Government Benifit Cap

[Dolph]

I disagree, I do see progressive tax as a counter-balance to lopsided salary calculations between the top and the bottom.

Does anyone, by any measure really think that Bob Diamond for example is worth 1,000 times the wage of one of his cashiers? Don't get me wrong, I agree with the principle of capitalism, those that work the hardest/have the best ideas/skills get more money than those that don't.

I don't know about Bob Diamond, but I could definitely see how person A can be worth many times the value of person B to a company, depending on the impact they have.

Having said, I don't think it always works because those at the top have a lot more power to influence pay rises in their favour and I believe they use that to demand wages that both cover their increased tax give and provide them with the disposable income they are used to. The 50% rate for example, I believe the rich just paid themselves more/demanded more to cover the increase.

More likely they just didn't pay it by shifting it elsewhere, because very few people at the top of companies get most of their income via salary, which Labour knew when they brought it in, it wasn't a serious attempt at anything other than laying a trap for the next government.

Hence why I would introduce personal tax codes, every person's would be unique to them and your income tax would be based on your employers generosity or greed. So if you work for a company that pays minimum wage whilst lavishing it's bosses with multi-million pound packages and you are at the bottom you'd pay no tax, your bosses would pay 70% However if your company pays say the boss no more than 50 times the average salary of his lowest level workers they would all get a flat rate.

That sounds like an utterly terrible idea destined to be both massively bureaucratic and horrifically abused by future governments to better one group or another.

Wages are defined by what a company values your contribution at and how hard you would be to replace, interfering with that rarely achieves the desired aim.

 

[Chris-.-]

I'm all fine for it, if I have to sign on I get 72.50 per week, don't see why everyone doesn't (as in humans, not children)

 

[aln]

Stepped tax rates are a recognition of the fact that the rich benefit more from society than the poor.

Someone with more income will pay more tax on a flat tax rate, thus the given justification is silly. The rich also largely don't seem to agree as swaths of people attempt to avoid paying tax as much as legally possible, such as your example with the self employed folks in the latter page.

I'm sure the majority of people would would disagree with me, but removing tax free allowance, upping minimum wage, opting for a flat tax rate and forcing tax/runmeration to be paid in the location it's earnt would probably be largely accepted as a much fairer system by everyone who's trying to avoid.

Now the disparity on wages is a completely different problem. If you ask me, you beat that by rewarding the companies that behave differently from the market norm, hopefully allowing for those types of companies to become the prominent in their fields due to the inherit advantages received.

But lets be honest, our elected representatives aren't interested in helping the poor, because they aren't poor. The headline tax rates are largely meaingless, and the income disparity is only ever growing. The richer you are, the less likely you're paying your fair rate.

That blurb is ultimately a distracting from a topic which is about an underclass and rich BTL owners prospering at the detriment to the average working stiff. This is the case and this is why cutting ridiculous benefits seems to have wide spead support from everyone except those receiving outrageous sums of free money.

 

[estebanrey]

That sounds like an utterly terrible idea destined to be both massively bureaucratic and horrifically abused by future governments to better one group or another.

Bureaucratic is just another word for complex, and yes it would be.

One of the biggest myths I see the government peddle is a 'simpler and more fair' system, the two are mutually exclusive in my book. The less rules you have the easier it is for both exceptions you need to deal with and for others to play it to their advantage.

It wouldn't better one group over another, it would be a standard, but complex, algorithm that applied to all workers.

Wages are defined by what a company values your contribution at and how hard you would be to replace, interfering with that rarely achieves the desired aim.

My suggestion doesn't tell companies what to pay in wages though, only how much their staff would be taxed on it. If you want to pay your workers the bare minimum you still can, they won't be taxed though whereas others in the same field at other companies who earn more would pay a small amount and hopefully aggregated both sets of workers would take home the same amount.

Again if you want to pay your execs millions of pounds you still can, only they'll be taxed heavily on it if it means you are paying those at the bottom very little to pay for it.

The general idea is that those at the top have the same take home pay with the 'loss' of their gross amount going directly to their workers in higher wages (instead of what we do now by taking it from the high earners and just giving it back in tax credits to their lower earning staff).

But I think me and you view businesses and life differently. You seem to have the attitude that humans exist to serve businesses whereas I believe businesses exist to serve humans.

Ultimately a business' only function is to pay people to live. People then use that money to buy things from other businesses who are paying people to live. Everything a business does is ultimately aimed at paying someone connected with that business more money, be it the CEO, the shareholders and seldom the staff.

