beyond PR gimmicks, trying to buy votes or employing friends of the powers that be.
The bank failure is clearly due to poor government regulation allowing the banks to gamble with others money. Heads they win tales the people/state looses it is not a very good bet for the people but often proved very good for the bank staff.
May 31, 2011
One small point, the government doesn’t ‘give’ the ‘rich’ money. They decide, under threat of imprisonment, how much to allow us all, from the lowliest employee up, how much of the fruits of our labours we can keep for ourselves and our families.
Glad you brought up the fact that Blair broke Britain and that Brown destroyed the banks, that’s two points I think everyone in the UK can agree on.
May 31, 2011
Ray
History has repeated itself really. In the 1980s spending by Government was restricted because yet again the British economy had been pushed out of balance between what was earned as a Country and what was spent. It is to be remembered that Governments have no money of their own everything that is spent is collected by means of taxation etc. A country has to earn the money before it can spend. Unfortunately Brown decided to spent before the money was earned. This was not the economic model the Conservatives had followed up to 1997, when at last, at the end of the Major years the economy was in recovery.
The Labour years under Blair, saw spending in the public sector, without creating wealth in the private sector to pay for it, causing deficits year on year. This spending was unsustainable. The only real growth area in the private sector was the financial sector and easy credit which created an economy which relied on people spending to keep afloat. Therefore, not only did Government debt become a problem but private debt also. This, even without the difficulties with the banks was a economic model which would fail. However, for all the money spent there has not been the massive improvement in services there should have been. Most of the money went to wages in the public sector and increases in welfare. High levels of immigration increased the economic problems. Those on benefits already, at the beginning of the Labour years, remained so as immigrants took the jobs British people would not do. This increase in people would see more pressure on services and costs for Britain, especially should a recession occur.
The intention is not to give the rich more money. The intention is to reduce taxation to encourage more people of enterprise and wealth to invest in Britain to create jobs. Otherwise they will go to Countries with lower tax regimes, a more skilled workforce and less regulation than Britain has. Only by wealth creation can Britain earn the money to spend for all the services required by the public.
May 31, 2011
āgive rich people more moneyā. This reveals the mindset of the deluded leftie. An extreme socialist believes all wealth belongs to the State, so money earned by individuals is not thereās, it is owned by the State to remove and give out at their discretion. Perhaps you hold such views or, more likely you have been indoctrinated by malignant socialism and you cannot understand the concept of wealth creation and taxation (except when it comes to your own wealth). āI accept that I will be rejected as some kind of socialist dinosaurā suggests you are consciously aware of the limitations of your statements, but the opportunity for an anti-Tory rant overrides.
May 30, 2011
Have not most of the rich sensibly moved their investments and money abroad already?
UK rates are way above maximum revenue rates (for silly and entirely counter productive BBC type fairness political reasons). Cameron (and the mad Liberals) wants to be seen as “fair” not “nasty” and you can all suffer high tax rates and a poor NHS as a result for this childish vanity. What is fair about people being unemployed.
It also needs to be born in mind that money left with the rich with lower rates will be invested or spent later by them and be taxed then a little more – but a bit later so the loss is often not a real revenue loss.
If the money is taxed at high rates it has numerous very bad effects:
It discourages incoming investment.
It encourages the wealthy and hard working to leave or work less.
It encourages the non tax producing black market and DIY/barter.
It takes money from sensible people who invest directly in what they actually want or need for themselves or their businesses.
It transfers it to government officials who waste what is left of it after huge collection admin costs on buying votes or daft while elephant windmills or something similarly mad.
It makes people use convoluted and complex inefficient structures to avoid tax.
It diverts efforts in to tax accountant, lawyers, tax collectors, vote buyers in government and other essentially non productive activities.
It delays and stops investment in plant & production tools.
It takes money from people who know how to use it and gives it to people who mainly do not.
It removes the incentive to work.
It diverts money to the 43% higher paid state sector where it buys less – indeed virtually nothing of any real value.
