BBC Reality Check - Total Tax Burden the Highest Since the 1940's

[Nimrod103]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

Isn't the difference mainly because of the student loan repayment/tax? It is due to the fundamental change in the way universities have been funded, so that instead of 2% going to university (as would have pertained at the time the 75 year old was at university), there are now 40% wasting...I mean benefitting from 3 years at university. These 3 years of idleness....I mean intensive study have to be paid for somehow.

[Eboli]

Lootman said:

In other words LVT ignores the "real world practicality" that the people and voters don't like it and won't accept it. So all that theoretical elegance and ponderous academia comes to nothing if it won't be accepted. Taxes should never be designed by people who spend their entire lives in academia and politics.

Gosh, that's why! Who'd of thought it? 'If it was so, it might be; and if it were so, it would be; as it isn't, it ain't...' seems apropos.

Eb.

[Lootman]

Lootman said:

In other words LVT ignores the "real world practicality" that the people and voters don't like it and won't accept it. So all that theoretical elegance and ponderous academia comes to nothing if it won't be accepted. Taxes should never be designed by people who spend their entire lives in academia and politics.

Gosh, that's why! Who'd of thought it? 'If it was so, it might be; and if it were so, it would be; as it isn't, it ain't...' seems apropos..

I expected a more substantive effort than that from you, I must say. I may think you are consistently wrong about these kinds of issues, but I did not think you were evasive and snide.

With a national home ownership rate of over 60%, it seems clear that the voters would never support a new tax on the value of their homes (over and above council tax and IHT), especially if it were designed to deflate house prices which you appear to desire. Nor do they have a stomach for anything that smacks of a wealth tax.

Maybe if a LVT replaced all other taxes (income, capital gains, inheritance, council etc.) then you might have a point. But we all know it would be an additional tax, and one which a landowner may not have the cash to pay.

Non starter I'm afraid.

[TUK020]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

Isn't the difference mainly because of the student loan repayment/tax? It is due to the fundamental change in the way universities have been funded, so that instead of 2% going to university (as would have pertained at the time the 75 year old was at university), there are now 40% wasting...I mean benefitting from 3 years at university. These 3 years of idleness....I mean intensive study have to be paid for somehow.

and National Insurance

[Spet0789]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

I’m not sure a 25 year old in employment living payday to payday would think they are taking less risk than a retiree living off their £1m portfolio of investments!

Fundamentally I think that society should aim to incentivise paid work.

[Spet0789]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

Isn't the difference mainly because of the student loan repayment/tax? It is due to the fundamental change in the way universities have been funded, so that instead of 2% going to university (as would have pertained at the time the 75 year old was at university), there are now 40% wasting...I mean benefitting from 3 years at university. These 3 years of idleness....I mean intensive study have to be paid for somehow.

and National Insurance

Yes, the difference is both those things. The current student loan system is awful in my view. It’s a (high) graduate tax which punishes middle earners. Those who probably shouldn’t have gone to university don’t repay, those who earn a lot remove the millstone quickly.

[Lootman]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

I’m not sure a 25 year old in employment living payday to payday would think they are taking less risk than a retiree living off their £1m portfolio of investments!

Fundamentally I think that society should aim to incentivise paid work.

What I meant by the risk differential is that someone who goes to work is going to get paid no matter what. They cannot possibly lose any money. Whereas the investor could easily lose 50% or more of his pot.

I would argue that the tax code should incentivise those who invest in profitable businesses, since it is those businesses that provide jobs for all those 25 year olds.

Pre-Thatcher the tax code did favour labour over (what they snidely referred to as) "unearned" income. Thatcher reversed that, quite rightly in my view. Most other countries do the same as us and give tax breaks for risk takers and wealth creators.

[dealtn]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

I’m not sure a 25 year old in employment living payday to payday would think they are taking less risk than a retiree living off their £1m portfolio of investments!

Fundamentally I think that society should aim to incentivise paid work.

I'm not sure a 25 year old earning in excess of £30k a year should be living payday to payday full stop. If they are there would be something wrong I imagine.

[TUK020]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

I’m not sure a 25 year old in employment living payday to payday would think they are taking less risk than a retiree living off their £1m portfolio of investments!

Fundamentally I think that society should aim to incentivise paid work.

I'm not sure a 25 year old earning in excess of £30k a year should be living payday to payday full stop. If they are there would be something wrong I imagine.

