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Raising the tax threshold: Pros and Cons.
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Easyrider
Posted: 06 July 2022 08:41:50(UTC)
#1

Joined: 09/11/2020(UTC)
Posts: 1,951
Taking the lowly paid out of paying tax and Nics has benefits and disbenefits IMO.
https://www.bbc.co.uk/news/business-62049263
Being slightly left of centre on economic matters and slightly right of centre on social matters, I have mixed views on the matter.
I obviously support progressive taxation, that is, the more one earns not only is more tax paid but it is paid at an increasing rate.
But paying no tax or NICs at all means that the person involved makes NO contribution to paying for services such as defence, education, health-care, the law, probationary services and a host of other things.
Also will it not encourage laziness and lack of ambition?
I know a few women who are well-off but deliberately work P/T in order to avoid paying tax,or who deliberately take low-paid jobs which are below their capabilities.
In other words, they game the system.
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NoMoreKickingCans
Posted: 06 July 2022 08:51:16(UTC)
#2

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Oh and nobody else ‘games the system’ - like the super rich etc. ?
Come on - if it is tax avoidance then go for the rich elite and the corporates, not housewives trying to earn a state pension.

The principle of everyone pays a tax was tried once before by some lady or other - it didn’t end well.

The tax threshold should be raised by inflation immediately. It doesn’t benefit the wealthy because they forfeit their allowance, it does benefit ordinary people. Not raising it is stealth taxation - something I abhor - another thing that demenstrates the falling standards across our politicians.
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6 users thanked NoMoreKickingCans for this post.
Tim D on 06/07/2022(UTC), Easyrider on 06/07/2022(UTC), David Brabury on 06/07/2022(UTC), Peter59 on 06/07/2022(UTC), Busy doing nothing on 06/07/2022(UTC), Guest on 10/07/2022(UTC)
ANDREW FOSTER
Posted: 06 July 2022 09:19:49(UTC)
#3

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I like the principle that everyone pay something.

So I'd like to actually see more "bands" starting at maybe £5K with something like 5%, 10%, 20%, 40%

It would smooth out a lot of step anomalies in the system and make for a fairer system. It would incentivise some to work more and not face those p/t walls.

I'm not going to complain too much, but it is ridiculous that someone in my position has paid zero income tax for four years and may never do so again until my pension age which is still nine years away.

I would be looking at removal of the 40% tax relief on pensions and reduction of Capital Gains allowance to match dividend allowance of £2K.
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2 users thanked ANDREW FOSTER for this post.
D Bergman on 06/07/2022(UTC), Easyrider on 06/07/2022(UTC)
D Bergman
Posted: 06 July 2022 09:26:22(UTC)
#4

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I have never understood the logic of UK income tax thresholds, and the concept of the "Basic rate of tax".
(older members may remember a parliamentary debate in which Neil Kinnock kept pressing Thatcher to admit that her government had raised taxes - which was true - and her continued reply was "we have reduced the basic rate of tax".

Other countries have much more graduated rates. Take Israel as an example:

Annual income Rate of tax

£0 - £17K 10%
£17K - £25K 14%
£25K - £40K 20%
£40K - £56K 31%
£56K - £115K 35%
£115K - £150K 47%
£150K + 50%
(figures are rounded)

The advantages are that there is no "Basic" rate which tends to become a political football, all income is taxed, and both the thresholds and precise rates can be tweaked according to need (and political expediency).

The UK jump from nil to 20% and then the doubling of tax to 40% are thus avoided, and so there is a greater sense of fairness.

It is not a perfect system - all tax systems have anomalies - but much better than the UK IMO.
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Sara G on 06/07/2022(UTC), ANDREW FOSTER on 06/07/2022(UTC), Easyrider on 06/07/2022(UTC), Tim D on 06/07/2022(UTC)
Sara G
Posted: 06 July 2022 09:33:38(UTC)
#6

Joined: 07/05/2015(UTC)
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I wonder if tax thresholds should rise automatically with CPI, or wages? We do seem to be subject to ever more stealth taxes these days, and freezing thresholds at a time of rising inflation feels somewhat counterintuitive

