By Joe Cox / @compassoffice
Today Compass published its report "In Place of Cuts". The report sets out tax proposals which would see 90% of income earners benefit from reforms that make Britain's tax system fairer.
At present, proportionally the poorest tenth of people pay 46% of their earnings in tax while the richest ten percent pay only 34%. The blueprint calls for a shift to a more progressive taxation system, reversing the trend of the last 30 years which has seen the tax system become more regressive. We propose to do this by introducing a 50% rate of tax at £100k, introducing higher council tax bands and abolishing tax havens for 'non doms'. The report also calls for the 10% rate of tax to be reinstated.
The report also warns against cutting public sector jobs. It calculates that after redundancy pay, added unemployment benefit and the reduction of demand that arises from unemployment, very few cost savings are made through shedding public sector jobs.
As an alternative, the Compass report outlines how the deficit can be managed by making the tax system more progressive and cutting certain projects, such as Trident.
Polling shows huge support for the idea of a more progressive tax system:
* 78% would like to see a tax system whereby the richest 10% at least pay the same percentage of their income in tax as the poorest 10%; only 14% disagree.
* 59% would like to see the re-introduction of the 10p tax band, with only 13% against.
* 62% would like to see tax reform measures that increase the incomes of 90% of households, with 24% against.
Measures outlined in the report would benefit 90% of income earners and send a clear signal to those on middle and low incomes - people who have slowly drifted away from the Labour Party since 1997 - that Labour are clearly on their side. At the same time it would expose the Tory plans of savage cuts in public spending, which would not only harm economic recovery but would expose them as a party that supports the richest 10%, instead of the 90% majority.
Delicious
Digg
Reddit
Facebook
StumbleUpon
If you live in Westminster, however, you can write lots of IOUs, con people that you are rich, spend regularly on anything you think is right and nothing happens.
If you live in Brussels, then you don't even have to employ an accountant to check the books!
It is a miracle really........
But then nothing can happen to us, because, you see, we're Marxists!!!!
As for not cutting the public sector, dream on. The UK is a homeowner who remortgaged his house to buy a Ferrari; telling him he cannot afford to run the car is not really 'cutting'; simply giving up what he could never sustain long-term. I would call that 'Prudence'..
Taxes on earned income should be drastically cut - to maybe 20% - with taxes on unearned income brought in to make up the difference.
Huge benefits from cutting evasion, avoidance, and deadweight costs of collection and so on could then be shared out equitably.
Rents, eh?
You nicely illustrate the point about taxing unearned income eg a land value tax which would shift the tax burden away from shops' earned income onto their landlords' un-earned income.
"I do not see the value to society of cultivating a large stateist, high benefit culture."
I agree with that.
"we see it as intrinsically wrong to heavily tax wealth creators"
I agree with that too - and unlike the Big Lie rhetoric of 'productivity' to which you subscribe, I regard individuals working in the Public sector as 'productive' wealth creators just as much as, and in many cases more than, the Private sector.
"to fund people who do very little but consume the wealth others generate."
This is where it gets interesting. I think that the wealth you or I generate or 'earn' should be taxed at maybe 10 to 20% pa maximum.
But when we choose to invest the tax we save in property, shares, bonds, or whatever, then any income or gains that investment brings to us is not 'earned' in my opinion, and should be taxed along the simple, but unavoidable lines I advocate. eg location benefit levy; limited liability levy, and so on.
The wealth collected from unearned income should be distributed to all citizens as of right, with no nonsense about means testing.
The fact is that neither a landlord nor a share-holder, generates wealth: they simply extract it from others by exploiting the privileged property rights conferred upon them by society.
But I digress.
We then have a calculation to make. Is the tax we would have to pay on our unearned income and gains going to off-set the tax we save on our earned income? And if not, are we pissed off enough to leave the country?
If we do leave the country to avoid such taxes it makes little difference to the tax take, since tax will be collected from whoever buys the land, and from the gross corporate revenues of the companies whose shares we sell.
