What is fair when it comes to tax?
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- เผยแพร่เมื่อ 7 มิ.ย. 2024
- Tax systems need to be fair. There are two ways of determining if they are. One is horizontal tax equity - which means taxing all funds received in the same amount whatever source they come from - and vertical tax equity - which describes progressive taxation. We don’t have either right now. The Taxing Wealth Report 2024 tries to create both.
ABOUT RICHARD MURPHY
Richard Murphy is Professor of Accounting Practice at Sheffield University Management School. He is director of Tax Research LLP and the author of the Funding the Future blog. His best known book is ‘The Joy of Tax’.
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Council tax on a >£5million pound property in London about £3000, council tax on a studio flat in Leeds about £1000. Sounds fair.
Do you get 3 times the services in London?
same tax for Buckingham Palace as for a £0.75K home in Harrogate...
@@mbarker1958 Same services.
@@adenwellsmith6908 Why do we never hear about £5m property owners in London complaining about council tax?
@@benedict-4965 Because you don't mix with them.
More people should be watching this guy. He's very sensible, easy to understand and makes persuasive arguments.
VAT is certainly Not fair.
If an item changes hands several times, the amount of tax in the VAT system approaches confiscation. The amounts collected in tax is equal to the value of the asset. Am I missing something?
VAT is a sales tax but also a poll tax.
There should not be VAT on essential goods and services.
yet another poll tax like standing charges and TV licence
VAT registration is a hinderance to many small businesses. The £90k threshold includes all revenue which may have to pay for materials, vehicle, fuel, an apprentice before even a wage is taken.
Trades like plumbers, builders and electricians may not take on apprentices or cease work in Feb/Mar waiting for the new tax year. Some are more creative and run different branches of work through separate companies.
They know that particularly with residential work, VAT registration is fatal as they become instantly 20% more expensive than competitors, some trades have dropped out of residential work altogther and this drives inflation as households have to pay more for trades.
Yup
Well said!
Top 5 Tax Equity Policies:-
1) Increase the Tax Threshold to at least 20K
2) Equalise Income Tax with Capitals Gains/Dividends Tax
3) Implement a Wealth Tax for people with assets over and above 1 Million at 1%
4) Replace Council Tax/Business Rates with LVT
5) Merge NI with Income Tax
A wealth tax is on assets.
Earnings above £1 million is an income tax
Largely agree as usual.
Taxes on work should be less because tax should be tax on money and money distribution.
Tax should incentivise work and is a money supply tool.
So how are you incentivised to work if tax is 90%?
@@adenwellsmith6908 Who is advocating 90% tax? And those higher rates, when they are in effect, are not on the whole amount of income, just the top percentage.
@@helenheenan3447 Do the maths. How much debt does the state have? Cost of servicing the debts. Cost of services. What tax level is needed?
The problem is with those debts. Not the money owed to banks. The other debts like Richard Murphy's pension. That's £16 trillion.
Annual rate of increase 10%
Total it up, and 90% taxation is needed across the board.
Unworked for income should pay more than someone who gets out of bed and grafts.
Unfortunately not in reality
Agreed
TH-camr Kieran Kaur “ACCOUNTANT EXPOSES: The UK Tax Regime Isn't Set Up For You To Get Rich” 5:46 Multimillionaire Rishi Sunak paid an overall tax rate of only 23%! The system is designed to tax workers not the wealthy who get most of their income from living off their assets.
Just as a question of clarity...Can tax ever be too high? If you tax over 50% on any portion of income this for many would feel like working for the state rather than for primarily their own benefit. I'm not sure psychologically many people can adjust for that and the 50% boundary looks very close but rarely exceeded, except for traps like loss of personal allowance taking tax to 60% plus for small parts of the tax system.
Capital gains tax must allow people to protect their savings vs inflation and risk.
Instead of focusing on 'fairness', which it once did with a highly redistributive tax system, Sweden has a bigger state by having a much flatter rate of tax - no personal allowances and 32% up to £45,000 per year with 52% on anything more than that. Capital taxes are a flat 30%. There's no inheritance tax either. Most people pay more tax but means testing of benefits is much less. They found it works better because there has been more incentive to grow the economy and everyone is better off.