Depends on what they have to pay in rent

[Eboli]

My Dear Lootman,

You don't 'alf go down Tolkeinesque Bag Ends (that's cul de sacs to you).

You observed:

Maybe if a LVT replaced all other taxes (income, capital gains, inheritance, council etc.) then you might have a point.

This, of course, opined after I had already clearly stated that LVT

...would replace all other taxes on land (Council tax, rates, Income tax, Corporation tax, IHT and CGT and SDLT) - indeed the Georgists have always referred to it as the Single Tax...

.

So, maybe, even you accept I might have a point?

As for whether voters would support a measure designed to deflate house prices, I suspect you may be right historically but the worm turns as more and more voters find it difficult to get onto the so-called housing ladder. Yesterday's argument from yesterday's man, then?

We clearly won't agree as you have a habit of engaging the chimera of what you suppose to be the argument rather than the argument itself, and then animadvert against the chimera. 'Nuff said.

Eb.

[Lootman]

]Maybe if a LVT replaced all other taxes (income, capital gains, inheritance, council etc.) then you might have a point.

This, of course, opined after I had already clearly stated that LVT

...would replace all other taxes on land (Council tax, rates, Income tax, Corporation tax, IHT and CGT and SDLT) - indeed the Georgists have always referred to it as the Single Tax...

That is theory. In practice LVT would be introduced whilst retaining at least some of the other taxes. To believe otherwise is to believe that politicians can be trusted. Good luck with that. Few voters would think it was worth the risk.

As for whether voters would support a measure designed to deflate house prices, I suspect you may be right historically but the worm turns as more and more voters find it difficult to get onto the so-called housing ladder. Yesterday's argument from yesterday's man, then?

It has been "yesterday's argument" for the last 50 years and probably always will be. Never bet against an Englishman's home

We clearly won't agree as you have a habit of engaging the chimera of what you suppose to be the argument rather than the argument itself, and then animadvert against the chimera. 'Nuff said.

Now you are resorting to personal attacks again. If you were winning this debate then history would be on your side, and it is not. Your arguments as always are too theoretical and academic, and not grounded in reality.

[TUK020]

My Dear Lootman,

You don't 'alf go down Tolkeinesque Bag Ends (that's cul de sacs to you).

You observed:

Maybe if a LVT replaced all other taxes (income, capital gains, inheritance, council etc.) then you might have a point.

This, of course, opined after I had already clearly stated that LVT

...would replace all other taxes on land (Council tax, rates, Income tax, Corporation tax, IHT and CGT and SDLT) - indeed the Georgists have always referred to it as the Single Tax...

.

So, maybe, even you accept I might have a point?

As for whether voters would support a measure designed to deflate house prices, I suspect you may be right historically but the worm turns as more and more voters find it difficult to get onto the so-called housing ladder. Yesterday's argument from yesterday's man, then?

We clearly won't agree as you have a habit of engaging the chimera of what you suppose to be the argument rather than the argument itself, and then animadvert against the chimera. 'Nuff said.

Eb.

Eboli,
I believe you have a valid point, and have made it well.
I have not given you a rec though, as I believe you are veering into "playing the man rather than the ball".
tuk020

[dealtn]

I read something interesting the other day.

A 25 year old university graduate pays 42.5% tax on marginal earnings above £30k.

A 75 year old university graduate pays 20% tax on marginal earnings above £30k.

Presumably the 25 year old is mostly taxed on employment income whereas the 75 year old is mostly taxed on investment income.

Since the latter involves risk and the former does not, would you not expect the latter to be taxed at a lower rate?

I’m not sure a 25 year old in employment living payday to payday would think they are taking less risk than a retiree living off their £1m portfolio of investments!

Fundamentally I think that society should aim to incentivise paid work.

I'm not sure a 25 year old earning in excess of £30k a year should be living payday to payday full stop. If they are there would be something wrong I imagine.

Depends on what they have to pay in rent

If they are living payday to payday because their rent is so high then I think you are making my point for me. Something is wrong. Addressing that something might include moving to a different area, a different house, sharing a property, moving back home.

Not all options will feel attractive. But neither is living payday to payday.

[1nvest]

Tax freedom day is calculated to be May 5th for the UK currently.

It's more important than ever that the average person is smart about their tax situation and makes full use of tax shelters. The amount of people I know who could cut their marginal tax rate from 42% to 0% just by contributing into their company pension, for example, is staggering

And with long in ISA, short in SIPP, that money can be filtered back out again

PV example (US)

Imagine SDS (2x short) inside SIPP, SSO (2x long) in ISA, and click the annual returns option to see just how much the SIPP value would have declined over time. Combined with other taxpayers topping that up for you, and even a relatively low/safe return becomes a more decent return.