I admit not many would leave but if the best went to spain and italy that would make our league less good , Or we will have rich owners avioding paying extra tax and paying it some other way ,
ricki ( West Ham fan)
interesting enough Spain tried that by taxing foreign players less than national and forced to retract it as there was uproar in Spain that foreigners were beig taxed less.
Very few British players would leave this country, it has been proved time and time again and like with the claims of exodus of talent, I think that is exaggarated to make the point.
after Paul Daniels as mentioned earlier today is still in the country
As i said before it wont raise that much , but one way it will harm the country is sport and then (indirectly) voters , Many sports stars (mainly football) will want to keep as much of there money as possible ,So they may got to another country and our league will become weaker and make our 2018 bid look a bit silly .
ricki
no you would rather put the tax burden on indirect 'consumer' taxes which hits the average and lower earners more than those earning £100k
Not only not graduates, but hopefully with enough life experience to have the self confidence not to just follow the herd. That doesn't just mean an old git. There's young people who've had to struggle to get through without the benefit of a good education.
* Decrease economic activity
* Increase the use of tax avoidance and evasion measures
* Move to work and invest in more favourable tax regimes.
Seriously do you really think those of us hitting the 100k mark will just sit there and go "ok it's for the greater good because you say so, so take yet more of my income"?
but lets be honest here. The right wingers in the Tories can afford to do that, the 'true socialists' for Labour frankly can not afford to be an MP (more time not cost) and going back to another thread the party should be enciuraging normal working class people to be MP's and not all uni graduates.
I think the same was said of beloved St Tony and the Labour party.
Tony's solution appears to have been to work the patronage system to bribe large sections of the PLP into line. You could draw some parallels between Walpole's last administration and the conduct of the current PLP.
I imagine Mr Cameron will try the same. After all he's pretty much tried copying everything else TB did. If the Tories do try to keep their right wing quiet in line in this way, they'll be sowing the seeds of future defeat as surely as New Labour has.
Yes I think there are areas where the wealthier are going to have to contribute more, but we have to be careful about it. I suspects Sue Kirby is right and we will end up paying more.
There are times when you'd think he is a parody of someone on the right by by someone having a laugh, instead of a real person. But I occassionally look at same of the right wing blogs. Guy is a cuddly pussy cat compared with some of their ravening 'contributors'. (All obviously devourers of virgins, puppies, and babies.)
Why the contents of these things haven't been used to embarrass the Tories is something I don't understand. A list of choice quotes from ConservativeHome could be very off putting to the majority of people. Lord Ashcroft might even want to reconsider his investment, as now the Tories can't effectively distance themselves from a site they now effectively own and run.
I get the feeling the mud slingers/special advisors don't know how to deal with ordure they didn't write themselves.
It is also about those good old values of the richer amongst us (I am on above average earners) supporting the less fortunate.
however I still have more than enough to live on and certainly those now paying 50% do, so it is down to that basic human concept - greed.
it is absolutely self interest and I understand it. There are many reasons why people hate paying tax. It is never fair for everyone and a kludge at best, intrinsically it is impossible to do a good job.
I was thinking about this article on the Tube on the way home and the thought occured to me, that in todays economic climate it is impossible to discuss tax rises without specific measures to improve efficiency in the public sector. This is because the public sector is viewed as in efficient. So in selling it to the electorate we say more tax because we need it and we will do a better job of spending it wisely which means the pill is easier to swallow.
On your point bout those not on PAYE I agree to a degree; the Goverment now have very sophisticated models to work out the tax take and the effects on it by tweaking. The only reason they will not make the changes that at first seem to be obvious is that the country loses out, simple.
Regards John.
P.S. If there are any 100k jobs going I would be happy to take one and pay 50% tax on my earnings.
This article is written from la la land. It's not a question of choosing or not choosing to make cuts to the public sector, but one of being forced to do so (see Mervyn King's comments today). If not the IMF will make the choice for us. As to the 10p tax rate, don't make me laugh. Gordon has already looked like a total idiot on this one. Can he make a u turn on a u turn without turning the u into a circle?