Recognise
If I have 2 dependent children, and receive £1 income, for Horizontal equity can I split that income between dependents? So instead define it as 34p income for me, and 33p income for each child? I.e. Same effect perhaps as setting up a family trust to avoid tax.
If I have incurred 25p interest cost on debt to obtain £1 in capital gain, for Horizontal equity, can I deduct the debt cost from the income? So define it as a 75p capital gain. I.e. Same effect perhaps as setting up a limited liability company to avoid tax.
The very rich will always find ways to avoid tax usually via legal loopholes they lobby for. The only people that end up paying the 'socialised tax' are those on lower and middle incomes that are currently being decimated by rising taxation and government's inflation taxation (currency printing or monetised debt to pay for war and welfare).
We have to decide initially does tax fund spending or merely reduce consumption ie Aggregate Demand.
Why did Dishi Rishi pay 23% on over £2 million when I earn only a fraction but was in the upper tax band? Let's chase after the scroungers ... not the ones who are on 'benefits'.
Dishi Rishi??? More like Fishi Rishi
On the basis there is only a finite sum of wealth, any method of taxation therefore cannot be considered as "progressive" by definition.
Horizontal tax is different from a flat tax how?
Horizontal Equity taxes both capital gains and labour
A flat tax taxes everyone at the same rate, rather than at a progressive rate
The vertical argument is illogical & redundant. In a welfare state which can redistribute at will - like the UK, which seems to be the assumption of this vid - progressive tax rates have no effect on the actual income of the less well off. The state gives immediate income support according to bureaucratic policy at that moment - the state prescribes the final income therefore many 'progressive' tax bands or one at the maximum rate for all makes no difference to the outcome. One rate has the added benefit of equality of treatment by the state on tax collection with no undemocratic calls for tax discrimination as well as simplification of the code. ::This also highlights part of the reason why redistribution outside of any real constitutional restraint is just tyranny.
There is a lot wrong with the current tax system, and I agree with the presumption that all genuine income, whether earned or unearned should be taxed at the same rate, calculated as the total leaving the original source, and the total arriving in the account of the receiver. I do not agree with capital gains be taxed at the same rate as top income, or even taking the taxpayer into 45% from 40% on realised gains, for myself I would just not realise the gains but would borrow the 'income' i needed. That element of recommendation could go very wrong.
I do agree with Resolution Foundation who suggested that ISA's need to be restricted as to the value of tax exempt funds, as self evidently the wealthier middle classes will end up undertaxed in that respect. An interesting report, but not one to gain much attention, judging by the number of commentators!
Capital gains at personal income tax rates is unworkable. Imagine selling a property. After paying tax on the gain youd likely not have sufficient proceeds to buy again in the property market. It would also trigger what economists call a lock in effect.
@@ralphede5918 Thanks for your comment on my post, appreciated.
CGT isn't as simple as income tax, as the person holidingban asset can choose when to dispose if an asset and when to make a capital gain.
Practically there are also other issues where business owners or BTL landlords cannot realistically make a capital gain without selling all or some of their business or property.
People like this often pay taxes in other ways like dividend tax (now broadly similar to income tax after factoring corporation tax). In terms of tax planning many will just dispose of these assets in a tax efficient manner towards the end of their career or pass on tax efficiently to family.
If you are really talking about people who own large share portfolios, that they can again choose when to dispose (even taking on debt to fund lifestyle in lieu of making taxable gains), or even reside when they make those disposals.
Really this hints more at wealth tax, but again you have asset rich and cash poor people who would struggle to pay such.
I like your sentiment, but the detail of how you would align CGT and Income tax practically needs more explanation other than just the % as its more nuanced than that.
Progressive tax systems mean a hardworking person pays not only more for services provided by the government but a higher proportional amount.
There is no agreement on what fair is
30% gross profit margin by the state. Why do they need such a mark up?
