Newsflash: the United Kingdom has just raised their top tax rate from 40 to 50 percent. That’s before (after?) the country’s 17.5 percent VAT on virtually everything a resident buys—save petrol, alcohol, cigarettes and other items covered by “sin taxes,” which are WAY higher. And council tax. And the rest. Which includes the tax on new car purchases. For company director types, that little item was calculated at 35 percent for the first £80K. After that, nada. But now, it’s 35 percent on the whole schmeer: the complete purchase price. The Times reports that “The move left some luxury-car makers fuming, in particular Bentley, which is owned by Volkswagen but has its factory in Crewe.”
Stuart McCullough, sales and marketing director, said: “The government has talked about the importance of high-skill manufacturing to the postrecession UK economy. Changes to company-car tax, capital allowances and fuel duty will hit higher-value vehicles worst of all and two-thirds of these cars are British in name and manufacture.
“It is frustrating that we asked the government for support but the Treasury has instead made it even tougher. We would urge them to reconsider some of these measures, especially the changes to company-car-tax upper limits.”
The new tax regime inflames old divisions, as this quote re: a potential exodus of top earners [from the first article] proves.
Let them go. Let them leave.
The same people who’ve never experienced £100,000 a year will still be here.
The teachers, the firemen, the nurses, even many doctors don’t get to that rate.
In fact, if all the wealthy leave, we’ll even have more houses back from the buy-to-let greed of late.
Good.
This will just make things wose.
They will now see the rich moving more money offshore.
GB will be lucky to escape bankruptcy Iceland style.
We did the same thing to luxury yachts in the U.S. about ten years ago. It wasn’t too long before the politicians intent on punishing people able to buy the yachts discovered boats are built by a large number of blue collar and small business types.
Are there any productive people left in the UK? The place became a socialist slave camp years ago…The parasites overwhelmed the producers years ago.
Britain continues a century of decline by doing more of the same. But life will be so much nicer for teachers, fireman, nurses and many doctors once all the UK’s high earners have escaped to tax havens.
Wow, I didn’t realize that taxes in the UK were so ridiculous. I get annoyed that I have to pay a 6% sales tax.
Still, given that (if I understand this correctly) the bit about vehicle purchase tax is basically just getting rid of a tax exemption, it isn’t really an extra tax on the rich, it’s just bringing the tax on absurdly expensive cars in line with the tax on inexpensive and moderately priced cars.
Even with the struggling pound £80K is well over $100,000, and if you have the capability to spend that much on a rapidly depreciating asset such as a car, you have the money to pay the same percentage of tax that someone scraping together to buy a £15K car would be required to cough up.
THe US should look realy hard at the UK. And think if it’s enough to have an economy that relies mainly on insurance, re-insurance, banking (so-called “invisible economy”). The UK’s industrial meltdown is well documented. Should the US follow that lead?
Is the UK really a horrible awful place where the people eat only gruel and slave all day to support “parasites?” I think it looks like a decent place where the people live decent lives, but to hear much of the griping from the anti-tax crowd it’s the most horrible torture imaginable to live in a place where the rich aren’t coddled by the government and given tax breaks on the income they don’t manage to hide.
Taxation always makes people holler and scream, I guess. It isn’t enough to live within your means and be a happy contributing member of society, it seems that everybody just wants more and more and more and if some needs to go to infrastructure or the greater good, it’s the end of the world.
Nuts to the rich, I sez. There’s nothing wrong with honest money well-earned, but huge inheritances and trust funds and shareholder-funded multimillion dollar CEO paychecks don’t add up in my head. I believe that every person should be paid what their worth, and that worth should be determined by what they contribute to society, whether that be job creation or goods or services. I don’t believe that any CEO is worth the salary of 200+ lineworkers, and I certainly don’t believe that being born to rich parents should mean you live a life of opulent luxury without having to lift a finger or contribute to society.
Proposals like this don’t pass until the super wealthy get so full of hubris and sneering disregard for the lower classes that they go out and do something stupid, like, I don’t know, ruin the world economy. This is just the expected populist backlash to years of outright stupidity by the rich. Don’t worry. The moon won’t crumble into bits and all of England won’t catch fire. Things will happen, then other things will happen, and then we’ll be right back where we started in no time. Feel free to freak out and froth about it in the meantime, though.
