It's very bizarre that Boris John son has supported an idea that I have helped promote in parliament, albeit for all the wrong reasons. He has argued in the Telegraph that the rich are a good thing because of all the tax they pay, concluding:
Indeed, it is possible, as the American economist Art Laffer pointed out, that they might contribute even more if we cut their rates of tax; but it is time we recognised the heroic contribution they already make. In fact, we should stop publishing rich lists in favour of an annual list of the top 100 Tax Heroes, with automatic knighthoods for the top 10.
As has been discussed here often the Laffer curve is bunk for all practical purposes: cutting taxes at any rate of tax currently charge in the UK (and some from the not too distant past as well) will always cut government tax revenue so on this issue Johnson is just out with the right-wing fairies. He's in the same place with the idea of knighthoods for taxpayers: maybe he should read a little more about the widow's mite before making such an absurd suggestion relating to simple compliance with the law.
Where I do agree with him is on publishing a list of the largest UK taxpayers. This is a proposal included in the UK Corporate and Individual Tax and Financial Transparency Bill that I wrote for Michael Meacher and still in the course of its second parliamentary reading at present. Now Michael and I might have had a different motive from Johnson, but we come to pretty much the same place on the need for transparency.
The notes to the Bill argue for publication to to ensure that the tax returns of the highest earning individuals in the UK are available for public scrutiny so that:
- An understanding of the income profiles of the highest earners in the UK is available on public record. Currently available data does not provide sufficient information for the impact of this highly influential group in society to be understood for policy making purposes;
- The use of tax reliefs by this group in society, who are likely to benefit most from them, is better understood to inform debate on future taxation policy;
- The impact and influence of this group in society is understood by the rest of society so that informed decisions on the way in which wealth is used to influence policy can be made;
- The composition of the income of the wealthiest can be better understood so that the potential impact of wealth taxation can be better appraised.
And:
Section 3 — the disclosure of the tax returns of selected individuals
Tax debate is not just about companies — it has also focused on the tax advantages many high net worth individuals enjoy and the ways in which the tax system appear to favour them. As with company taxation informed debate has, however, been hindered by a lack of contextual data to really understand how the tax system works and what the impact of policy decisions might be. The existing duty imposed on H M Revenue & Customs to keep taxpayer affairs secret has hindered such understanding. This section does, therefore, require that the tax returns of the top 250 earners in the UK should be published on line.
Earners is carefully defined. It is based on a combination of income and capital gains and that is for good reason: one of the particular concerns is how the income of high net worth individuals is shifted from income into gains and then in turn how that income is reduced by allowances and reliefs. Those most effective at doing so are, therefore, specifically targeted by this provision to make sure maximum understanding can be delivered by this data.
The data is also, specifically, not anonymised. Whilst for those on much lower income aggregate data is often adequate for research purposes this is not true with top end earnings where specific contextual data is needed to understand exactly what is happening. Anonymisation would destroy this contextual dimension to the data.
Anti-avoidance provisions are also included: delaying a return will not prevent its publication if appropriate.
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Just how does the tax system favour wealthy individuals?
Particularly when we discover that the, despised, 1% contribute 30% of the total tax revenue and the equally despised (by Tax Justice activists) 5% contribute fractionally less than 50%.
Look at overall tax burdens
The wealthiest then pay least
You know that
Please do not waste my time
And then there are the issues of the higher repayment that the wealthy owe for having benefited most from a prosperous society – an educated, housed, safe workforce and all of the publicly funded infrastructure without which they could not have become so wealthy.
Take 50% of £1bn, and you are left with £500m on which to live. Take 50% of £10k and you have a mere £5k on which to live. Money has become some sort of totem of personal worth that is independent of its function – that is, to provide for a dignified human existence.
It is morally right that the wealthiest should bear the greatest burden of tax, but at the moment, they don’t even bear their share.
“Look at overall tax burdens
The wealthiest then pay least”
I suppose it depends on who you term “the wealthiest”. The latest ONS statistics show that those in the bottom 20% of incomes are paying around 36.6% of their income in all the various taxes and the those in the top 20% pay 35.5%. But of course there are people in the top 20% of incomes who aren’t even paying tax at the 40% rate (only 14% of people do), so I doubt they would be classed as “the wealthiest” by most people.
Someone earning £150k is paying £59,812 in tax and NI which is 39.875% of their income in taxes before a single penny of VAT, council tax, alcohol & tobacco duty and so on. Clearly, they are paying more tax as a % of their income than the average person in the bottom 20% of incomes. And you have to be earning more than that to be in the top 1% of earners, those most people would think of as “the wealthiest”.