 

[D.P.]

Part of the reason for salary differences is actually due to the higher levels of taxation that higher income earners are subjected to. Employees want to earn X amount of money, after tax. If the total taxation is hitting 50% then the salary X has to be inflated by 67% to make up the difference.

The rest is natural market forces, scarcity of skilled personnel, ease of replacement, value add to the company. Almost ever adult human on the planet can clean toilets, very few people have the skill sets to be successful CEOs, guess why a CEOs salary is so high? A CEO might make critical decision that earns the company hundreds of millions of pounds, of a toilette cleaner help make a nice working environment but doesn't provide anywhere near the same value to the company.

It is a completely bananas idea to try to force something which is not a natural product of the world we live in.



Gold is relatively expensive compare to iron because it is a scarce resource like skilled labour. Why try to lower the value of Gold and artificially inflate the price of iron?

 

[GAC]

ahh the labour tax crys about the 50% rate coming down to 45%.

just rememebr kiddies in 13 years of labour power that 50% rate was only introduced for the final 6 weeks as a pr exercise, hoping it may save them then, or give them something to wave come the 2015 election as they knew the torries would have to drop it.

 

[Bear]

No, that's wrong. When I was self-employed I could choose either to take income or leave money in the company. In the company it just sits there attracting no tax. Move it forward into year X, and I pay year X's tax rate; move it back to year Y and I pay year Y's tax rate. My fundamental income remains the same; it's just a matter of whether it's sitting in my account or my company's account.

No you are wrong, although what you say is partly correct, you can defer payment if you leave it in the company, but you will have lowered your income in that year as you would have fixed it at the £42k mark to avoid paying income tax via your tax return.

Esterbanrey was correct, lowering your wages to avoid tax does lower your income. If you paid yourself more so you pass the higher rate tax threshold, you would get an increased income although you would also start paying 22.5% tax on that income.

 

[Dolph]

Bureaucratic is just another word for complex, and yes it would be.

One of the biggest myths I see the government peddle is a 'simpler and more fair' system, the two are mutually exclusive in my book. The less rules you have the easier it is for both exceptions you need to deal with and for others to play it to their advantage.

It wouldn't better one group over another, it would be a standard, but complex, algorithm that applied to all workers.



My suggestion doesn't tell companies what to pay in wages though, only how much their staff would be taxed on it. If you want to pay your workers the bare minimum you still can, they won't be taxed though whereas others in the same field at other companies who earn more would pay a small amount and hopefully aggregated both sets of workers would take home the same amount.

Again if you want to pay your execs millions of pounds you still can, only they'll be taxed heavily on it if it means you are paying those at the bottom very little to pay for it.

The general idea is that those at the top have the same take home pay with the 'loss' of their gross amount going directly to their workers in higher wages (instead of what we do now by taking it from the high earners and just giving it back in tax credits to their lower earning staff).

But I think me and you view businesses and life differently. You seem to have the attitude that humans exist to serve businesses whereas I believe businesses exist to serve humans.

Ultimately a business' only function is to pay people to live. People then use that money to buy things from other businesses who are paying people to live. Everything a business does is ultimately aimed at paying someone connected with that business more money, be it the CEO, the shareholders and seldom the staff.

On thr first point, I have never bought into the argument that taxation should be used as a lever to affect change, either social or economic. Taxation is a forced removal or property and therefore should be applied fairly, uniformly and transparently, just as we expect other restrictions on human rights to be applied in such a manner. your proposal fails that test as it doesnt treat people fairly or uniformly, but treats them differently based on how the government percieves the ethics of their employers pay policy. As such the position is unsipportable to me.

with regards to my view of businesses, people don't exist to serve businesses, businesses exist as a vehicle to improve trade between people in goods, services, knowledge and labour. They allow people to voluntarily merge their resources together in order to make a better return than they would bartering their resources between individuals.

 

[Mr Jack]

No you are wrong, although what you say is partly correct, you can defer payment if you leave it in the company, but you will have lowered your income in that year as you would have fixed it at the £42k mark to avoid paying income tax via your tax return.

Let's fantasise I'm making £2.4m a year; enough that it's effectively taxed at the top rate. 50% rate gets introduced in year X, so I pull two month's income forward, and pay 40% tax on £2.8m in year X-1 vs. £2.0m in year X. I then discover that in year X+2, the tax rate is going to fall to 45% so I hold back as much as possible for the next year, let's say two months worth. I then pay 50% on £2m in year X+1 and 45% on £2.8m in year X+2. Overall effect, my income, pre-tax over the four years in £9.6m but by shifting sums around I reduce the amount taxed at 50% from £4.8m to £4m and the exchequers take from £2.4m to £2m, or £1m a year. I also inflate the take in year X+1 from £0.96m to £1.12m.

