One thing we hear a lot especially is that people should pay a fair amount of tax, this is something that is trotted out almost weekly by people like Owen Jones, Polly Toynbee, UKUncut amongst others.  However when you ask someone who holds this view what is a fair amount of tax for someone to pay the only answer you get is “the rich should pay more….” But they never say how much more or why they think they should pay more. 

So this got me thinking just how much tax do the rich pay a year.  Well I suppose we have to work out who the rich are.  Now I am assuming by the rich they mean this magical 1% of the population.  Now the 1% is about 300,000 people who all earn over £149,000 per year.  So someone on a wage of £149,000pa would pay a total in income tax and national insurance of £59,043.36.  An effective tax rate of 39.6% which is a fair whack of anyone’s wages to have to give to the tax man.  If the wage increases it goes up rather drastically;

  • £200,000 gives an effective rate of 43%
  • £300,000 gives an effective rate of 46%
  • £500,000 gives an effective rate of 48%
  • £1,000,000 gives an effective rate of 50%

As opposed to the average person on £20,000pa who has an effective rate of 20%.  Now looking at the effective tax rates of the “rich” I would say that anyone paying more than twice the effective tax rate of an average person is most defiantly paying their “fair” share; if not actually paying more than their fair share.

As if we look as where the tax income actually comes from the +300,000 people paying the top rate tax actually contribute £47bn a year to the treasury in tax, roughly about 30% of the total income from about 1% of the working population.  If we increase that to the top 10% of earners in the UK which is about 3million people that becomes about 65% of the total tax income paid by only 10% of the working adults in the UK. 

Now when you look at those figures it makes you wonder what these people mean by fair share.  As if anything I think the current tax system is grossly unfair, especially on those who earn large wages.  Why should Mr Smith pay 40% of his wages in tax when Mr Jones only pays 20%.  Now if Mr Smith paid effectively 20% then 20% of £150,000 is still more than 20% of £20,000. 

I can’t see any reason for increasing Mr Smith’s tax bill that would be remotely fair.  Arguing that he should pay more tax because he is rich; is well not an argument it’s an ideological left wing statement.  If these people wanted to have a properly fair tax system then the only logical tax system is a flat rate tax.  Where people pay the same percentage and those who earn more still pay more. 

So to those people who think that the rich should pay their fair share, I suggest you go and look up what fair actually means before you start using it; and stop using it as a disguise for what actually is the politics of envy and the fact you want to impose punitive taxes on those who work hard and earn a good wage.  In a properly fair society people would all have an equal tax rate and pay a fair proportionate of their wages to the tax man.  Not this unfair system we have now and most defiantly not your socialist ideas of penalising the rich simply because they are rich.

 


12/06/2012 11:26am

Good piece, makes good sense. The other issue about so-called 'progressive' taxation is that above a certain level people pay accountants or exploit legal loopholes in order to reduce their tax bill (because it is worth them doing it to save significant amounts). I agree with a flat rate - as you say, as a percentage, the more you earn the more you contribute. Simple, and relatively cheap to administer.

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DavidX
22/08/2012 6:01am

Jane

I agree broadly - the problem comes with agreeing what is relevant income. If I have earning £500,000 as, say, a barrister, but have office and staff expenses of £250,000 it wouldn't be fair to chanrge me tax on £500,000. But we have to agree what expenses are fair to allow...

And what if I made a money on one year, from expenses last year - you can't really look on each year just by itself.

But having gone down that route you have re-invested many of the issues that lead to low nominal tax rates, which migth be fair, or might be the result of cunning schemes.

Making any sense?

DavidX

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