New flash: the United Kingdom has just raised their top tax rate from 40 to 50 percent.…
*sigh* If only in the States the top 2% would pay the same percentage in tax as the guy who makes 140K, or 90K…I don’t know about the tax structure in Britain, but in the US, the wealthiest don’t pay their fair share (percentage wise) as the rest of the working schmucks. Just think how much more equitable things would be if everybody paid 15% in Federal taxes, no deductions at all.
golden2husky, I’ve heard good arguments against the flat tax, but at the end of the day, I think it would be the fairest, easiest to understand structure. Whatever % from everybody – EVERYBODY – small business owners, shoe salesmen, CEOs, politicians. No tweaking and fiddling and pages and pages of exceptions and deductions. Easy-peasy. I don’t totally buy that the same percentage would be unduly burdensome to the poor, though I see where the argument comes from. Hot dog, if rich people actually paid all their taxes, things would be, well, different mostly, maybe better.
Um, whatever. Fuck the rich, whatever.
It’s still really stupid to raise taxes, or eliminate exemptions or whatever it is, during a recession. The government is trying to demand. That’s what is all that stimulus money is for right?
What, no Tea Party?
40% Tax? 50% Tax?!?! plus a 17% VAT tax? Well that’s an economic dog’s dinner, eh love?
No wonder so many wealthy Europeans have moved their ‘primary residence’ to Dubai.
http://www.dubai-online.com/jobs/tax.htm
I don’t know of any poor people that employee others. Rich people leaving the UK isn’t good for that society, regardless of anyone’s attitude of rich people.
Flat tax will NEVER happen, precisely because it is the most fair. Interestingly, you don’t hear many on the political left talking about it, but lots of conservatives do. I wonder why.
Another difference is that individuals generally don’t pay as much tax to their local municipalities in the UK. The council tax is typically a few hundred pounds, maybe a little over a thousand in London. My NJ property tax is many times that, and no, I don’t live in a mansion by any means.
Unitary versus federal government structure. Yup.
Residents of the UK are taxed more than those in the US (I should know, I’m British). Although, to be clear, that 50% rate will only be on income over a certain amount (150,000 pounds, ~$220K), i.e. income below that amount is taxed at a lower rate -I believe 20% on the first ~38,000 pounds (about $56K), 40% thereafter. Lest anyone be under the impression that a person’s whole income be taxed at that rate.
Our Federal income tax is graduated in the same way. Different %, at different points, but the same idea.
A flat tax with no deductions would result in higher taxes for most of us.
I’ve compared my income/income tax with friends in the UK and we really aren’t much lower here. We have state income tax to pay (though some states don’t have it) and some of us have city income tax to pay (1% for me). As you mention, there is also property tax.
VAT makes a big difference though. Sales tax in my state is 6% and food/medicine are exempt.
It seems to me a basic principle of fairness is that those who benefit the most percentage wise from the system should pay the most percentage wise to support the system.
Any other approach results in a transfer of wealth from those on the bottom to those on the top over time since the less wealthy with less income are taxed overall at a higher rate. Warren Buffett has pointed out several times this is the American situation.
We are now witnessing the effects of this policy. Wealth and income are so concentrated at the top that the economy collapses from lack of demand and the inability of many on the bottom to meet their obligations. But it is the wealthy who now get the bailouts, not the average Joe who can’t make his payments and declares bankruptcy.
Americans didn’t arrive in our current predicament by chance or mistake. It has been the general policy of government and the wealthy who run it to take us here for the past nearly 30 years.
Huge taxes and huge government.
Never works and it wont this time.
Around half of the US taxpayers pay no income tax. The rich pay a huge dispraportionate chunk. Best not to chase them away, although in truth the smart money is already fleeing to Asia.
It is starting to become obvious they neither understand history nor economics in some circles. A better question for these leaders is do they know where money really comes from?
Robert the current VAT in the United Kingdom is 15%, it will revert to 17.5 later this year!Yes its a expensive place to live and even visit, here in Canada we seem to have copied the British Tax system,like here in Ontario we have 8% Prov. Tax and then 5% GST from the Federal govenment, so I think people who have only a 6% State Tax have it good!
Britain is lost, and on the fast track to becoming Third World. The economy is shot, and political correctness in the social/legal system has pretty much destroyed individual freedom in thinking. If these cars continue to be made in the UK, it will be mostly for their Muslim overlords from the Middle East.