If someone invests say Ā£1M in the UK for say 30 years and manages to get 10% PA return then with 50% income tax and 40% IHT it will almost certainly loose money after inflation. Leaving less than the Ā£1M in real terms to pass on. And that is if you do well at a 10% return so why bother.
In short you get more if you just milk the cow rather than chopping all its bloody legs off. Could someone get this simple message through to Cameron/Clegg. If they want to win the next election they need to do what will work not what looks “fair to the BBC”
Growth forecasts lowered yet further to 1.3% and 2.2% I hear this morning – even that looks rather optimistic with these clowns in office.
May 30, 2011
Stamp duty on property (a turnover tax) at up to 5% is particularly mad. People moving often pay more in tax than 100% of their earnings in the year they move. So they just don’t move and no tax arises.
May 31, 2011
The considerably wealthyavoid stamp duty by purchasing property through a company. A majority of the Hyde park One development of multi-Ā£m apartments have been purchsed this way. Nearly all of these people are from overseas. such people are pumping Ā£bns into certain areas of London, some of which will trickle down to us peasants, but then we and are children suffer from inflated property prices, as a result. The Govt must increase taxes on the international wealthy who use London as their playground. It has become a haven for them and they will not suddenly desert, as long as those tax increases are reasonable.
May 30, 2011
Quite so, this is another example of government ignoring the blindingly obvious. I know several youngish, self made and not wealthy business people for whom the 50% tax rate was the last straw who have uprooted their family and business off shore.
When you wrote that CGT only collected Ā£3B a year I was staggered and there is a strong case for its abolition for the good of employment and the economy. In the world of Nulabour and Coalition Finances this is nothing. Another blindingly obvious decision but imagine the handwringing socialists having a field day.
May 30, 2011
The Laffer curve reminds us that the tax base falls as the tax rate rises, and a technical answer to the question of maximising tax revenue is to set the tax rate such that a further one percent increase (say) just results in a one percent fall in the tax base (i.e. at the point of unit elasticity of the base with respect to the rate). The problem is to know what the current position is in these terms. The experience you quote suggests a CGT rate of 28% is too high, and no doubt the tax base is nowadays much more sensitive to variations in the tax rate because all the financial innovations that have taken place in recent decades have made tax much more easily avoidable.
We need simplicity in the tax rules to counter avoidability. The previous government produced a tangled web of tax rules for the tax lawyers to deceive hmrc: a truly Gordian knot.
May 30, 2011
So what happened to the idea that cutting government spending was the answer?
It does not really matter how you intend to raise more taxes, the mere fact that you do will choke the private sector. Pick my pockets you may but when you have done there will be nothing left to pick, whether I notice you doing so or not,
May 31, 2011
True but it does matter how tax is raised as well as how much – many ways of raising taxes change peoples behaviour in a negative way, perhaps set up complex expensive structures, stop working, move investment into dafter but lower taxed investments (wind turbines perhaps) or just invest overseas.
May 30, 2011
You (the UK) indeed need āall the jobs, investments and growth in revenueā you can get. But a longer term direction is also needed. While socialism may not be the answer, neither is unbridled capitalism. British research shows a strong correlation between more āunequal societiesā and a host of health and social problems. The following graph is very instructive: http://www.equalitytrust.org.uk/why
Looking at this graph, as a northern European country, the UK could strive over the longer term to become more like Norway, Finland and Sweden and less like Portugal or the US.
May 30, 2011
Very few are suggestion unbridled capitalism – just a smaller state, sensible tax rates, law and order, defence and fewer but sensible regulation when needed to control monopolies or exploitation as needed.
Inequality is a complete red herring beyond a certain basic level – it has no real effect the graph your refer to just show inherent differences between the US at one end and Scandinavian counties at the other and their population mixes history and gun laws.
June 1, 2011
Lifelogic: “Very few are suggestion unbridled capitalism ā just a smaller state,”
I don’t know, we have tried progressively intrusive socialism over the last sixty years, some unbridled bare back capitalism might make a refreshing change.
