Welfare myths

[NTECUK]

Its all about striking a balance.
Something that's impossible for any of the people who have been in government for over 40 years can't manage.

[timwilky]

Maybe I am just to thick to understand

Originally Posted by Bri w

Top up's are because for some industries to remain competitive in a global market they can't afford to pay a living wage. In effect, the Govt is subsidising some companies rather than have them go under and put even more people on the jam roll.

No, they are enabling unscrupulous employers to pay less than a living wage with the assumption that the tax payer will make up the difference. These unscrupulous employers are costing the welfare system we should be driving them out of existence.

Originally Posted by Bri w

And as some benefits have specific qualifying limits it quite literally pays to only work a certain number of hours and/or earn a certain level of pay.

This has to be wrong. It should pay people to work full time, not penalise them as they would get more from the welfare system.

Originally Posted by Bri w

In isolation its wrong but in the real world there's no choice. But having said that, there's a fair number of people who actively seek to only work 'x' hours, prefering a full time wage(inc benefits) from a part time job.

Dave C keeps saying he wants work to be rewarded. when then doesn't he make working for a living more attractive than signing on.

I walk Jasper each morning and think how disgusting the littered paths are these days etc. Workfare has to be the way forward. You want money for nothing has to be a thing of the past. Want welfare, then work for it.

Originally Posted by yorkie_chris

My view is taxes should be fair enough that it isn't worth the expensive accountants time to dodge them. For example high rate earners "going offshore". If the tax was FAIR (applied equally...) then gaining 20% of a million a year is a sight better than gaining 50% of f*** all!

Very well said. What cracks me up, is that on the one hand, people gripe about company directors being paid large salaries then on the other say the government need to encourage companies to base their operations in the UK.

Guess who chooses where a company is based? The bosses.
Guess who gets paid the most? The bosses.
Guess who has most to lose by being taxed more highly? The bosses.
Guess who has enough money that relocating overseas is easy? The bosses.

Taxing the wealthiest to a point where they say, "***k this, I'm off" is one of the ways we disincentivise companies from operating here. Then we gripe about another factory closing and reopening overseas and suddenly hundreds of folks are out of work. The failure to see cause and effect in this respect is staggering.

The figure varies quite a lot at the point where economists state the 'ideal' top rate of tax should lie. By this, we mean the rate that strikes the best balance between generating revenue from tax, but not so high that the high earners:
A) Go overseas
B) Use accountants to lessen their tax liability significantly.
Yes, there will always be some who resort to A and/or B, but the balancing act is in hitting the "sweet spot" where few enough of them do that you raise the most total income.
The % at which this should be set varies. Typically, it's somewhere between the high 30s and the low to mid 40s. 40%, or possibly (only) as a short term measure, an increase to a high as 45% is likely to be the best compromise, IMO. 50% is too high. 10% may not sound like a big difference if you only pay £4,000 tax a year, but if you earn £1,000,000 a year, it is.

This is too complex and nuanced for most people to grasp, though. The idea of "tax the rich" is a lot simpler to sell as an ideology, even if in reality it means everyone winds up poorer.

Originally Posted by yorkie_chris

Edit:
And if this was done in the first place then a lot of salaries wouldn't be so high. Companies wouldn't offer as high rates as a lower taxable income would result in the same net income.

It's insane that we have such large 'steps' in tax rates at wholly arbitrary points in people's earnings. I can understand the historical reasons for this, when the maths had to be worked out by hand, but in this day and age, where a computer could apply a 'curve' with a resolution down to the penny, tax rates could be scaled they should be scrapped. Better yet, pick a (high) sensible personal allowance that everyone gets and then just put a constant rate on all earnings above this.

The problem with having a high personal allowance meaning lots of people dont pay tax is it takes them out of society.

People have both a responsibility and a right to contribute to their own governance. Every person that pays no tax is getting all the benefits of society for free and thats just as bad for them as it is for those paying.

I'm not suggesting they pay MORE tax, but that people who pay for things value them more than people who get them free, if people aren't taxed they don't care what the government does with the money.

[timwilky]

I like the way you are thinking. But there are anomalies that resolving.

A worker on minimum rate should not be paying tax. The threshold should be at least £12,000.


A tax allowance should be transferable. So if someone is not using their partner, parent, carer etc. whoever is providing for that non wage earning individual can use the allowance.