As the erstwhile British comedian, Viv Stanshall, once quipped anent his countrymen: “You fought in the last war to make people like yourself impossible.”
http://tinyurl.com/djhwao
It’s good you feel that way JakeCarolan;
One day you might rise up out of the doldrums and taste success. Then I’m sure you’ll be clamoring for higher taxes and the return of all your money back into society.
Oh, and where exactly does our tax money go? Local politician expense accounts? Kickbacks to the construction companies paving the roads every year? Or maybe the $300,000 stained glass window the Mayor of Montreal installed in his office in the mid-90’s.
No, wait! I know, it goes to the millions on disability and welfare that sit around smoking cigarettes, drinking beer, and enjoying the fruits of your labor. That’s pretty much the situation in Quebec, where 3 million work and 4 million don’t.
As a doctor, I work my fucking ass right off, seeing 50 patients a day and taking call 2-3 weeks a month. I come home exhausted and in pieces from the daily drama. I make $400,000 a year, and about $180,000 goes to taxes. And people around me say I don’t pay enough taxes – fuck them. I earned the right to buy a 911 or take a fancy vacation for $15k and blow off steam. The dick who strives to answer phones for a living and make $8 an hour doesn’t, that’s for sure.
Around half of the US taxpayers pay no income tax. The rich pay a huge dispraportionate chunk…
Not relative to what they make, they don’t. Obviously for every person in the top 2% there are far more in the lower 50%. So, duh, there are many lower income people that pay little income tax. And to save you the bother of pointing it out, with Obama in office, that number is going to grow. But in the upper reaches, most income is not from the easily taxed W-2 wages, its from capital gains, investments, etc. And a whole toolbox of tax shelters, loopholes, etc are available to the wealthy that don’t apply to average, or even above average wage earners. So, while the richest may contribute a significant sum overall, their contribution is still a far smaller percentage of their overall earnings than that of the typical taxpayer. And that is unfair no matter how you look at it. Fairness in taxation is not about bloating the government, or screwing the Canadian doctor who posted above (looks like Canada doesn’t shower the wealthy with nearly as many tax breaks as Uncle Sugar). Nor is it “class warfare” or having distaste for the really rich. Who doesn’t want to be wealthy? It is about having everybody pay their fair share. And as for fair taxes on the rich chasing jobs away, spare me. American industry shifts work to cheaper countries whenever it can. There is no altruistic behavior in the boardroom. Those charitable deductions would not happen (mostly) if there was no money to be saved when tax time rolls around.
DeanMTL: No doubt that you would prefer 15% flat across the board. And, yes, you damn well have earned the right to buy that 911. Don’t be to bitter on those guys hanging around doing nothing but smoking and drinking. They will end up in you office needing lots of medical care, and at least they have insurance!! LOL
DeanMTL –
A person’s worth to society (and in general) can’t be quantified through income alone. You make $400,000 a year, and as a doctor you are likely doing some good for the world (assuming you aren’t running a plastic surgery shop specializing in breast implants and lipo). That’s great for you, but what about the teachers of the world who like you paid for an advanced education, see hundreds of students per day, have just as much stress and end up working close to as many hours once you figure in all the time spent behind the scenes not actually in front of the class, and bring home anywhere from 30K starting to 80K after advanced degree bonuses and many years of service. Do you feel that they, along with police officers, firemen, EMTs, military personnel, and a number of other skilled, needed, yet grossly underpaid citizens need to ‘pull themselves out of the doldrums’?
If you are paying what you say you are in taxes, then you are paying a 45% rate, which, with a flat tax system, would likely drop to below 20%. You would be bringing more money home, and the government would have more money to run by pulling in that 20% per year from those making millions per year who are currently paying next to nothing in taxes through voodoo accounting and mountains of loopholes in an antiquated and byzantine tax code.
I can’t see how anyone can argue that a tax system which would treat all people the same regardless of income unfairly targets the rich.
OH..oh The Montreal doc let Canada’s secret out.Our health care system has a few flaws.
Lets see, we take a well educated Doctor and he practices in a big city.Then we tax the living crap out of the guy.Right,somebody has to pay for the free health care system.So why not tax the number one,most important element of the health care system?
So sooner or later the Doctor gets pissed off and takes his practice down to the U.S.Remember this Doc has a big city practice.
Then all the bleeding heart’s ask “why can’t we get a Doctor to set up in Bumfuck Northern Ontario”Pop 1400?Of course in the next breath the socialist’s point to the south and say”At least we don’t have the problems that those poor souls in the United States have”
Buy your 911, DeanMTL, though I’d rather see you in a Vette and enjoy a wnderfull vacation.