By which I certainly don’t mean the type of fascist crony capitalism we know today. That is a result of a large state.
A smaller state would leave more room for other ventures, be they profit motivated or [real] charitable status.
June 1, 2011
Peter van Leeuwen: “British research shows a strong correlation between more āunequal societiesā and a host of health and social problems.”
Research sponsored by a socialist state advocates more socialism.
May 30, 2011
Again I agree with your analysis and the solution to raising more tax from the “rich”.
The failure to remove the 50% top rate of income tax and the imposition of the 28% rate of CGT has had the consequences that were predicted. There has been an exodus of very high earners, people spend more time legally avoiding CGT than looking for ventures in which to invest. Last week there was a report that investment in new ventures was down c30% year on year. I know of one investment management team that, en bloc, sold their entire holdings in the firm that employed them while the CGT rate was 18%. So much for an incentive to do well. They were not alone. The coalition tax policy is stupid.
May 30, 2011
With Labour’s 50p rate intact and National Insurance just having risen 2%, the current top rate of tax on earned income in the UK is 65.8% above Ā£150,000. This is seriously damaging our economy.
Personally, I would merge NI and Income Tax, raise the personal allowance to Ā£10,000 then charge a single rate of 45% above that, (with a 50% rebate for retired people). I would also scrap the separate CGT regime and simply carry gains across to income, or company profits, relieved at 20% per annum after two years. So if you held an asset for 7 years, there would be no tax to pay.
Big simplification and lower taxes on the highest earners and businesses to get them investing in Britain again.
May 30, 2011
What is needed is a shift away from high direct taxes for those with high levels of income to higher indirect taxes.
Take for example council tax. The introduction of at least two new higher bands for the more expensive homes could replace some of the higher rate of income tax. Similarly the removal of all discounts for second homes and even replacing them by a premium would not only produce more income but also help to reduce the demand for houses much needed for the low income families.
May 30, 2011
I believe the rich have got substantially richer in the last decade, meanwhile average incomes and below have stagnated if not fallen.
The Black Death changed the economic dynamics of the country, enabling labourers earn more money for their labour, putting in place the foundations for an enterprise economy. Making the already very rich barons then would not have helped the economy one jot.
Or take the case of Standard Oil, would it have made the US economy more wealthy by making Standard Oil even more of a money machine? No, by breaking up Standard Oil generated a great deal more wealth.
Making the rich richer is not always a panacea for economic success, in some circumstances , yes, it is the solution, as with Mrs T’s action, but right now I don’t believe it is. Over the last decade or more the wealth base of the country has been narrowed into a smaller section of the country, making them richer isn’t going to help, for their increased wealth would have already paid dividends for the rest of us, but it hasn’t. Sometimes the economic recovery is to be found at the other end of the income scale. This is where I think we are now.
May 31, 2011
Iain
My question would be, how do you create wealth at the other end of the income scale? I presume by this you mean the ordinary working people. These people rely on those of enterpise to create the jobs in the fist place, so how will growth come from them?
Long ago history, I feel, is no help to finding solutions now. The World has moved on, and the new Global age sees much more competition from developing Countries. The balance of power in the World has shifted to Countries such as China and India. Britain must compete to gain business or sink under a mountain of debt. This can only be done by attracting those who could invest in Britain to do so. High taxation is one reason why they would not, there are others of course.
May 30, 2011
It’s got nothing to do with raising revenue, itās about being seen to punish the better off. Labour use the sin of envy as a tool to promote themselves, and for this reason they need a poor and uneducated electorate where they can cultivate envy.
Under Margaret Thatcher’s government swathes of the population were lifted out of state dependence and the economy was cooking on gas as they say. This was a nightmare for Labour who do not want a self reliant (and educated) electorate, and their solution to this problem was to swamp the country with an influx of immigrants from the third world. With the commensurate fall in educational standards due to teachers struggling with language and cultural challenges and the increase in the demand for social services and housing the balance was redressed to Labour’s satisfaction.