What's going to happen post election is that we'll all have to pay more income tax - bottom, middle and top. Anyone on PAYE is going to be the immediate victim as they're an easy target and reliable for income in that they're easily assessed. Add to that rises in VAT and NI, and the outlook is pretty grim. Starship Britain has been led into a black hole and Captain Brown was at the controls.
Probably not, if he does I am ugly enough to take it on the chin. The sheer scale of selfishness is worrying.
having rich donors ?
on PAYE I can not avoid/evade/minimise my tax, why should others no matter how little or much they earn ?
Ouch! Felt that from here. Do you think he'll bite?
"Did I not read a report a while back which stated that tax evasion was greater than beneft fraud and look what gets cracked down on the most."
This is correct to my knowledge. Everybody knows that the law provides ways of minimising tax exposure. The more the tax system is viewed as punitive the more legal avoidance. If taxes are viewed as fair then people will pay them, hence the substantial increase in tax revenues as a result of lower taxation. People will pay it.
Guy is his own worst enemy, he can make some really serious and valid points, but they are completely lost like tumbleweed in the dessert when they are buried in sillyness.
Could it be a maturity issue?
I'm afraid I'm with Voltaire on this one. I get the impression you are really as well.
Surely it is of benefit to actively practise in engaging in debate with those who disagree with you fundementally, as well as those who merely differ in a small degree in their point of view.
To be honest I feel Guy probably triggers even more debate with people feeling inclined to explain why they don't agree with him.
I can't imagine he's converting anybody to his view of the world, and yes, it may make some people angry, but I've always found anger can be directed to a purpose. There are some nuggets of insight in there occassionally as well into what it is we don't like about some on the right without the need some correspondants seem to feel to make it up.
Did I not read a report a while back which stated that tax evasion was greater than beneft fraud and look what gets cracked down on the most.
. 1976-77 1978-79 1981-82 1986-87 1999-00 2008-09
Top 1% 11 11 11 14 21.3 23.0
Top 5% 25 24 25 29 39.8 42.3
Top 10% 35 35 35 39 50.3 53.1
Next 40% 45 47 46 42 n/a n/a
Lower 50% 20 18 19 16 11.6 11.5
There is nothing like clinical empirical evidence and pragmatism. I my mind this makes this compass proposal invalid as the trend on the top 1% will probably reverse.
.......Next!
That's your choice of course, but whether open debate functions if comments are censored on the basis of what makes you angry is an interesting point.
Regarding the "family down the road" and issue of taxation, which this thread touch upon, a lot of people I mix with question the "fairness" of some of the things Labour propose.
A number of those voters whom Blair appealed to in 1997 and 2001 are likely to drift back to the Tory party and one of the issues is the rising tax burden, the death of aspiration and the underclass growth of generations of families on benefits.
I am openly right wing, I do not see the value to society of cultivating a large stateist, high benefit culture. That includes for me and others of my opinion, the fact that we see it as intrinsically wrong to heavily tax wealth creators to fund people who do very little but consume the wealth others generate.
That may make you "angry" but it doesn't remove the reality of the views that are held.
LL can either deal with reality (including the widely held negative view of Labour's many "failings") or be hypothetical but it can't be both.
My basic question is what is the reasoning that says those subject to the imposition of a high marginal rate of taxation i.e. 50% would engage with the regime?
By engage I mean maintain the same rate of economic activity, not increase the use of tax avoidance and evasion mechanisms and not look to alternative tax regimes?
As an aside, Alex, if you want me to stop posting then let me know. I have no problem as work is far too busy at the moment. I'd rather know what the rules were and not waste my time than enter into debate and have comment never see the light of day.
Surely if you are outsourcing Public Sector jobs to the Private Sector, the Public Sector should therefore shrink?!
I can only assume it is Gordons way of keeping the jobless figure below the magic 3 million? if so isn't this crass missmanagement and cowardice? if the Goverment is unable to create an enviroment for Private Enterprise to flourish and can only employ more and more Public Servants with no way of keeping the payments up, should be removed from office and let someone else have a go?
The Public Sector now pays its employees on average more than those of us in the Private Sector, and thats before Pensions are taken into account.