Using the ONS quintiles is really rather crude and a more accurate picture is given elsewhere in ONS statistics where households are examined in decile groups (it’s Table 16 of the latest ONS report on incomes & taxes). That shows that the average income for households in the bottom 10% is £5,175 and the top 10% is £110,271. After benefits and all taxes are accounted for those numbers become £6,491 and £72,069. In other words those in the bottom 10% of household incomes get more in benefits than they pay in taxes.
As I say, it depends on what you mean by “the wealthiest” but most people would not think of someone who didn’t even pay tax at the 40% rate as “the wealthiest”. You can certainly say that the average person in the bottom 20% of incomes pays more tax as a % of their income than the average person in the top 20% of incomes but to extrapolate that to say that the wealthiest pay less tax as a % is very misleading. Saying so really is a case of “lies, damned lies and statistics”.
This work has been done by deciles and the results still stand
Wealthiest means capacity to pay
It’s simple
You just want to deny it
“This work has been done by deciles and the results still stand”
Could you provide a link to this work?
My numbers were taken from the ONS “Statistical bulletin: The Effects of Taxes and Benefits on Household Income” published 10 July 2013 and their numbers contradict what you are claiming.
I have done it here
Just used the search engines and say by decile
Seems like you are belatedly endorsing PWCs Total Tax Contribution.
In your dreams
“Just how does the tax system favour wealthy individuals?
Particularly when we discover that the, despised, 1% contribute 30% of the total tax revenue and the equally despised (by Tax Justice activists) 5% contribute fractionally less than 50%.”
In proportion to their earnings, the rich effectively pay the least. You conveniently forget the VAT charge of 20% that ordinary people have to pay on food and other items. VAT is a regressive tax, so ordinary working people pay the bulk of it.
I wonder about the transparency of ‘think tanks’ who try to influence policy such as the the Institute for Economic affairs. I took this from the ‘who Funds you?’ website.
Discloses annual income Yes: £1,020,000 y/e 31/12/11
Displays funding information on own website No
Names organisational funders No
Declares amounts given by organisational funders No
Names individual funders No
Declares amounts given by individual funders No
Notes
IEA told us: “We do not give out information about specific donors. The editorial position of the IEA is wholly independent of any donors.”
5
Transparency rating
D
The Tax Payers Alliance doesn’t even meet the first one.
Transparency rating E
The rich often complain that they pay an unfair share of overall taxation, quoting figures such as the top 1% of earners pay X% of all taxation. However this makes the mistake of assuming that income and thereby money has an intrinsic value. However we know that fiat money only has a value as a means of exchange in which to obtain utility or as a store of value for future utility. It is also known that the law of decreasing marginal utility applies to income, £10 is valued much more by the poor than the rich.
The true fair way to apportion the tax burden between society would therefore be for individual tax rates to be calculated so as to equate the decrease in marginal utility felt by all taxpayers. But as the poor value £10 more than the rich and therefore value the loss of it more. Than were tax rates to be set this way the rich would be paying far more in tax than they do now. Those on the lowest incomes who pay hundreds of pounds in tax but who really need that money lose far more than the richest who may pay millions of pounds of tax but are still left with millions in after tax income.
So if Boris really wants to celebrate the tax heroes he should be praising those on the lowest incomes who nominally give up the least but who lose the most utility from it.
Hence my widow’s mite argument…..
What about the fact that you can get benefits worth £26K out of the taxpayers pot.
Plenty of people in the town I live in don’t earn anywhere near that.
And no one gets £26k in benefits bar a landlord
Can you define ‘rich’ please? Where would the boundaries for poor – doing okay – quite well off – rich actually fall?
At last-somebody who has brought the marginal utility argument into it! The money the rich unheroically pay barely touches them on the marginal utility front. Johnson is an anti-intellectual oaf and self inflated (he uses a foot pump) windbag who is propagating the old cliches about the rich. He doesn’t mention that the rich have benefited from bailouts,bail ins, quantitative easing, housing bubble grants and years of syphoning wealth from our communities via the real estate scam. Another example of dumbed-down manipulative neo-lib speak. having just read an article in the ‘I’ about malnutrition cases in our wealthy country Johnson is sounding out of touch with everything except his cosmic inherited wealth fuelled ego.
‘Boris Johnson said to Him, “All these things I have kept; what am I still lacking?” 21Jesus said to him, “If you wish to be complete, go and sell your possessions and give to the poor, and you will have treasure in heaven; and come, follow Me.” 22But when Boris Johnson heard this statement, he went away grieving; for he was one who owned much property.…
very true
On the other hand if we had a thorough, effective and progressive system of property taxes the dependence on avoidable personal income tax could be greatly reduced. Now I am off to take shelter.