This is Cameron’s problem, and his solution is to adopt the language of the left and to be seen to punish success. I can’t think of a better way to ensure failure.
May 30, 2011
Factually correct truth: Optimally lower tax rates stimulate revenue growth and increase tax revenues to the benefit of all.
Politically correct truth: Increasing top end tax rates takes money from the greedy and privelidged rich to give to the disadvantaged poor.
So no surprise then that true to form, our ‘Conservative’ government chooses to believe the PC truth. Another blow for common sense.
How hard can it be for someone in the treasury to plot a graph of tax revenue versue tax rates and find the peak of the graph ?.
But of course that wouldn’t fit in with the deeply patronising ‘where all in this together’ narrative and David Cameron’s unhinged belief that he needs to de-toxify the ‘nasty’ Tory brand.
We are as a nation slowly building our own funeral pyre because a few deluded individuals at the heart of government will never do the right thing if it doesn’t fit in with their PC beliefs.
May 30, 2011
Tax the rich and you drive away the talent. At the very least they’ll pay advisors to avoid tax. It will result in a loss of revenue and a loss of jobs at all levels in the chain.
The establishment has made enemies of smokers and drinkers too with tax policies. Less tax is being raised here as well. And so we have rising life expectancies with absolutely no idea how to pay for it – this is not adding to the overall sum of happiness or the deficit.
Also the policy of undermining British people through a combination of pointless education, benefits culture and the importation of unskilled labour is an unmittigated disaster. So too it seems the privatisation of railways, utilities etc. My water bills now approaching Ā£1k pa for an ex council semi and there is no train to get me home from the theatre at 10pm.
I ask you directly, Mr Redwood. Does the establishment hate Britain and the British people ? Because from where I am it certainly seems like it.
May 30, 2011
“…this is not adding to the overall sum of happiness or *helping to clear* the deficit.”
May 30, 2011
The Community Charge was a disaster and I can clearly remember the queasy sensation in the pit of my stomach when I first heard of it.
JR has not told the whole story about ‘high’ tax rates: for example, when income tax was at 98%, all bank loans were tax deductible, thereby ensuring that a house purchase was the centrepiece of any investment strategy, and the rules on who was self-employed and what was a business expense were lax to say the least.
I believe the main (if not indeed the only) reason Labour reduced capital gains tax was to benefit ‘friends’ in the private equity ‘industry’, not, I would have thought either a resonable basis for fiscal policy or the type of activity, benefiting the country.
Setting the rate of Capital Gains tax is difficult: is it really fair that stock exchange investors can be hammered through the booms and busts but houseowners are mmune to tax in any case?
Clearly, tax should be unavoidable for anyone resident in this country: one form of taxation which would be unavoidable is property tax. The present system means that a foreigner can own a multimillion pound property here and pay very little direct tax at all whilst ‘consuming’ a valuable resource. I cannot help feeling that property taxes are very difficult to avoid and, in principle, fair. That the old rates system was imperfect both in application and outcome does not mean it was wrong in principle. The scheme we have, which is an unsatisfactory hybrid of the Community Charge and the old rates should be reformed to recognise that property is an expression of both wealth and consumption but a necessity only in its most basic form and should be taxed accordingly. Let rich foreigners pay for the luxuries this country provides and if councils want to house pennyless foreigners in houses which most of us cannot afford, let them pay through the nose for the privilege.
May 30, 2011
Or you could tax second homes, bring down the price of flats and stop young people from staging a sit in in Trafalgar Square and shutting down central London for several weeks.
May 30, 2011
Your arguments are absolutely correct Mr Redwood. I cannot understand why successive Governments think that by raising income tax rates it will lead to more revenue when past experience shows the opposite. I think your leadership are more concerned at not being seen as the nasty party or the party of the rich. How they can think that when they’ve just lowered the upper threshold of 40% tax to just over Ā£40,000 is beyond me. Most people would not consider this level of income a Kings ransom. We actually need big reductions in income tax to drive a nation of entrepenours, not the reverse.