How can this be fair? and can it honestly continue? I don't believe it can. When we hear next year that all Public Sector workers have enjoyed wage rises again which leads to more being paid into its Pensions how are the rest of us going to feel, bearing in mind we are all going to be paying higher taxes by then.
This injustice should be the first port of call for our cash strapped Goverment. If you keep taxing the wealth creators you will force more and more out of business.
Small business which represents the majority of workers are being slaughtered at present with obscene Rents and Rates, employers NI contributions, and a tax system that punishes these small companies with fines if they pay late.
The reason we have 1000s of empty shops across the UK is no small business can generate enough profit to pay the rent and rates. The chain stores can just about make it work as buying in bulk can save enough money to warrant running stores that are actually making a loss.
As an example a small shop outside the main shopping area in Reading, Berks, (20 foot square)is available for 26k a year and 12k rates. So a small shop costs 38K a year, do the Goverment not realise how busy a small shop has to be to be able to cover such an extortinate amount? this is why so many smalll businesses now only operate on the web. Which means less employment which we simply as a Country cannot afford any longer.
The tax system needs a radical shake up too. This is what I think should happen at least:
1. The 50% rate should be introduced out of necessity and a 5%-10% windfall tax on bonuses from institutions partly owned by the public should be introduced maybe only for 2-5 years. Banks wont leave London because of the unique position and time zone.
2.The tax threshold should be lifted to at least £10Kp/a (£15K for married couples). No-one on minimum wage should be paying tax IMO.
3. VAT will need to be lifted above 20% partly out of necessity and partly to shift taxation towards consumption. There should also be a tax on socially and enviromentally unacceptable actions and credits for good actions (tax credits for renewable energy usage, electric cars or recycling).
4. Inheritance tax threshold should be lifted but out of necessity can't be. The rate should also be lifted thereby taxing fewer people more.
5. 10p tax rate should be reintroduced - simple, should never have been scrapped.
6. There should be a tax on purchases made using credit cards. There should also be a tax on remortgaging. The use of these practises should be discouraged officially in most circumstances.
7. There should be a tax on leverage buyouts of British Companies. This will discourage PE firms taking on ludicrous debt to buy companies with the sole aim of riding a stock market rise thereby profiting.
8. There should be no CGT for those earning under £35Kp/a. We need to capitalise the poor, not tax them.
These things should happen at least, I'm sure many people have plenty of ideas. Obviously I don't know exactly how they would all work together but I think there's a good mix of tax rises and falls, but I don't know the effect in totality.
When the higher rate fell from 83% to 60% and then to 40% higher earners stopped getting involved in sophisticated and expensive attempts to minimise their exposure to tax. So the receipts from higher earners rose.
If you are keen that higher earners should bear an increasing major share of the total income tax burden, keep rates low. If you are just interested in envy and vindictiveness, put them up and watch net receipts fall.
To use your language : "utter nonsense from the right of the right"
Requested link : http://www.statistics.gov.uk/downloads/theme_compendia/AA2009/AA09Webversion.pdf
This is the whole of the Annual Abstract 2009 - about 2.5 MB if I remember correctly - and it's full of 'good stuff.'
The promise these four gentlemen made in respect to leaving these shores was a great encouragement to me to vote Labour in the first place. How disappointed I was when only the sober and gentlemanly Jim actually saw fit to keep his word.
Tory policy in respect to taxation normally is focussed on indirect taxation and so I would advise everybody to make all of those more expensive purchases before the Conservatives have a chance to jack up VAT to 20% or higher next year! Talk about putting a fire blanket over the fragile recovery! I can mix my metaphors with the best of 'em.
The top rate of income tax IS going up to 50% next year whoever wins the next election, Labour or Conservative, not that there's much to choose between them these days, and so I'd just like to wish GuyM all the best when he relocates to another country sometime during the second half of 2010!
