Maxium tax rate

[Innocent Abroad]

British Prime Minister Tony Blair has recently trashed the Liberal Democrats' plans for a top rate of income tax of 50% (on, I think, incomes over £100,000 a year) by saying that it would simply not bring in the desired revenue because of (legal) tax avoidance. In his view, the rich will simply not pay more than a certain amount. (Presumably this just happens to be the amount he's now collecting!)

In fact, by UK standards, 50% is not a high tax rate. I should stress that this is a marginal tax rate - obviously, the average paid over the whole of the income is a lot less. Indeed, I believe there were higher top marginal rates in Margaret Thatcher's early years, and during the Conservative governments of 1951-64.

Now, I hold these truths to be self-evident:

(1) If I were the government, I could spend the money better than they do.

(2) You should pay more tax than me. Ideally, I should be let off tax altogether because I'm so wonderful.

Back in the real world, it's obviously true that if you have penal rates of taxation they will be self-defeating.

So, what is a penal rate? Blair thinks 50% is, but 40% isn't. And how do we strike a balance between direct taxes, on income and property, and indirect taxes such as VAT (in Europe) and sales taxes (in the US and Canada)?

Would you be willing to pay more tax if you could hypothecate it? That is to say, you could say how the government must spend it (e.g. on health-care, or education, or even subsidies to oil companies!)

What makes a tax fair?

[Jray573]

If you could choose where it went why could you not just choose to donate it? Why does the government need to hire people to be the middle-man effectively spending more of your donation?

Also, they tax you to watch 5 channels on TV that don't even have many shows. They tax you to drive into London, or charge 3.80 to take the tube 15 miles out to zone 6, while running off of nuclear power. They charge for absolutely everything and still manage to want to tax people in the top tax bracket more then 50%.

I talked to a British fellow in a pub at the Amsterdam Airport. He seemed pretty peeved that once he reached that 100k tax bracket he lost quite a bit more money then at 98k. At 50% a guy who makes 100k really only makes 50k. It just seems rediculous.

Now, I'm not really a fan of socialism, nor a Brit, so I don't really understand the politics here. As a capitalist they seem pretty extreme. I have never seen so many taxes before.

[Innocent Abroad]

As I suspected, you don't get the difference between

average and marginal rates. The effect of the Liberal Democrat proposal on your friend, assuming he earned £102k, would be 10% of £2000, or £200 - about 60p a day! His standard of living would be far more affected by a 1/4 per cent hike in his mortgage.

Tube fares are not taxes, any more than taxi fares are.

As to "why not just donate it?", well in a sense you are right - hypothecated taxes can be seen as a form of compulsory donation.

I wonder if your friend is one of those people who think that I should pay him the money I owe him tight now, but that he should only pay you the money he owes you when it suits him, if ever. There are a lot of them about!

And yes I know there's a typo in the thread title, sorry I don't know how to fix it.

[Jray573]

This was several months ago. I can't remember the tax percentage he was paying. I thought it was really high at the time though. I don't think it had to do with this proposed bill.

I think he was more of a capitalist, I don't know his policies on debts.

As for the tube fares, you are somewhat right. Though they created a tax for people who drive to work and then hiked up the prices for taking the tube. I can't believe how much they charge.



I'm curious though, do you not support the cap?

[Innocent Abroad]

I agree on the level of fares - why London's tube should be twice the price of New york's subway is a mystery to me.