Moreover, I would suggest that David Cameron understand he does not have the support of the nation in his Ā£11.5 borrow to give away in aid to foreigners either. If your in a hole you should stop digging. Nothing he says will justify this absolute nonsense.
May 30, 2011
The top rates for maximum tax revenue (in the medium to long term with existing top rates in brackets) are surely more like:
CGT 18% but above inflation only (now 28% not inflation linked)
Income tax flat rate 25% (up to 50%)
Inheritance tax 10% (40%)
VAT 10% (20%)
employees NI 8% (12%)
employers NI 8% (13.8%)
The last two are just back door income tax in all but name for most earners.
You may get more initially with the higher existing rates for a few years but you are just rendering your country uncompetitive and will get less thereafter. New investment will not be in the UK and you are slowly killing the golden goose to the severe disadvantage of all.
May 30, 2011
Perhaps you could explain John, why the government’s long-term objective of harmonising National Insurance contributions with income tax rates should be such an “incredibly complex affair”. Why is it supposedly so complex and why can we not have a single rate of tax on incomes before the end of 2014/15?
May 30, 2011
What it will come down to, as always in the last two decades or so, is that any attempt to increase direct taxes on the rich will be an abject failure, so that instead the required revenue will be raised from the middle classes, the nouveau riche I suppose, even if many of them are struggling to pay their bills. I used to feel physically sick when the Brown One mumbled on about “hard working families” and how he much wanted to support them, and then went on to raid their salaries, savings or pensions. The Coalition hasn’t become quite so obnoxious yet, but I am guessing that it’s only a matter of time. David Cameron’s puerile posturing on the Overseas Development budget (Live Aid rocks, man, yeah!) was a bad sign.
May 30, 2011
Cut spending on them as a lot seem to be in the public sector – reduce subsidies to the ‘rich’ would help. BBC/EU/banks Aid to rich countries China/India etc.
Keeping zero interest rates is very helpful to the rich as they can buy real assets with borrowed money, whilst the currency depreciates.
Implement a general anti-avoidance rule on tax, would be useful, as probably some dodges are steps too far, but currently legal.
Otherwise reduce tax rates on lowpaid labour ( private jobs which dont enjoy public sector benefits) to increase real productivity and reduce state spending.
May 30, 2011
In South Africa where I lived from 1980 till 2009,in 1985 and 1986 I worked for a rich family with assets built over a period of over 100 years [Millions],the youngest family member decided to leave with his family and go to Australia for good,although there were severe foreign exchange regulations prohibiting the export of any assets especially cash.I watched this man take out of the country Rands in cash [In a business briefcase] funds totalling at least R5,000,000 .He laundered this into Australian dollars by offering the expatriate south african community a very favourable exchange rate for their visiting money when they went back for holidays.I know this went on for more than the time I was employed by the family ,this was done under the noses of the authorities [inducements were paid].The position financially of this person is now that this money was used as seed capital and now has created a wealth situation in excess of A$250,000,000.What I am saying is that whether legal or not where there is a will there is a way,and the wealthy ALWAYS find a LEGAL way.Taxing the rich is ALWAYS counter productive.By the way the
assets in Australia of this person support over 1000 jobs,not a bad return for the initial amount,in south africa this amount would support now probably 5000 jobs and 8 times that in family members.Finally how many entrepreneurs were produced in the old CCCP
the home of communism,yet look at their wealthy now,as well as their foreign exchange and gold reserves compared to this country,a question not answereable by lefties.
May 30, 2011
John
Think you have said it all.
Its logical to you, its logical to most people, other than die hard Socialists who just want to penalise people for political reasons, and of course the present government who appear blind to the reality.
Perhaps if Government Ministers (and Public sector workers) had ever had to earn a living where the harder they worked, the more they risked their own money, the better they were paid, it may come to fruition. Sadly most of their income is fixed no matter if their performance is good, bad or indifferent, and because they are not in the real world, low tax rates will perhaps never happen and growth will be forever a fraction of what it could be..