"The richest 1% of this country pay 23% of all income tax collected (table here) in 2008-09. The richest 5% pay 42% of the tax. These ratios should warm the heart of the most ardent redistributionist. Brown’s wise refusal to raise the top rate of tax has seen the richest shoulder a greater share of the burden. In 1999-00 these ratios were 21.3% and 39.6% respectively. I credit Brown with doing this knowingly: he knew that to get the richest to shoulder a greater share of the burden, you don’t raise the top rate of tax. It was precisely his hunger for tax, I believe, that led his refusal to raise the top rate.
Last July, I asked HMRC to trawl its databanks for earlier ratios before Nigel Lawson’s 1988 budget which reduced the top rate to 40% and had hotheads like Alex Salmond storming out of the chamber in protest.
"Share of total income liability" is available for selected years. Expressed as a percentage
1976-77 1978-79 1981-82 1986-87 1999-00 2008-09
Top 1% 11 11 11 14 21.3 23.0
Top 5% 25 24 25 29 39.8 42.3
Top 10% 35 35 35 39 50.3 53.1
Next 40% 45 47 46 42 n/a n/a
Lower 50% 20 18 19 16 11.6 11.5
Note: from 1999, people taxed as individuals not families
This is why Nigel Lawson should be regarded as the most distributive Chancellor in British history. When he reduced the top rate to 40% he unleashed wealth creation and the government profited by taking a smaller slice of a much bigger pie. This is why the system the Tories bequeathed to Labour was more ‘progressive’ than what they inherited from Callaghan and Healey."
Can you please post a link to "HMRC, Distribution of total income before and after tax ; Annual Abstract of Statistics, 2009 ; Table 8.1" I do not seem to be able to find it.
Peter,
Mr Thomas also advocates scrapping National Insurance.
In 2007/08, the NI Fund received £77 billion in contributions, so the total effect of these two measures is minus £127 billion.
Hmmm ....
Peter, I cannot speak for 2009/10, but in 2006/07 15.6 million people earning over £16,000 pa were paid an aggregate £652 billion.
On Mike Thomas' proposal, each of these earners would receive a tax allowance of (say) £16,000 : £250 billion in total, with a taxable income of £400 billion (rounded) remaining and an income tax yield of £100 billion (compared with £140 billion actually collected in this income range).
Total income tax collected in 2006/07 was £150 billion, so it appears that the proposal falls short by £50 billion.
People earning up to £16,000 received £148 billion in aggregate, on which they paid tax of £11.7 billion so the result would be to return £12 billion (rounded) to the 14.7 million million people earning less than £16,000 and £40 billion to the 15.6 million people earning more than £16,000. That is, on average, the people earning above £16,000 would receive 3.3 times the amount that people earning less than £16,000.
It's "radical." I leave it to others to judge whether it is equitable, or not.
Source : HMRC, Distribution of total income before and after tax ; Annual Abstract of Statistics, 2009 ; Table 8.1
"Finance Secretary John Swinney said departments were getting better at using resources and sharing services.
A total of £838.8m of government efficiencies were made in 2008-09, against a target of £534.4m.
Mr Swinney said: "This government's focus is on delivering high quality, frontline services and money freed up is already being reinvested for that purpose, in health boards and in local and central government.
"The efficiency programme targets are deliberately challenging and increasing this year and next - meeting or exceeding these is ever more crucial as we recover from recession and deal with the damaging effects of a cut to our budget by the UK government."
BBC Scotland.
It would be interesting to know what the costs to the IRS are for these plans. I would guess that it will cost more to enforce than it will recover. First of all the sort of tax return those over the £50,000 limit are likely to submit will be complex and wide open to challenge and counter challenge as cases of the IRS vs Blah in the courts demonstrate.
Those on PAYE above this level will soon ask to be re-employed as subcontractors so they can gain what ever advantage they can from their self employed status or form themselves as a Limited Company and pay themselves a wage below the £50,000 limit. There are so many holes in this suggestion that it is clearly written by someone who is likely never to have been self employed or owned their own business and having done both I can tell you in legitimate tax liability reduction techniques I am not even starting to scrape the surface. There's the council tax rebate for using a room in my home as an office, partially or full write down of telephone , internet, electricity, clothing, car costs, computers, materials, travel, certification, etc. The flip side is that technically you would have to be on short term contract but that can always have an automatic roll over clause.
