I’m sure it’s against the rules to reproduce three letters from the Guardian in a day, but I had a hand in two and I can’t resist this one because of the sheer abundant relevance of much (most) of it:
Three cheers for Peter Wilby's timely call for a radical reform of the tax system, and not least for an end to the myth, so convenient to high earners, that progressive taxation is a disincentive to effort and innovation. And while we're about it, why not ditch the negative concept of taxation as a "burden" and talk about "the privilege of taxation" instead? I'm quite sure that those of us at or below the average income of around £23,000 a year would be delighted to be taxed at 50% if our taxable incomes were more than £50,000 a year, never mind the government's rather pathetic 45% for incomes over £150,000. It's time our highly paid politicians got real.
Peter Wrigley
Birstall, Yorkshire
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But…
If it was so appealing to be taxed at 50% on 50K, why don’t all the people currently earning 23K just start earning more so they can be in the even more appealing situation of earning 50K or more and only being taxed 45%?
As general rule, the answer is because they can’t. They are not as capable, or do not work as hard as those who make 150K. OR, they have made a conscious choice for lifestyle or other reasons. But that is no reason to punish those who don’t make that choice.
Those who are earn a lot are that way because they are capable or hardworking. Why should they be punished for that? Yes there are many who are crooks, fraudsters or tax evaders, but those people should be weeded out by the criminal law or other aspects of the law. It should not be inherent in the tax system to discriminate against them – at least not to the extent of 50%.
This reminds me of the first time I saw a P60 for a very highly paid director which showed income tax and national insurance contributions deductions totalling several million pounds. Colleagues thought it shocking that someone should have to pay that amount of tax, missing the point that there is – to use Mr Wrigley’s term – a ‘privilege’ in paying that amount.
As for Min’s comment, in what sense is being taxed at a marginal rate of 50% ‘being punished’? Such individuals would still have a net higher income than others.
TaxTwit
True, they would still have a net higher income than others, but not as high as it could be.
I am not opposed to a higher marginal rate of tax for the wealthy. I don’t see the fairness in hugely high rates like the 50% etc etc. Why should half or more of what someone produces with their own work be taken away?
Min
We are back to the same old same old. These people are able to earn what they do not just because of their own efforts but because of the social infrastructure in which they operate. Try attempting to earn large amounts of money honestly and without fear in a country without a decent social infrastructure and you will find it just isn’t possible.
Yes, there is a point at which high levels of tax re silly. 98% tax is raelly not a good idea, but I have no problem with 50%. Remember that the fairly low paid are on marginal rates of 31% (tax and NIC), plus the impact of employers NIC depressing wages.
James
I don’t deny at all that the wealthy are only able to earn high incomes because of the infrastructure provided by the countries they live in.
But both the wealthy and not-so-wealthy are beneficiaries of the good infrastructure provided by developed countries, so the point still stands that people who are wealthy are (generally) so because they work harder or smarter than others. Why should they not be able to enjoy the benefits?
I am not against progressive tax rates. I don’t agree that there should be a “crackdown” on the wealthy in terms of tax reform. What have they done wrong that should be cracked down upon?
People become very wealthy not because they work harder than the majority of us (try telling that to my 92 year old dad!) but because either they, or those they have inherited from, have appropriated the surplus labour of many others and have had access to land (whose value is created by the whole of society) without surrendering the rent as taxes – or they are common thieves. This is how capitalism works. The common ownership of the means of production and the collection of land rent for public benefit, is the solution, so that workers receive the full fruits of their labour (after tax, of course!). Markets, especially the land market, can then function efficiently for the benefit of all.
Hi Carol
Remember I said generally – no offense meant to your dad!
Why should the land-owner have to surrender ALL of the “surplus labour”?
If you take any successful company(lets assume a truly successful, productive company, not one that is enriching itself by whatever dishonest means) very few amongst the workers would be able to make the company what it is if they were put in the shoes of management.
What ever enterprise we talk about, the full success of that enterprise it not all down to the labour of the workers. It is to a large extent because of owner or management of that enterprise directs the labour of his workers in a profitable and efficient manner.
So off course the owner deserves to keep some of the surplus labour – after paying the requisite tax off course.
Min
Economically this is very confused.
Management are labour.
Owners get three rewards – profit for enterprise, interest on capital, rent on land.
The reward you describe is profit. It is not split out in reporting – but it is important to recognise it is very different from interest and rent.
If land were taxed as Carol and others were suggested the logic is productive enterprise would be taxed less. You should be on the side of the land value tax campaigners – not opposing
Richard