Buffett's law is an idea gaining traction in the USA.
Of course it is wrong that billionaire's pay less tax on their overall income than their secretarial staff. The question is what do we do about it?
There are remarkably simple solutions, all of which suit the tax simplification agenda. First, we could abolish all allowances and reliefs for those earning over £150,000 a year. It's really not hard to do and the case for doing so is glaringly obvious: why should we even now grant up to £25,000 of actual cash saving a year to those earning more than £150,000 a year who want to put cash in their pension funds when they are already incredibly well off and we could instead have a teaching assistant in a school? The choice is a no-brainer, surely?
Second, we could align the income tax and capital gains tax rates and at the same time reduce the capita gains tax allowance which is ludicrously higher than for income tax and easily transferred between spouses. Nigel Lawson did it; let's do it again and began to tax wealth seriously as is essential if we are to build a just society.
Third, we need to set minimum tax rates if we won't limit reliefs so that whatever your gross income there is a minimum rate of tax you will pay.
The net result? More tax paid and massive tax simplification.
Oh, and I'll come back to the fact that we need to do this to multinational corporations as well later.
But let's not for a minute pretend that these issues cannot be solved: they can be, and we'd have a massively simpler tax code at the same time which the rich always say they want. Put the two together though and they always bleat. Which always suggests to me how hollow their real commitment to tax simplification is.
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At what stage is the rubicon crossed and the higher earners are taxed to the extent that they believe that tax is no longer fair and equitable and that they are subsidizing a section of the community, some who prefer not to earn a wage.
Eventually you squeeze the higher earner (particularly the younger ones who have not yet built up asset wealth (maybe still paying off student loans) and are still relatively mobile) who vote with their feet and move to a lower tax regime. Who will then pay the taxes that fund the NHS and those who live on benefits?
Way above current tax levels is the answer
But I do note your endorsement of the a fact that the ‘politics of envy’ are the preserve of the rich
Quite right Richard – at what point are the lower earners left out to such an extent that they believe tax is no longer fair and equitable and that they are being penalised by an elite section of the community, some who prefer to abrogate their responsibilities?
Back to the earlier comment – where on earth is there a shred of evidence that these so-called high earners are upping sticks and leaving? According to recent evidence, inward migration to the UK sits at around 570,000 per annum and has done for a number of years. I’d love to see some further information on this.
If these so-called wealth creators place so little value on the rich culture the UK has to offer, the tremendous support the country provides, the ability for anyone to succeed, a comprehensive health care system, superb life expectancy, a superb natural environment and – most importantly – a business climate that allows them to increase their earnings, I’d say they’re more than welcome to politely fly/flee off to more appropriate climes.
You are still confusing the higher-earner and the rich. The two are not axiomatic.
If you want to tax the rich, then tax the rich – and if you want to tax the high earner, then tax the high earner.
Taxing the high earner doesn’t necessarily tax the rich and many rich will escape taxation as they are on either low income or tax exempt income.
I imagine a lot of very wealthy individuals would welcome your proposals as they will fall under the 150K threshold and the shenanigans with allowances and deductions and thus pay very little income tax.
As ever you are campaigning for the pedants
The over lap between the 1% earning over £150,000 and the wealthy is very high. Oh, not complete I am sure but both represent elites far , far different from the experience of most and well able to pay the taxes I suggest
Your comments are simple attempts at distraction from that truth, which is why they are so ridiculous
OK, you maybe right but it all depends on how you define wealthy, a point I have been trying to drive home.
So, for the sake of completeness, please define what is wealthy, then this may make more sense.
For example, are the 172 civil servants who earn more than Cameron wealthy? And how do you reach your conclusion?
Are they wealthy in comparison, say, Stuart Rose who took home in excess of 10 million last year?
I think it’s quite safe to say those in the top 1% of income earners are wealthy
If not the term has no meaning
I am in broad agreement with this, with one small caveat: there must be a cut-off point for minimum tax at the bottom end of the scale, so that, for instance, people who are only able to work part time are not given an increased burden.
Of course!
But we could afford that in this case
That’s one of it’s virtues
“Of course it is wrong that billionaire’s pay less tax on their overall income than their secretarial staff.”