There is plenty of truth in both sides of the above arguments. Nevertheless it is true that the richest five percent of United States taxpayers are paying about 80% of the total federal income tax. If you “screw-the-rich” people think you can improve on that, go for it.
At the same time, we are perilously close to a situation where half of the people don’t pay any federal income tax at all. There will be nothing to stop them from voting for people like the present occupant who promise them handouts of federal money: they won’t be paying for it, someone else will.
I’m in Rhode Island, where the Democrat legislature (much like California) is controlled by the public sector unions and welfare industry (there’s a booming cadre of “social services” providers here).
RI is also known as a welfare magnet – people move here (including from overseas) to get on our generous Democrat welfare system.
So we pay some of the highest taxes in the country, yet the roads are cratered, the bridges collapsing, and the public schools stink.
But state employees and welfare recipients are making out like bandits (because they are).
There are some “rich” here, and an increasing number of poor. It is the middle class that is being wiped out.
Businesses won’t locate here (quite rational on their part), and so there are fewer and fewer jobs for the middle class.
You class warfare types have it all wrong. Just look at RI, or socialist economies overseas, and see how prosperity declines overall, and the middle class keeps shrinking as upward mobility becomes impossible.
Jack Welch of GE even pointed to RI’s dysfunction on national TV last Fall, and said it is a preview of what awaits the entire country under the Obama community organizer spread around the wealth administration.
God help us.
golden2husky comments on the fact that around half of the US taxpayers pay no income tax. “The rich pay a huge dispraportionate chunk…,” and writes:
Not relative to what they make, they don’t.,
You are wrong. If I pay no tax, or if I receive a “credit,” but have earned some income, there is no way you can say that someone who actually pays taxes, any amount of tax, is not paying a disproportionate amount to my zero payment.
Some people will not be happy until it is a crime to make more than anyone else.
DeanMTL, it’s interesting that you suggest that when I “rise from the doldrums and taste success” that I’ll see things differently. I don’t personally view income as the primary measure of success – at 26 I feel like I’m a very successful person. I am married to a wonderful wife, own a nice little house, and am going back to school to pursue my Masters degree. In the Fall I will leave the private sector to start a job as a Special Education teacher making about $35k, a lateral move for me, financially. This, combined with my wife’s income, provides us with a workable income, and we are happy, satisfied people who work hard and are glad to live in a country like this and pay our taxes. We live within our means, put aside some money for the future, and prepare our home and lives for children in a few years. I’m certainly not in the doldrums just because I don’t have a monster income, and I think I have already tasted success. It is sweet, and I am glad to have worked hard and made the right decisions to get to where I am.
Nobody’s saying doctors making $400k+ don’t deserve to buy nice things or go on vacations. I hope you are able to live comfortably on your $220,000 take-home income. Nobody’s saying that people who make $8/hour answering phones have earned the right to a 911 and free dinners on the system. I do think it’s disingenuous to imply that everybody who doesn’t work is a noncontributing, beer-drinking, cigarette-smoking leech, but I live in the US, where poor people can’t even afford to go to the doctor because everything is privatized, employer-based and highly priced. What I am saying is that I don’t think the rich deserve extra breaks just for being rich, I don’t think the tax scale should stop sliding up commensurate with income, and I don’t think that if we ask the wealthy to contribute proportionate to their ability to contribute, this fantastical wunderkind will pull up stakes and move elsewhere and nobody will be able to rise up and replace them, because they are so very special.
This is false. If the rich run away from taxation, somebody else will take their place in society and create jobs and become rich, although maybe under a different tax system. Then things might change and they, too, might abandon their homelands and others will replace them.
fincar1, though I doubt your numbers are 100% spot-on, but assuming they are, when 5% of the people can afford to pay 80%, the income gap is massively, horrendously wide. Incomes in the US have been functionally declining since about 2000 in all segments except for the wealthy, which have enjoyed significant increases. It’s unfortunate that so few have to shoulder such a large proportion of the burden, but even more unfortunate that so much of a country’s wealth is concentrated in the hands of the few.