May 30, 2011
Agreed the politics of envy are very strong and Cameron has swallowed the nonsense all whole but come the election the politics of what has worked or not will surely win out.
If he doesn’t start soon it will not have had time to have worked though.
June 1, 2011
As I have pointed out before. It is not about ‘envy’, but social justice.
June 2, 2011
Bazman
I hear this a lot from socialists, social justice, what does that mean exactly? Is it socially just, that the people who have worked hard, saved, did not take any credit they could not afford during the Labour years, are the very ones being punished now for those who did act irresponsibly.
Is it socially just for people to stay on benefits during the Labour years out of choice, whilst immigrants were brought in to do jobs they were not prepared to do.
Is it socially just that people in the private sector have seen their pensions eroded whilst those in public sector continue to enjoy very good pensions at the expense of the taxpayer. Even a worker who may not be able to afford a pension of his own in the private sector contributes to pensions in the public sector through taxation.
Is it socially just that the public sector continues to waste money on a grand scale, whilst the private sector continues to be squeezed.
I can give you many more examples of what I believe is socially unjust, but I am pretty certain none of them will be what you had in mind.
May 30, 2011
the tens of thousands of ICT visa holders and their employers should be paying national insurance, and they should be paying the same tax as a Brit
the crazy “aid” budget should be dropped to about 5% of its current size and squeezed for efficiency
sure competitive tax internationally makes sense, but the same goes for taxes the little people pay, it is plainly crazy that tobacco and booze taxes are so high here and there is a proper black market industry bringing in tobacco and booze from other countries with lower taxes, if we dropped the tax on these things to be competitive our tax take would probably go up too, would sound a lot fairler if you stood up for stuff like this and not just tax cuts for the rich
many ordinary folk can jump ship and leave this country now not just the very richest, the tax system does not take account of this dynamic for any of us
May 30, 2011
Well said. What % of the UK’s total income tax take do those earning >100k pay?
May 30, 2011
The argument is rarely heard that the top 1% pay 26% of all income tax. (Never from a politician.) We have a massively redistributive system. If we want growth we need to get back to a top rate of 40%…Amongst the top 1% are an awful lot of mobile foreigners who do not need to be in the UK. I just met a New Yorker who was going to relocate his asset management business to London but stayed away because of the politically motivated tax the Coalition dare not repeal.
May 30, 2011
The arguments of Ray North exasperate me and profoundly depress me,I saw Clinton completely made speechless in the presidential campaign against Bush snr,when a questioner asked him about his assertion that ‘Trickle Down economics failed” with the remark/question “How many Jobs had the likes of Henry Ford,Sam Walton,Bill Gates and many other hugely wealthy people” TRICKLED DOWN into the economy of the USA alone,in fact the questioner answered his own question by saying that Walmart stores on it’s own employed at that time 1,600,000 people and that it was fair to extrapolate that “Trickle Down” economics from wealthy entrepreneurs had probably created many many times that number of jobs.ANY question that can render Clinton speechless is on the money. While the likes of Ray North’s thinking exists we are doomed to fail.
By the way an interesting number to calculate would be the LOSS to this country of the 1970’s LIEBOUR govt’s enormous taxes on income that Drove Tom Jones,Rod Stewart,
Engelbert Humperdink,Michael Caine etc etc etc out of the UK,OUR LOSS was the USA’s Gain.
Another commenter on this issue before me earlier spoke of people taking themselves,their families and businesses OUT of the UK,for god’s sake there is a programme amongst many
called Wanted Down Under does Ray not wonder WHY this drain is happening.It is forecast that the Antipodes alone will take more than 6 million of our people in the next 15 years,WHO will replace them and their knowledge,drive ,energy ,enthusiasm and most of all Capital which may have taken as much as 20 years to accumulate.Perhaps Ray you probably want foreign exchange restrictions like there were in the 1970’s,except that
they did not then Restrict the Talent of the people I mentioned which was saleable as is the same Right Now
May 30, 2011
I don’t think that a few percent on tax up or down in general is not what matters.