Surely you mean “a lower rate of tax” than “less tax”?
But your methods would require much legislation and costly changes to IT systems in order to implement. Why not just raise the Primary NIC UEL contributions to 10% or 12% or something?
Low earners are already protected by the NI system and tax allowance (although this could be raised).
60 percent minimum on those who earn £100,000, never mind £150,000. And why, pray tell, are high earners paying just 1 percent National Insurance contributions when everyone else is paying around 12 percent?
Of course it is wrong that billionaire’s pay less tax on their overall income than their secretarial staff
Can you provide us with evidence of anyone who has claimed otherwise?
All those who support very low or no capital gains taxes….which is very many in your part of the economic world ….way out with the Tea Party
Richard, I know plenty of people who want to drastically cut CGT, but I don’t know anyone that thinks billionaires should pay less tax than their secretarial staff.
If you can provide some examples I’d be very interested.
Isn’t that an admission on your part that you already know the answer?
And then there are all the flat taxers
OK, as I am in the tax profession so as it is my turf, I will inevitably shudder at the ignorance
of people talking about tax. As have said before, any idiot can dream up higher rates and new forms of taxation. It is one thing to propose and another to implement. And it will take HM Revenue & Customs years to train up new Inspectors because they can’t cope with present legislation- and the UK has one of the world’s most complicated codes.
And I’d tend to shudder at the pessimism of anyone who says it can’t be done. After all, we gave ourselves (in no particular order and avoiding any debate on value/cost/etc):
– the channel tunnel
– flying
– reaching the moon
– the National Health Service
– the microchip
If it will take years to get them trained up, let’s start as soon as we can.
I’m just looking at the IRS website.
Page 4 shows the actual average tax amount and tax rate payed by each income strata ($20-30k, $1m+, etc).
Its difficult to put a table into words, so the link is below, but its shows that, the more you earn the more the IRS actually recieved in Income Tax both in absolute terms and as a tax rate. So for example $50k pa pays c.8%, whereas $500k pays 24%. In all the top 1% of earners pay c.20% of all tax.
I’m not judging, defending, excusing or moralising. I’m not saying its too much or too little. I’m simply examing the data underneath the public conversation and sharing, because it is almost certainly not the case that millionaires pay less tax or a lower tax rate than their secretary. Not as a rule anyway, although I’m sure individual instances of evasion do exist.
http://www.irs.gov/pub/irs-soi/11intr08winbul.pdf
a) the top 400 will not feature as such in that table
b) that’s where the issue has been focussed
c) people only ever said ‘some’
But you’re a truth denier – so why let facts get in your way?
No it doesn’t show the the top 400 but it does show the top 319, which is probably close enough.
And it does not make your case
You fail to make your case because Buffett argued across all taxes – not just one
So shifting income to gains massively reduces rate for example
And the absence of payroll taxes on investment income is another issue
Why is it you people are so pedantically small minded?
And why can’t you grasp anything beyond micro detail
The evidence here proves nothing in the overall case – as I have already noted
I have no case to prove, merely some data to share, and income as defined by the IRS *does* include Gains and Dividends[1].
The ‘big picture’ seems to be: the top 319 people in the US pay a lot more in tax, both in absolute terms and as a tax rate across all income including capital gains. Evasion probably exists, but even including that effect, 319 people collectively fund c.20% of all US Federal Govt spending.
[1]From page 10 of the same report:
“income includes, for example, salaries and wages, taxable interest, dividends, alimony, and net amounts from such sources as business income, rents and
royalties, and sales of capital assets.”
Well it says it’s talking income taxes…..and that’s the key point
eh? Not sure what your point is, maybe its a typo, but the IRS data *is* about income, where income is clearly defined as including salary, interest, capital gains, divindends, etc. And on that definition, the rich pay more. A lot more.
As I said, I’m not interpreting the data to say its too much or too little, but the data makes it difficult (verging on the impossible) to support the general notion that millionaires pay lower tax or tax rates than the middle classes (other than individual instances of evasion).
But not all those things are subject to income tax
And some are subject to other taxes
And then you ignore the value of tax shelters for the rich
You’re just playing semantics
This correspondence is closed