@@adenwellsmith6908 Is that a 30% gross margin on products the government buys e.g. government paying £100k for roadworks that cost £70k
Yeah, tax rates are certainly unfair. Some people in low incomes pay 0% whereas richer people can pay up to 55%. That is a penal rate. No one should pay zero in tax. Even the lowest paid can afford 1% . At the other end of the scale, everyone should keep the lion’s share of what they earn. This implies a top rate tax of less than 50%.
Who has the highest money content, the government obviously why does not the government pay tax
We now need a birth grant of £2,000 and a doubling in child benefit.
Most people squander their incomes, neglect to invest.
For that reason I have little sympathy for the bulk of the population.
Investment returns have been excellent, people must be bitter that they missed out. I hate government intervention and taxation c. 45% of average persons income (gov spending is 45% of GDP)
The reason is that after the state takes their surplus, they haven't much left.
For example, 20% of their income is taken as NI, and given to someone else. Doesn't go on their services.
What if that had been invested? How much wealth would they have had?
What if you compare that with what the state offers, including all the off the book debts.
I probably wouldn't say bulk without substantiated proof, but I agree with you. Same as for benefits: our taxes are taken advantage of by crime, lazy people and lack of checks by HMRC, to the detriment of those in real need (unfortunately many). The government needs to be a lot more responsive and responsible with our money.
@@101MY So specifically what's needed?
Here's one plan.
All government spending to be published to the penny. Names address of people and companies who receive the money.
Then you get a percentage of any savings by spotting fraud, over spending etc.
For example, the other day 5 people were convicted of a 50 million benefit fraud. Just 5.
Now scale that up.
@@101MYSubstantial proof is in the proportion of families who invest in stocks
I just want low taxes, govt spends 45% of GDP.
I don't want other people to pay my way via progressive income taxes
Our tax system is already progressive and most people do pay tax on income from other sources because successive governments have either reduced the thresholds on which taxes must be paid on interest, capital gain and dividends or removed the exemption all together. Buy to let is a good example. Previously interest payments could be offset against tax liability but that exemption has now been removed so tax (at income rate level as you suggest) is now payable. The result is investors are pulling their money from the market meaning fewer rental properties and rents go up. Happens every time governments raise tax or impose rent limits. When will socialists ever learn that if you overtax people they walk away and the level of goods and service reduces meaning prices go up. Why would anybody risk their capital if there's little or no incentive to do so?
Capital gains should be taxed on genuine gains (after inflation has been discounted). Over the last few years you needed close to a 10% "gain" to break even. Particularly this year where the CGT allowance is only £3k.
Similar comment applies to taxes on interest receipts, which have also been below inflation for most of the last decade.
And Brown's tax raid on dividends, cut returns by the same amount. That's why there is a lack of investment and the UK stock market underperforms.
Socialism for the super rich and fascism for the poor
Between 2021 and 2023 the share of income taxes paid by the top 5 percent increased from 52.2 percent to 65.6 percent, while the share paid by all other taxpayers declined. You cant tax your way to prosperity, taxes destroy it
How much did their wealth increase in the same time?
Quite right too. Especially as it is this group setting the taxes. And spending it.
Also, has it ever occurred to you how the Victorian era - the era the Tories wish to return to - did not resemble a modern liberal democracy and that the health and happiness of the nation has always been better under left and centrist policies?
One last point, both the US and UK have done best at times of high taxation. Look at top rate of tax during America's golden age. They built their infrastructure on it too:
"For tax years 1944 through 1951, the highest marginal tax rate for individuals was 91%, increasing to 92% for 1952 and 1953, and reverting to 91% 1954 through 1963. For the 1964 tax year, the top marginal tax rate for individuals was lowered to 77%, and then to 70% for tax years 1965 through 1981."
Look at this age of supposed 'low taxation' - for a start it is not low taxation and secondly it is really code for 'not investing money in people or capital projects'.
What do we have now? high taxes, massive national debt AND crumbling infrastructure, failure of the low-tax rich to invest in British jobs. And poverty.
Taxes are a fiscal tool to control Aggregate demand ie inflation