What we have to as a society is to save a lot more and spend less. Can government change our behaviour? I’m not sure. Perhaps giving savers a real rate of return would be start. Maybe even more incentive for new savers is needed.
May 31, 2011
Whatever is said here, nobody does anything. John just lets us vent whilst doing nothing. Gentelmen your words fall on deaf ears. Such is Johns legacy.
May 31, 2011
John please explain how borrowing money from China to give to India makes any sense?
Or will you continue to avoid this question?
Reply: I have said beforee I do not agree with this policy.
May 31, 2011
High taxation, particularly on high earners and people who would potentially create wealth, impedes growth. This is surely a lesson that should have been learnt over the years by most sensible Governments. Big state is also a drag on any economy which needs to see growth, Britain has too much of both. It is a pity really, that the private sector cannot withdraw its labour and march through the streets and complain of the many difficulties which people working in this sector face. High taxation and the destruction of their pensions being just two of the issues the private sector have had to deal with. Years of a Labour Government pushing the economy out of balance by spending beyond the UKs means in the public sector, should surely have seen a Conservative Government, when returned, address these problems. Yet this has not happened, the public sector continues to suck the private sector dry with ever increasing spending by Government.
Brown only introduced the 50p tax out of spite, to help along his agenda of the politics of envy and wrong foot the Conservatives should they come to Government. Brown knew the new type of Conservative that Cameron represents would not have the courage to reverse this, and on this issue he was correct. Brown was also right to assume that under a high taxation, big state regime the UK economy would not grow substantially This Brown hoped would see the Labour Party win the economic argument with the public, should he lose the election, that cutting too soon stopped the growth of the economy. The truth is rather different of course.
I now understand why it is wrong to have rich people like Cameron in Government. Not for the reasons of envy that Labour espouse, but because of misplaced empathy towards those who have less. The economy of a Country takes no account of rich or poor, it works on a simple process of money in and money out. Spend too much and you do not help the poor, they will inevitably get poorer, as the money to provide services and welfare begins to run out. With wealth, of course, comes options, tax them too much and they will leave or not invest, and again it is those who have less who suffer. A good economy benefits all in society and this relies on wealth creation not on high taxation and big state.
June 1, 2011
The gap between rich and poor grows ever wider with employers and big business not willing to share no matter how much money they make.
June 2, 2011
Bazman
Glib socialist statements such as you make are easy rhetoric, but have no basis in fact. Companies are not charities they have to make profits to keep going in a very competitive environment. Many businesses are struggling at the moment, it would not help the economy or the poor one bit to increase their burden through added tax. Those who could move their business to a more tax friendly Country would, others would merely close their doors. Therefore, no profits or tax would be there to share. Britain needs business to grow and expand, and for new business to be attracted to the UK in the first place, to create more jobs in the private sector. This would not happen if more of their profits were lost to the state.
The less well off and unskilled always suffer when the economy of a Country fails as incomes are squeezed. Britain with heavy debt is now totally reliant on these companies and those of wealth and enterprise to help grow the economy which is the only possible solution to the UKs economic problems. Your ideas would merely chase away the wealth from Britain making the less well off even more so.
May 31, 2011
You are approaching this from the wrong angle. We should not be talking about taxing wealth even more. We should be understanding how the wealthy are making money and looking to see how this wealth can be more equitable. It needs to be shared amongst greater numbers. This is what Thatcherism, for me, was all about; opening up the markets to individuals and giving them the opportunity to create wealth. However, modern socialism twisted this policy to be viewed as selfish individualism. Their subsequent policies have restricted the opportunities for individuals in favour of big business.
For example, investment banking makes a lot of money for a small number of businesses and their employees. Current political favour is skewed to legislating and regulating this industry, making it more bureaucratic. What we need is the market to be opened up to smaller companies, with de-regulation of competition and regulation of best practice and monopoly.