By doing this I produce the false impression that the 50% rate has reduced the tax take, when - in fact - it would produce a higher tax take if ever allowed to bed in.

 

[Freakbro]

No you are wrong, although what you say is partly correct, you can defer payment if you leave it in the company, but you will have lowered your income in that year as you would have fixed it at the £42k mark to avoid paying income tax via your tax return.

Esterbanrey was correct, lowering your wages to avoid tax does lower your income. If you paid yourself more so you pass the higher rate tax threshold, you would get an increased income although you would also start paying 22.5% tax on that income.

Just because you and Esterbanrey don't understand how it can be done, doesn't mean it isn't being done.

There are plenty of ways to defer income that don't just involve lowering your salary. And you are fixed on this £150k as a salary being received through a PAYE scheme, people on these wages (and upwards remember) take a lot of their income through bonuses, dividends etc.

Just google about deferred income and the 50% tax rate, there is plenty of information about people doing it. eg:

A leading firm of accountants has defended the deferral of bonuses and dividends until after 5 April to take advantage of the forthcoming reduction in the top rate of income tax from 50% to 45%, after Goldman Sachs decided this week to abandon a plan to delay payment of UK bonuses.

The move would have seen payment of deferred bonuses from the last three years delayed from February until early April, the Financial Times reported.

3 Years they have deferred their bonuses to save 5% of tax....even Mervyn King had this to say about it (hardly a liberal soft leftie)

Sir Mervyn King, governor of the Bank of England, said he found it ‘a bit depressing that people who earn so much find it would be even more exciting to adjust their pay-outs to benefit from the tax rate, knowing that this must have an impact on the rest of society, which is suffering most from the consequences of the financial crisis’.

It was well documented that the years prior announcement of the rise to 50% then the years prior announcement of the reduction to 45% caused large shifts in remunerations to avoid the 50% where possible. Whereas as Mr Jack already said, you need a period of stability at this tax rate to get a true reflection on the take, so yes, the 'fact' that the tax take dropped during the first year of the 50% band, though true is not actually representative of what people are trying to prove.

 

[elmarko]

No, stepped tax rates are the result of a system that allows a majority to vote to take more of someone else's property than they are willing to have taken themselves, nothing more. For some reason, even though the right to property is included in the declaration of human rights, it comes with a caveat that exempts the government from worrying about it, which renders the whole thing meaningless.

A stepped tax system is required to counter the gross imbalance of incomes - to ensure enough funds exist to maintain society to a level in which the rich can make money,

Part of the problem with this kind of pure capitalist ideology is that it doesn't take into account externalities or systemic risk - if we had a true "free market" it would destroy society.

Thankfully both those on the left & right are aware of this fact (apart from a few "Libertarian capitalist" loons in the USA) - even much of big business don't want it (as they enjoy having the state to bail them out).

 

[Amp34]

In this area upto £400 a month is the going rate for a single bedroom/studio flat. Yes there are more expensive but they are ripping people off

So

ESA - £98 a week
Housing Benefit - £100 a week ( if it's a £400 rental )

So far £198 ( Remember £100 of that goes to the landlord )

However if you want to factor in council tax which some now have to pay part of, that totals depending on area to £72 a week or just over. This is well below the cap of £350.

I'd love to see the Rent of people getting £350 or what style of flat they live in, although they don't actually get £350 to play with.

Exactly. I don't understand how people can justify being against a cap of £350. Very few get it anyway and it's way above the standard rate, even in lonon, of what people should be getting to survive.

On the other hand I also don't understand the people that seem to be assuming everyone on benefits gets anywhere near the £350 or £500! It's s bit like a business having cap on dining expenses of £50 a night, and people complaining...

 

[Amp34]

Stepped tax rates are a recognition of the fact that the rich benefit more from society than the poor.

But that has to be defined by recognicion being by some, not all. The poor benefit significantly as well, especially jobless, who are given the means to live a comfortable life. The rich just get a bit richer (if at all) the poor can live.

Or we could go back to little society such as that in the medieval period where the poor starved and froze to death and the rich built themselves large castles/homes and lived very comfortably...