And mikey, the US healthcare system is not good. Even a well-off guy like me with decent coverage is afraid to go to the doctor for fear of going bankrupt if it turns out I’m sick. It is shameful that our country has a system set up where it is possible for a family to lose their home, lose their savings, lose everything because a member of the family was stricken with disease. Living a healthy life free of unnecessary illness and fear of medical bankruptcy should not be a privilege granted only to the rich.
As a doctor, I work my fucking ass right off, seeing 50 patients a day and taking call 2-3 weeks a month. I come home exhausted and in pieces from the daily drama. I make $400,000 a year, and about $180,000 goes to taxes.
Given the educational and work requirements, you’re worth it. I knew of a skilled engineering manager, near the end of his career, who took a position in a new firm for a rumored ~$250K.
All the class warfare types were meltdown jealous about how no one is ‘worth’ that kind of money. But this manager had, in effect, traded two years of retirement for the stress, challenge and compensation of a start up.
Super Genius Social Engineering types think they can determine what a person is worth. I think $400K is base pay for Major League Baseball players. You can shut down almost all professional sports with a little ‘social-engineering’ logic. You can only imagine what sort of damage it can do to the regular economy.
I do think it’s disingenuous to imply that everybody who doesn’t work is a noncontributing, beer-drinking, cigarette-smoking leech…
And I think you should recognize that people just like that do exist, which you haven’t yet. Those people are more of a drain on society than Richie Rich will ever be, and there are a hell of a lot more of them.
but I live in the US, where poor people can’t even afford to go to the doctor because everything is privatized, employer-based and highly priced.
But that’s the great thing, Jake. They don’t have to afford it. They just go to the emergency room, and everyone else foots the bill or the hospital eats it. Lovely.
And people on the left like to forget the effect leading an unhealthy lifestyle can take on your body, because it takes away their hated foe: personal responsibility. There are highly publicized links between obesity and smoking and several terrible chronic diseases like high blood pressure and heart disease. Yet 1 out of 3 people let themselves become obese and 1 out of 5 smoke. Why the hell should I pay for their health care when it’s obvious they don’t give a crap about themselves? Who are you to tell me I should?
And who are you to tell the son of the billionaire he has to do something before he can enjoy the wealth? That’s up to his parents, not you. If a board of directors determines that a CEO is worth 200 times a lineworker, that’s up to them, not you. That’s why so much of this rush to soak the rich feels like a massive liberal power grab. Making up for how useless they felt during the Bush years. This pendulum crap really gets annoying.
In the 1950s, largely regarded (especially by conservatives, oddly enough) as America’s high point, the top tax rate was 90%. Was Ike a dirty commie?
Oh, and in 1953 (if you were a white male, anyway) you could graduate high school and get a job where you made enough money to buy a house and a car, and probably be secure enough to have a family by 25 (with ONE income
). Try doing that now on a high school education. Hell, try doing it with a B.A. before 30 without getting into massive consumer debt.
“But that’s the great thing, Jake. They don’t have to afford it. They just go to the emergency room, and everyone else foots the bill or the hospital eats it. Lovely.”
So you want to change the law so if someone is bleeding to death, they’re told they can’t be treated if they don’t have the money? Because I’m guessing you don’t want universal health insurance.
Even if we did change the law so emergency rooms could refuse to treat sick people or victims of car wrecks because they couldn’t pay for treatment (what a lovely society that would be), you’re still going to pay for the sick so long as you have health insurance. That’s what insurance *is*. It uses money from the healthy to pay for the sick in exchange for getting a safety net in case you get your rugged individualist butt T-boned by some moron in an Escalade.
And the main reason the rich pay such a large perecent of the nation’s (income) taxes is because they’ve become so much wealthier than the bottom 98% over the last 28 years. If you look at what they pay as individuals–the percent of their incomes over and above the highest rates–they’ve been steadily declining since the 1950s, with a brief uptick in the 90s that was reversed by George W. Bush this decade.
http://commonsensepoliticalthought.com/wp-content/uploads/2009/03/taxgraph.jpg
Jake,
Thoughtful reply. Thanks.
To the others, no plastic surgery. I do gastroenterology and biliary, so most of what I see is colitis, bleeding ulcers, pancreatic and liver cancer, etc.
I live very comfortably on 220k a year, and I don’t have a 911 (I drive a $25,000 Wrangler) and my last vacation was a $3500 2-weeker in Greece a year ago.
I just get sick of hearing everyone tell me I’m getting away with murder for making so much and my taxes should skyrocket to 50 or 60%. I’ve yet to meet someone who works as fast and hard as I do.