June 1, 2011
“We should be understanding how the wealthy are making money and see how this wealth can be more equitable”
The places to make money over the last 20 years money have been property by pumping up land values to ridiculous levels and the financial services industry .
The lesson is clear ; it is very difficult to make even a comfortable living by doing anything productive or making anything other than houses .
I realise that investment banks provide useful functions but they do a lot beside which is pure zero sum game stuff – which creates no net benefit for society .
Ultimately the last 20 years has been about people who don’t make anything harvesting those people who do .
May 31, 2011
1. Why would anyone base a tax optimality discussion on threshold rates. Surely a better result could be obtained with a smooth curve (not necessarily monotonic) than a function with steps?
2. At least having growth/redistribution discussions based on tax, gives some room for political accountability. The current tax on savers’ capital due to negative real interest rates, has a significant redistributive effect but I haven’t heard (m)any backbench MPs consistently and continuously arguing for the end to BoE independence / increasing base rate.
3. Politically the current situation might be inevitable. There is always some argument to help those in need (through no fault of their own) and equally there is an argument not to tax the most productive (probabilistically some of these are bound to be in those with the highest incomes) – this means people in the middle could be squeezed, and yet this is probably where elections are won/lost.
May 31, 2011
The gap between rich and poor grows ever larger. The haves and have nots are now on par Victorian times. This is not about childish envy, but social justice. The large corporations profits are in no way reflected in the wages. An elite few are giving themselves massive and disproportionate rewards whist the workforce get the crumbs. Even the state in not benefiting as much of the wealth is syphoned of abroad. The belief in the trickle down effect is false as all evidence points to a ātrickle upā effect. A transfer of wealth from the average and poorest sections of society to the wealthiest. This is just more fantasy on par that Victorian mill owners set up mills to help the employment of woman and childeren. When a piece of gold is beat to thin it is not worth anything.
This idea of the rich fleeing Britain is even more sample fantsy by the fact that it is though they are only tied to Britain by money and oh yeah where will they be going? Switzland? Hong Kong etc? Oh really? The ones that want to can go and take their minimum wage jobs with them.
June 2, 2011
Bazman
I would recommend that you move into the modern World and deal with the problems of today not yesterday. It is yourself who lives in a fantasy World.
When all these companies and people of enterprise have left the UK or closed their doors, because profits are not being made, who then will pay for the less well off? In any case you could squeeze the better off and business as much as you like, but it would still not solve Britains economic problems, it would not be enough. Therefore the less well off would continue to be so.
June 1, 2011
and what about business taxes?
Business rates set by Whitehall which don’t allow “localism”
and an example from a retailer
He buys one item for Ā£1.11 ex vat and sells for Ā£2 (rrp)
if he is not VAT registered his margin is almost 67p, but if he is VAT registered his margin is almost 56p. If he is VAT registered he gets the “benefit” of having to employ an accountant to verify his sales etc, and obviously act as an unpaid tax collector and ward off the VAT man.
On top of which, because only higher revenue companies rank in the VAT sales league, the company may be subject to Corporation Tax on the profits
Why therefore do even the Conservatives think that it is worthwhile settng up a business under current UK Tax laws?
June 2, 2011
Maybe we could extend this idea of low taxes to low wages as the two often go hand in hand? Abolish the minimum wage and immigration allowing Britain to be attractive to the third world. This would help business no end and all the wealth generated could be used for the good of the country.
June 6, 2011
I believe in low taxation, not no taxation. I think the rules on comicality need revising. Those resident, but not domiciled here should be made to pay a proportion of their income tax here, 1/365th for every day they live here.
January 31, 2012
Yesterday, while I was at work, my sister stole my iphone and tested to see if it can survive a 30 foot drop, just so she can be a youtube sensation. My apple ipad is now destroyed and she has 83 views. I know this is totally off topic but I had to share it with someone!