The 40% threshold is far too low. It smacks of the 1992 election where labour wanted to tax the rich. But someone decide rich was earning over 20,000 so just about every professional of the time was deemed to be "rich". No wonder despite everything John Major won. These days the higher rate of tax is hit by salaries of £34,000 so to put that into perspective an Army sergeant or an experienced police constable is deemed to earn sufficient to pay higher rate tax.

Originally Posted by timwilky

A worker on minimum rate should not be paying tax.

This.

It is bureaucratic and inefficient to give with one hand and take with the other. There is an inherent cost of administering tax, that we gain no benefit from, it's simply "the cost of doing business" of taxing people and it doesn't wind up in the public coffers. It's in everyone's interest, rich and poor that this cost should be minimised. A really cost-efficient way is to set your minimum wage at the right level and then not tax people on it.

If we're saying there's a generalised, minimum amount people can survive on and use this as the basis of a minimum wage, why roll tax onto it? Either the tax will drive it below the 'survivable' threshold of that income, or, more likely, you're artificially increasing the minimum wage, above what it needs to be, solely in order to tax people on it. You're also artificially inflating the cost of basic labour, which arguably contributes to unemployment.

Spank86: I feel I contribute to society more through doing my job than through the taxes I pay. Perhaps if I did something socially irresponsible/negative/selfish like working in cold call telesales, or selling snake oil, I might feel worthless unless I contributed through taxes.

When I see all the tax I pay, I am reminded of the useless/non-existent service I get for it when I drive out of my glass strewn, graffiti'd lane, onto my potholed road. I often question whether my tax does any real good at all, or if it just keeps a load of useless non-entities off unemployment benefit (which, in any event, I would also be paying for).

I'm not talking about services rendered, I'm talking about paying into your own governance, giving you a vested interest in how your money is spent. I might not be explaining it too well but it's about intertwining society with government. How can you have pride or shame in your government and country if you have no input into it.

Your last paragraph encapsulates it perfectly. If you paid no tax you'd be happy to see things fall apart, or at least would have no right to hold anyone to account.

I do agree that there will always be people who pay no tax, and there is always things like council tax but those people should be minimal.

In part all this is why some few people on welfare feel entitled to "government money", and feel like they should have more and better lives. They don't see the pain side of the equation, the money is only government money briefly, chiefly it's The taxpayers money.

As a recipient you are in some ways a charity case and that can become a mindset, it divorces people from society at large and the government. Whereas when one is paying to live it brings you closer to everyone else and fosters civic... Well pride preferably but civic something even if its civic shame or disgust.

Or at least it should if handled properly, at a basic level why not drop litter if you don't have a hand in the pot paying for it to be cleaned up?

[Biker Biggles]

Originally Posted by timwilky

I like the way you are thinking. But there are anomalies that resolving.

A worker on minimum rate should not be paying tax. The threshold should be at least £12,000.


A tax allowance should be transferable. So if someone is not using their partner, parent, carer etc. whoever is providing for that non wage earning individual can use the allowance.

The 40% threshold is far too low. It smacks of the 1992 election where labour wanted to tax the rich. But someone decide rich was earning over 20,000 so just about every professional of the time was deemed to be "rich". No wonder despite everything John Major won. These days the higher rate of tax is hit by salaries of £34,000 so to put that into perspective an Army sergeant or an experienced police constable is deemed to earn sufficient to pay higher rate tax.

Just to clarify what happened in 1992---------
The Labour shadow chancellor John Smith published a proposed budget before the election.What he proposed was not to raise income tax as such for the higher earners,but to abolish the upper limit for National Insurance contribuions which for some reason was then about £25000 and to this day is still set at about £35000.It would have been a massive simplification of the revenue raising system and could have allowed a considerable raising of tax thresholds generally,but certain elements in the media portrayed it as a massive hit on Nurses Teachers Army NCOs and god knows who else.No party sinse has published a proposed budget or anything similar.
I happen to think the late John Smith was a man of great integrity who might have done a lot of good if he had survived.Who knows?

[yorkie_chris]

Originally Posted by Spank86

I do agree that there will always be people who pay no tax, and there is always things like council tax but those people should be minimal.

What about people who earn less than their basic allowance?

They still pay stamp, they still pay VAT on everything they spend, fuel duty etc.