“I just get sick of hearing everyone tell me I’m getting away with murder for making so much and my taxes should skyrocket to 50 or 60%.”
Nobody is talking about raising taxes on anybody who makes under $250,000. And even then, it will go to 40% of every dollar made after $250,000, not 40% of their entire income.
“I’ve yet to meet someone who works as fast and hard as I do.”
How far do you think “hard work” would get you if you got dropped off in Somalia (tax rate: 0%)? Serious question–there are certain conditions in society that make it possible for people with talent and drive to make money. Creating these conditions costs money. That’s the part withheld in taxes.
Something tells me Bill Gates wouldn’t be the worlds richest man had he been born in Afghanistan.
BDB, the good doctor is Canadian, and I think the tax structure you’re referring to is Obama’s proposed adjustment to the US, so it’s all a bit off to try to discuss specific policy. Regardless, as a matter of priniciple, I agree with your assessment that taxation is necessary to create the conditions necessary to allow wealth to be created.
DeanMTL, thanks for the additional info, I understand that it’s not a lot of fun to be well-to-do in this current climate. A lot of people are mad at the wealthy because of the actions of the idiots on Wall Street, but it’s unfortunate that legitimate, valuable contributors like doctors and honest small business owners feel attacked. It takes a lot of time, training, money and dedication to pursue medicine or start a thriving small business, and these people oughtn’t be beat up for reaping the rewards of their hard work.
Anyway, even liberal hippies don’t generally dump on doctors for making money because it’s recognized that they work hard and contribute a very valuable, necessary and specialized service to society. Around the world there’s just a lot of populist backlash against the rich because questionable Wall Street-type “wealth generators” have done such a horrible job and been massively compensated for ruining the world economy. The unfortunate result of this is hard-working small business owners feeling attacked for their success or similar cases, but I think if you actually talked to people they would generally say they have no problem with honest people making big money providing valuable goods and services. Most people recognize that it’s necessary for someone who assumes the risk of starting a business to be well compensated for that risk. It’s corporate CEOs serving on each others’ boards, voting in massive pay raises and golden parachutes for each other that have people bristling. Multimillion dollar compensation with no real associated financial risk or even attachment to performance is absurd and needs to be corralled.
Even if we did change the law so emergency rooms could refuse to treat sick people or victims of car wrecks because they couldn’t pay for treatment (what a lovely society that would be), you’re still going to pay for the sick so long as you have health insurance. That’s what insurance *is*.
I’m not talking about regular people being sick. I’m talking about the irresponsible. The ones that make bad lifestyle choices. The ones that raise everyone else’s insurance rates and collect more often.
As for the advantaged: so what? Not everyone starts at the same level. Don’t whine about it. Overcome it. Can’t? Try harder.
CarShark sez: Even if we did change the law so emergency rooms could refuse to treat sick people or victims of car wrecks because they couldn’t pay for treatment (what a lovely society that would be), you’re still going to pay for the sick so long as you have health insurance. That’s what insurance *is*.
I’m not talking about regular people being sick. I’m talking about the irresponsible. The ones that make bad lifestyle choices. The ones that raise everyone else’s insurance rates and collect more often.
Hmmm… And most irresponsible of all are, of course, those who don’t get any insurance at all, right?
So the obvious countermeasure would be to make it mandatory for everyone to get insurance.
Oh, wait–
I’m not talking about regular people being sick. I’m talking about the irresponsible. The ones that make bad lifestyle choices.
You’re already paying for them, too. If you have health insurance, you’re paying for all the sick people, whether they got it because of genetics or because they ate too many french fries and smoked out their lungs.
Anyway, even liberal hippies don’t generally dump on doctors for making money because it’s recognized that they work hard and contribute a very valuable, necessary and specialized service to society.
Right. Doctors make wealth from their labor, a very valuable service. When we’re talking about people making low six figures, they generally still make money off of actual labor/service. It’s when you get into the millionaire range where people are no longer making the bulk of their income from a labor or service, but making money from financial speculation (doing stuff like betting against mortgage derivatives), which is the class people are angriest at right now. And there are some very legitimate reasons to be angry at them.
Jake–
Thanks. I missed the part about him being Canadian. I have no real knowledge of Canadian tax rates, so I’ll shut up on specifics!