 

[elmarko]

Or we could go back to little society such as that in the medieval period where the poor starved and froze to death and the rich built themselves large castles/homes and lived very comfortably...

Or the other side of a coin is a society in which the rich took the **** for too long & all got executed by the poor in a revolution.

The sword swings both ways, modern society also stops the above occurring.

The poor don't benefit in relation to the work they do (ie all the work), a corporation is built off the labour of the workers.

 

[Hagar]

The poor don't benefit in relation to the work they do (ie all the work), a corporation is built off the labour of the workers.

So the poor do all the work.

I really would like your definition of poor. Not as a percentage of average pay which is a moveable target, but below what level of income in 2013 is a person or household poor.

It strikes me that there are a few poor, very few rich and the huge majority in this country comfortably off (although they would like more). This is in stark contrast to the polarisation of rich and poor in this thread and others.

 

[Xordium]

there is no real reason for them to have to be sustained in prime central London accommodation when those rather valuable assets could be put to better use by others and the proceeds from selling them used to build more and cut waiting lists.

Whilst I agree with this I would also say we need to ask ourselves why so many things need to be placed in those zones in the first place. This London-centric view for everything doesn't do the rest of the country any favours and I don't think it does London that many either.

 

[elmarko]

So the poor do all the work.

Not all the work, just most of the work.

Would you believe it 99% of the working population do 99% of the work.

Household income is meaningless (as it depends on the number of dependants in the household) or the area the household is living in.

Poor is basically at a level the individual can't sustain a reasonable standard of living (no ability to save) or enjoy taking part in the rewards of society they work just as hard to create or is forced into debt to live.

It's not that complicated, besides - I said "poor" not absolute poverty - it's subjective I agree but I'd class anybody who is consistently worried about being able to pay the bills or having enough money to buy food/heating as poor, also people who are excluding from having an actual life (living on the breadline).

Look at the wage distribution statistics.

 

[Xordium]

But if that all works so marvellously well, how come some contribute so little?

1) Because they were born into money and know how to disseminate it so they "avoid" taxation.
2) Because there is a disenfranchised group of people for which work was never a goal or a considered possibility and nothing was done to address this.

 

[Bear]

Let's fantasise I'm making £2.4m a year; enough that it's effectively taxed at the top rate. 50% rate gets introduced in year X, so I pull two month's income forward, and pay 40% tax on £2.8m in year X-1 vs. £2.0m in year X. I then discover that in year X+2, the tax rate is going to fall to 45% so I hold back as much as possible for the next year, let's say two months worth. I then pay 50% on £2m in year X+1 and 45% on £2.8m in year X+2. Overall effect, my income, pre-tax over the four years in £9.6m but by shifting sums around I reduce the amount taxed at 50% from £4.8m to £4m and the exchequers take from £2.4m to £2m, or £1m a year. I also inflate the take in year X+1 from £0.96m to £1.12m.

By doing this I produce the false impression that the 50% rate has reduced the tax take, when - in fact - it would produce a higher tax take if ever allowed to bed in.

I completely understand that but I thought you were talking in respect of you working under your company and deferring payments and thus leaving the money in your company. Aplogies I mis-understood what you were talking about.

 

[realBabelfish]

is this true (75%?) and do you genuinely believe this to be the case? certainly interesting....

not sure. i remember reading about it a while ago. certainly worth investigating.

My opinion about this isn't much.
I think it should be less about £400 a week after tax. That is more than enough for a standard 4 person family (2 parents and 2 children) to live on. I currently live on about that and I have a job. If they found that it wasn't enough then they should go out and get a job. If you want nice things e.g. car, computers and clothes, you should go out and work for it.
Most jobs out there pay over £500 a week if both parents are working.

no, most jobs are below £500 / week. that is around £32k salary, about £10k above average.

100 houses... I can understand someone owning a few and still working... if you've got 100 houses you're either incredibly wealthy or you're incredibly leveraged... in the first instance you've got a few million in assets in the second instance managing that leverage and that amount of property would be incredibly time consuming and stressful as you'd likely want to be managing at least a chunk of it directly.

I'm struggling to believe that someone who owns 100 houses would still be in full time employment working for someone else - unless they were in a very senior/well paid position.

he earned about £500-£600 a day and was rolling in it. he just liked doing his job 2 days a week (subcontracting). he was about 60+ though and had been 'collecting' houses for most of his life. he was also a really bright and clued up bloke.

plenty of people work when they dont need to. bill gates was still working when he was a billionaire as are many top businessmen.