I've had similar thoughts myself in the past (also for purposes of managing the LTA), but what if the trade goes the other way? So short SIPP, long ISA... what happens if the market goes down?
Then you just end up with everything in the SIPP, unaccessible, running into LTA problems, and probably taxable at 40%...

Click the annual returns in this (US) link and 2008 saw a large gain for the short, 60% up, but 2009 saw 50% down, so two year compounded -20% outcome.

Weighted 25% and yearly rebalanced is inclined to not become excessively tilted - for that to occur it would mean pretty much devastation/losses in standard markets to extreme levels where all others were as equally broke.

But could be a handful of years round trip to level pegging. this link again clicking annual returns and as that's a 2x long flip the sign such that a 2x short across 2000/1/2 would have gained 2.5x, but seen much of that wiped out over the next couple/few years. And only if started exactly in 2000, and not in 1999 or earlier. And only if you persisted to remain short in times of doom/gloom. Scaled down and more piecemeal/progressive, more (political/economy) circumstances selective, and over a decade or so its more inclined to see transition of SIPP -> ISA.

[vand]

this discussion has swung from pillar to post, but no one has asked some fundamental questions about the role of the State.

If you want lower taxes then you need to have a fundamental belief in limited government, self determinism, and entrepreneurship.

The problem our country faces is that no one is having that serious discussion. Everyone wants public handouts and low taxes - but you can't have both over the long term.

[Lootman]

The problem our country faces is that no one is having that serious discussion. Everyone wants public handouts and low taxes - but you can't have both over the long term.

If I had been a socialist revolutionary in the early 1900s plotting about how to turn the UK into a nation full of people with a sense of entitlement to other peoples' money, I probably would have figured my strategy as follows:

1) Arrange for a world war or two, with a great depression thrown in, to get people used to the idea of the government owning, running and meddling with everything.

2) Sabotage the post-WW2 general election to stab our heroic wartime leader in the back and give power to the most left-wing government the UK has ever had.

3) Under cover of a slogan like a land fit for heroes, nationalise large areas of the economy including business sectors like transport, energy and healthcare. Introduce a hugely expensive cradle-to-grave handout system so that doing nothing becomes a lifestyle option.

4) Gradually get people used to, or born into, all this "free" stuff so that they never vote out the welfare state, nor the huge tax take required to fund it. Foster a distaste for success and wealth. Even Thatcher only partially rolled it back.

5) Job done, people see government as the solution rather than the problem, and forever vote in high tax governments.

[MDW1954]

Moderator Message:
This thread is morphing into a discussion of politics, not economics. Unless it veers back towards a discussion of the economy, it runs the risk of being closed. This board is NOT an outpost of Current Affairs and News. --MDW1954

[vand]

The problem our country faces is that no one is having that serious discussion. Everyone wants public handouts and low taxes - but you can't have both over the long term.

If I had been a socialist revolutionary in the early 1900s plotting about how to turn the UK into a nation full of people with a sense of entitlement to other peoples' money, I probably would have figured my strategy as follows:

1) Arrange for a world war or two, with a great depression thrown in, to get people used to the idea of the government owning, running and meddling with everything.

2) Sabotage the post-WW2 general election to stab our heroic wartime leader in the back and give power to the most left-wing government the UK has ever had.

3) Under cover of a slogan like a land fit for heroes, nationalise large areas of the economy including business sectors like transport, energy and healthcare. Introduce a hugely expensive cradle-to-grave handout system so that doing nothing becomes a lifestyle option.

4) Gradually get people used to, or born into, all this "free" stuff so that they never vote out the welfare state, nor the huge tax take required to fund it. Foster a distaste for success and wealth. Even Thatcher only partially rolled it back.

5) Job done, people see government as the solution rather than the problem, and forever vote in high tax governments.

IMO the great move towards moderation can be led back to the collapse of communism and the fall of the Berlin Wall.

While the iron curtain existed there was a clear ideological divide between West and East, however with that competing ideology now consigned to history, people forget why they fought so hard for the opposite, and the ideals of communism become - which have always been appealing - begin to regain traction, whilst its abject failures are forgotten about.

[MDW1954]

Moderator Message:
Duly locked. --MDW1954