While we’re completely off the topic of automobiles, what’s everyone’s thoughts on the Fair Tax? Does anyone here know of any countries that utilize a national sale tax in lieu of income taxes? I think it’s a great idea, but would like to see an example of it in action.
What’s wrong with taxes? I thought everybody loved taxes. Live like Europeans and stuff, right?
I’m glad we all sorted that issue then.
@reclusive
The problem with the “Fair Tax” is that it operates as a regressive tax. This is due to the following truism: poor people spend a greater percentage of their money on things than do the rich. Since that’s true, a sales tax penalizes the poor relative to the rich. Rich people (especially in the top 5%) simply don’t spend as much of their income as do the poor; they’ve already satisfied their needs for a much lower percentage of wealth, then buy their wants, and still have plenty of wealth left over.
The only country I know of — off the top of my head — that relies wholly on a sales tax is Estonia.
I’ve heard estimates that a national sales tax would require a 30% effective rate — or more — to achieve the necessary results, and that involves taxing all goods, including foodstuffs, rent payments, interest payments, and services. The only way to prevent a sales tax from being crushingly regressive is to pay out “prebates” to everyone, in the form of checks of more than $5,600 per person, per year. The only people who would be truly happy would be the very wealthy, who would make out like the Visigoths under such a system. The very poor would do well, too, but only if they made less than $15,000 (or perhaps ($24,000) per annum. Anyone making more than that, but less than $200,000, would pay more. And the richer one became beyond $200k, then the lower one’s tax burden would become.
FackCheck looked at it in-depth, with figures from Fair Tax advocates, detractors, and neutral parties. http://www.factcheck.org/taxes/unspinning_the_fairtax.html
Read the article. I couldn’t help but notice that the author claims that it’d have to be raised to 34% to “bring the same revenue as the taxes it would replace”. Translation: Less money for Uncle Sam. As a proponent of smaller/more efficient government I like the idea. That same article goes on to say “Moreover, even FairTax critics like Gale agree that consumption taxes increase the size of the economy. Many studies show that long-term incomes would rise under a consumption-based tax system. Optimistic accounts show a 10 percent rise in income over time, but even the more cautious studies show gains of 5 percent to 7 percent.” The only real gripe I read was that those making more than 200k might not have to pay as much in taxes. Boohoo. Maybe they’ll utilize that extra money for job creation. Either way there’s still plenty of people making that much money who’ll blow most of it on extravagant things, and thus contribute plenty of revenue to the government.
Please, those people who are theoretically covered by the new tax rate do not pay any taxes anyway. They can afford to hire smart people who think up ways to do it.
@reclusive_in_nature :
I did the read the article: that’s why I recommended it. Where do you want to start to cut? You can’t just use a changed tax code to starve the exchequer. Even if you reduced spending, and thus the rate, it is nonetheless true that a sales tax would shift the tax burden (as a percentage) more toward the middle class, benefitting the working poor (if the prebate were high enough) and the ueber-rich (with or without prebates). So, apparently you believe that middle-class Americans don’t pay their fair share now? As for the rich creating jobs, I’ll believe it when I see it. Supply-side economics is a shaky premise. Personally, I’d rather increase the *marginal* rates on people who can afford a Veyron rather than on those who struggle to pay a mortgage and a Camry. I suppose that makes me a big-government socialist, but that’s alright.
I do find the growth estimates for a sales tax interesting. It’d be nice, but, again, the goal of tax policy is never simple revenue generation, but social engineering, whether it’s done by Republicans or Democrats.
One last note: what FactCheck doesn’t address, except tangentially, is the business of the government sending checks to everybody. If you really want to piss off the working poor and middle-class voters in this country, watch what happens when the government sends prebate checks to EVERYBODY, which means that Bill Gates, Warren Buffett, and Paris Hilton would all receive them. Do you want to imagine the outcry from that? In order for a NST/VAT proposal to be politically viable, that means that there would have to be an income test to determine eligibility for the prebate, with a ceiling somewhere around the $200K mark. THAT means retaining W-2s, 1040s, and the auditing power of the IRS (not to mention that the IRS would now be in the business of rigorously auditing the sales figures of businesses nationwide to ensure tax compliance). All of this just makes a sales tax a political non-starter.
As someone who has lived in the UK since birth, I really hope that this new higher tax rate does lead to many rich persons leaving these shores.
If these rich people really care about their role in job creation, wealth “trickle-down” and their contribution to society, please take a one-way ticket to Mogadishu and work your magic there!