As regards everyone paying something, they already do, notably VAT, and fuel duty. But these taxes aren't as noticeable, and are harder for individuals to understand in terms of the actual cost to them, which is perhaps the point...
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5 users thanked Sara G for this post.
D Bergman on 06/07/2022(UTC), NoMoreKickingCans on 06/07/2022(UTC), Sheerman on 06/07/2022(UTC), Tim D on 06/07/2022(UTC), Easyrider on 06/07/2022(UTC)
jeffian
Posted: 06 July 2022 10:02:15(UTC)
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It comes down to the question of 'Representation vs. Responsibility'. I agree with those who say (almost) everyone should pay something because the laws of supply and demand mean that if public services are provided for 'free', the demand will be endless and people will simply vote for the politicians who offer more and more at no expense to themselves. (Bear in mind that ONS statistics suggest that almost half the UK working population pay no tax).

I say 'almost' everyone because on the Israeli model quoted above, to take 10% of everything above £0 simply leaves those reliant on benefits having to be handed back what they pay out and more (although I suppose that answers my point about them having visibility of the consequences of their political choices).

I can live with progressive taxation but above 50% (and the combination of tax, NI and tapered allowances take it well over that) there is a psychological barrier to the Government getting more of every extra £ earned than you do, and that's when people start looking at tax avoidance schemes and other 'shelters'. As I've argued so may times here before, I'm a supporter of Flat Tax but if that is unrealistic, I could live with a total take capped at 50%. The way to achieve either of those would be to sweep away all the allowances and reliefs and tax everything the same (and before anyone comes back about 'the rich' and their schemes, hands up who's got an ISA?!).
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Keith Cobby on 06/07/2022(UTC), Captain Slugwash on 06/07/2022(UTC), Easyrider on 06/07/2022(UTC)
Keith Cobby
Posted: 06 July 2022 10:09:16(UTC)
#11

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Always been in favour of a flat rate above a personal allowance (say £10k), income tax doubles from 20% to 40% and income between £100k and £125k is taxed at 60%. This combined with very high pension taxes disincentivises extra work. Every pound earned over the allowance should be taxed at the same rate.
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1 user thanked Keith Cobby for this post.
jeffian on 06/07/2022(UTC)
Tom Mozy
Posted: 06 July 2022 10:58:44(UTC)
#13

Joined: 09/07/2013(UTC)
Posts: 424
.
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Easyrider
Posted: 06 July 2022 14:33:23(UTC)
#7

Joined: 09/11/2020(UTC)
Posts: 1,951
Sara G;229734 wrote:
I wonder if tax thresholds should rise automatically with CPI, or wages? We do seem to be subject to ever more stealth taxes these days, and freezing thresholds at a time of rising inflation feels somewhat counterintuitive

As regards everyone paying something, they already do, notably VAT, and fuel duty. But these taxes aren't as noticeable, and are harder for individuals to understand in terms of the actual cost to them, which is perhaps the point...


>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Indirect taxes such as VAT are also highly regressive. Poor people spend a higher proportion of their income on indirect taxes than better-off people, especially if they drink and smoke.
I don't agree conceptually with VAT because it's a tax on transactions. In other words it's a tax on economic activity.
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1 user thanked Easyrider for this post.
Sara G on 06/07/2022(UTC)
Easyrider
Posted: 06 July 2022 14:34:35(UTC)
#5

Joined: 09/11/2020(UTC)
Posts: 1,951
D Bergman;229731 wrote:
I have never understood the logic of UK income tax thresholds, and the concept of the "Basic rate of tax".
(older members may remember a parliamentary debate in which Neil Kinnock kept pressing Thatcher to admit that her government had raised taxes - which was true - and her continued reply was "we have reduced the basic rate of tax".

Other countries have much more graduated rates. Take Israel as an example:

Annual income Rate of tax

£0 - £17K 10%
£17K - £25K 14%
£25K - £40K 20%
£40K - £56K 31%
£56K - £115K 35%
£115K - £150K 47%
£150K + 50%
(figures are rounded)

The advantages are that there is no "Basic" rate which tends to become a political football, all income is taxed, and both the thresholds and precise rates can be tweaked according to need (and political expediency).

The UK jump from nil to 20% and then the doubling of tax to 40% are thus avoided, and so there is a greater sense of fairness.

It is not a perfect system - all tax systems have anomalies - but much better than the UK IMO.


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Thanks, I was unaware of that. Very interesting.
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