UK introduces 50% tax fate over £150k / year


#1

Ok, so it doesn’t come close to impacting an indie game developer (unfortunately), but is this a good policy?
Although I understand the motivations of people wanting people in the top 1% of earnings to contribute more towards government coffers, I also take seriously the point that this is a dis-incentvie to success, and qould quite possibly encourage entrepreneurs and top business talent to take jobs in countries with lower tax rates.
Will this actually have a net negative effect on UK tax income? (if the gains from those who pay are outweighed by the losses from emigration and people who take their jobs/businesses overseas)


#2

Look at New York. While most millionaires aren’t leaving the country, they are relocating to other areas of the country with lower income taxes. I don’t agree with current tax policies, since they essentially punish economic advancement. I’m more interested in a tax policy with a flat rate, or a national sales tax.


#3

I remember Vince Cable saying that our tax system is backwards because it punishes success and rewards failure. There is some truth to that. We tax economic achievement, rather than taxing stuff we should try to discourage such as pollution etc.
Just a thought :smiley:


#4

I much prefer your use of the word “dis-incentive” to “punish,” which seems ridiculously loaded in this context; doubtless the rationale for progressive taxation is more of a “that’s where the money is” sort of thing. Meanwhile, poverty sort of discourages itself, and conversely, though people might be a little less eager to make more than 150k a year in the UK if they know that a larger proportion of it is going to be taxed, it’s hard to imagine it having all that much of an impact. People aren’t going to start turning down the opportunity to make another fifty thousand pounds just because they know they’ll “only” get to keep twenty-five, instead of the usual thirty or whatever.


#5

I do agree with you on people not turning down the opportunity to make more money. And I guess it’s different in the UK. Here in the states, besides federal taxes, there’s state and local taxes, and a lot of people will go to those states/localities that have the lower taxes, though they can’t escape the fed.


#6

But imagine if Positech put its owner (me) in the 50% tax band? (I wish!). In that case, a business like mine that can be located ANYWHERE on earth is more likely to sod off to New Zealand or Canada than stay in the UK.
That must have some impact on UK govt tax revenue. We don’t live in a time where the UK has a huge manufacturing base, We make money from finance and IT, businesses that are trivial to relocate where the tax situation is best.


#7

I know corporations move their operations around the global looking to maximise profits, but does the efficiency equality trade-off really exist?

The most inefficient organisations I have worked in, those with huge disconnections between the decisions being made and the real world situation, are those with huge income disparities between employees, and the larger the disparity, the greater the disconnection, and they also tended to be fairly large organisations with a 1000 plus employees.

The most efficient and pleasant organisation I have worked in, had relatively equal income distribution, a highly educated workforce, with the great majority having four plus years of university study, and less than 500 employees.


#8

Entrepreneurs I suspect would avoid paying the 50% income tax rate through the use of trusts.


#9

how do they do that?


#10

Tax laws work differently in every country, and I am no expert on UK tax laws.

A trust implies dual ownership. Trusts have a person(s) that controls the assets (trustee), who can also be a beneficiary, and a person(s) who benefits from the obligation of the trustee to accrue wealth from the assets.

Trustees can be companies, and trusts pay no income or company tax, as long as they distribute all their income to their beneficiaries in the financial year that it is accrued. The beneficiaries (can include a company) then pay tax on the funds as part of their assessable income.

Discretionary trusts allow the trustee discretion when distributing funds to beneficiaries. It allows the trust to minimise or avoid taxation paid on its funds, although this depends on current tax laws. The most common discretionary trust is a family trust.

Trusts are a British institution that are particularly common in British settler societies. Depending on where you live, it can protect your assets against divorce, bankruptcy and insolvancy, minimise or avoid income tax and inheritance tax.

http://www.tasa.org.au/conferencepapers08/Economic/Gilding,%20Michael,%20Session%2029%20PDF.pdf


#11

Just wondering, but with these high tax rates what do the average person actually get in return from the government? I dont live in the UK or have ever been in the UK so im interested to know…


#12

“Free” health care.
lol


#13

“no such thing as a free lunch” my economics professor once told me.


#14

which is why taxes exist, i assume.


#15

He also told me “no one will spend your money as carefully as you do.” He liked to call taxes a legal form of what a thief does.


#16

Your proffessor sounds like he is pushing a personal agenda, more than teaching. Maybe is isn’t familiar with the economies of scale that large nationalised institutions can achieve over private ones? In particular, ask him about the relative proportion of Us and UK healthcare costs that are spent on bureaucracy, rather than medical care.


#17

That was several years ago. In the classroom it was strictly economics. You couldn’t tell where he stood on the issues. I only learned where he stood on the issues years later after hearing him speak. I’m sure if I did ask him about healthcare, he’d say leave it to private enterprise. I’d have to agree. A guy I know who grew up in the UK and Canada said healthcare in those countries is great until you actually have to use it.


#18

So, I’m guessing he’s not one of the 50 million people in the U.S. with no health insurance at all (either because their employers doesn’t provide it, or as a result of underwriting)?


#19

I still live in the UK> There can be little doubt that the NHS is far from perfect. However, it’s good points are that you know you are always getting the best treatment the NHS can provide, There is not a suggestion that because you are unemployed or on a low wage you are getting drug A where the guy next to you gets drug B.
Thats pretty cool.
I’ve known various people who have used the NHS to get ongoing medical treatment that would cost an absolute fortune, and of course it didn’t cost them anything. Imagine your doctor telling you what treatment you need, and never having to mention the cost at all. That’s pretty awesome. the last thing you need when ill is stress over how to pay for it.
I’m a strongly pro-free-market kinda guy, but the NHS just seems to be so more efficient than having private companies suing people over whether or not they are liable, all the time while people lie on a hospital bed wondering if they will OK the treatment.
Imagine all the money spent on US healthcare lawyers going into doctors instead :smiley:


#20

The 50% tax rate is nothing compare to the tax rates we got here in Denmark.
If we earn more then 347.200 Danish Kroner (about 41.237 pounds) a year, then our tax rate for anything over the £41.237 is 59,49% …
I pay about 49% in tax at the moment my self … and I only earn about £38.800 a year(260.000 Danish kroner)

Denmark have the 2th highest tax rate in Europe, from what I can see here on the internet its only Belgium who got a higher tax level then DK.