“The true fair way to apportion the tax burden between society would therefore be for individual tax rates to be calculated so as to equate the decrease in marginal utility felt by all taxpayers.”
The old “no true scotsman” argument deployed once again.
I’m not 100% convinced by this…..if you’re going to name one individual, you’d do better to name everyone including owners of small firms to see how much they pay in taxes after their accountants have arranged their matters.
Other than that…all published or none published.
“What about the fact that you can get benefits worth £26K out of the taxpayers pot”
Some get benefits worth hundreds of billions out of the tax “pot”.
Banks and corporations mainly.
And then they claim tax relief as well. And get high salaries and bonuses for being the abject failures at their “jobs” that they were, and are.
But, of course, the real criminal is the family on a hundred a week…..the rest of the benefit going on rent and council tax……..
Boris Johnson’s article was referred to in the Evening Standard
http://www.standard.co.uk/news/mayor/dont-bash-the-megarich-you-should-be-humbly-grateful-for-their-tax-says-boris-johnson-8946626.html
Someone please pass the “sick bucket”.
A timely reminder from him that we “serfs” should know our place in the neo-feudal” project for the UK. Next we’ll need to swear allegiance to the new “Robber Barons”.
Could it be more propaganda for tax cuts for the wealthiest individuals? Clegg has paved the way by throwing scraps from the masters’ table!
Richard – From the Parliamentary website (quote below) it seems that the Bill is not heading for a second reading.
“The Bill was not moved for debate on 1 November 2013. The order to read the Bill a second time lapsed. There is no indication when the Bill will progress further.”
True
The chance of it becoming law is low – but that is always true with the Bill 19th on the list
So?
The intention is to influence debate and the government is bringing forward its own law on the issue when I suspect this bill will be tabled as an amendment
“so?”
I was merely informing you of something you seemed not to be aware of. In your blog you said the Bill was “still in the course of its second parliamentary reading at present” but it isn’t.
As regards publishing personal tax returns, you clearly think this is a good idea so I’m wondering if you will be publishing your own. It would be a courageous example if you did.
As regards the Bill itself, it requires HMRC to calculate capital gains on the basis of what the gain would be “before the offset of any further allowances and reliefs”. As PPR isn’t excluded from this, you are calling for anyone who sells their home to have to now submit a tax return else the exercise is meaningless. So in addition to the 9.6 million tax returns which you would want trawled through to adjust for a total income which differs from the current legal definition of taxable gains, you’d be adding up to a million more tax returns which would have to be filed by people who would owe no tax at all under current rules. And all so that the top 250 could be published? Seems an awful lot of work to achieve very little.
I am a very long way from the top 250
That’s all Michael wanted
And actually, I have never got excited about personal tax returns – this was Michael’s idea
I think we can agree to disagree re the effect of the Laffer curve. The problem lies in how it is applies I think. But you are right I feel in assessing the impact of all taxes on rich and poor. And percentage tax/NI burdens are very misleading ,as has been said £5k tax to someone on £20k earnings has much more impact than tax of £10k with earnings of £40k. But there are problems with the arguments I see above.
Someone has to generate the wealth, and someone has to pay taxes. Here I depart from conventional Left wing thinking,skills,leadership and Entrepreneurship have to be rewarded for a successful economy. How much of course is the awkward question.
You forget that no one does have to pay tax….the money could be printed
The payment is to avoid inflation, not because it actually has to happen
But that’s modern monetary theory and most recoil from it
I feel sorry for Art Laffer. He never claimed to be the originator of the theory ascribed to him nor did he ever espouse that lower rates of tax would automatically bring in more money. He merely pointed out the self evident reality that there was a tax rate that would bring in the most amount of tax and that it wasn’t 0% or 100%. Where exactly on the curve the tax rate will bring in most tax wasn’t a definitive answer he gave.
Certainly, in the UK, the top 1% of income earners paid 11% of all income tax in 1979 when the top rate of tax was 83% (with a 15% ‘unearned income’ supplement) and today they pay around 30% of all income tax with a top rate of 45%. If history is anything to go by, jacking up tax rates for the richest in society will only leave us looking for more tax from the rest of us.
You ignore they capture much more of total income now
According to HMRC figures, the top 1% earned 11% of all income in 1999-2000 and will earn 11.9% of all income in 2012-13, meanwhile their share of total income tax was 21.3% in 1999-2000 and will be 26.9% in 2012-13. So the top 1% are earning only a little more as a % of the nation’s income than they were a decade ago but paying a lot more of its tax.
Which is exactly right