I can just see the millions of pounds of IRS money going west on court cases.... but to your idea of a fixed rate and LIT; its biggest disadvantage to politicians is the same advantage tax payers see - it is open book. They can't caress and finesse it around.
Radical? You've hardly scratched the surface.
Taxation of unearned income and gains from privilege would be radical.
BTW I agree totally on a local income tax and the abolishment of council tax.
As for the stats they are meaningless. Over 90% of the population are working class and of course they will say tax the rich.
If you are serious about evening out the imbablance then you can only have it at the expense of rich people moving around. This MAY reduce tax take it may not. Remember they choose where they want to pay tax. Make sure you are sure of your maths and projections before you do a Brown (a Brown is defined as a measure that is totally wrong and usually results in the wrong result).
We need to talk about this, just the same way as we need to talk about race. Given the scale of the deficit, its taxes or cuts. In my mind its a mix of the two.
One rate nationally, 25% on all income over £15,000. £17,000 if you are married. No NI. On all income and capital gains. Mandatory unemployment insurance contracted out to the private sector.
Abolish income tax credits and child tax credits and also a massive simplification of Inland Revenue.
That would remove millions out of income tax altogether and reduce the marginal taxation rates of the very poorest to return to work.
Local authorities can set a local income tax rate to pay for all local services.
Simple to understand and utterly transparent.
When you look at the corruption, waste and missmanagement of tax payers money, why should any Goverment be allowed to tax its people even more to cover the mistakes of Goverment, but no one in Goverment ever takes the fall for thier incompetence?
I can only assume its the Politics of envy and stupidity.
It is the typical right wing response that extra taxes will suddendly see a flight of people as a scare measure. I would like you to show me the research that would show this would happen because frankly the type of people you talk about probably do not even pay the 50%
It seems as usual people want the services and yet are not prepared to pay for it, on another forum I even debated with a tory that he reckoned bring the tax rate down for high earners to that of the normal earners would somehow create more money.
All theory, theory which even Thatcher rejected.
What these proposals always ignore is that in a global marketplace for skilled employees that "top 10%" as you put it are the most in demand and hence many can pack up and go elsewhere.
The other negative of course is that if you start taking 50% plus NI from my earnings then all incentive for me to work harder goes out the window.
So two simple questions for you:
1 Have you calculated the net effect of the migration of the wealthy out of the UK?
2 Why would someone like me work harder if you were taking over 50% of my income?
When you can factor those points into an argument and show worth then people might take notice of you.
If Brown is returned in May 2010 (god forfend) then in his arrogance there is no way he and his new chancellor Ed Ballsdrick or Foreign Minister The Dark Lord will buy this... so why will this 'bring voters back'?
If Cameron gets in the chances are the Tories will do this anyway (depending how you translate Cameron speak). The Queen's speech was a scatter gun of Brown's electioneering pap none of which is likely to be implemented and all of which has fallen short.
I know you MP's in Compass are busy stashing your expenses but how about stopping counting the pennies, dwelling a marching pace and look at the real problem Labour faces in May 2010, the literal elephants in the room, I give you Gordon Brown, Ed Ballsdrick and the Dark Lord. Like Macbeth's witches these three promise 'toil and trouble' for Labour.
Have a bit of a brainwave and look at how the SNP and CoSLA are dealing with the last three years of Labour cuts to the Scottish budget with their concordat but most of all find a spine and get rid of Gordon and his mates, that is how you will start to get Labour Voters back!
Can not see how any left minded person could disagree with compass
The 50p tax rate will bring in very little taxes, the rich will always avoid paying there fair share ( Does Mr Blair spend enough time in this country to pay tax?) , Your argue that cutting public spending will be bad , But all three partys are saying they will cut , Labour have said we will halve the deficit , What cuts are we going to make? The leadership do not care for the poor (see welfare reforms that attack disabled people) , the 10p tax was a brilliant policy and fair ,But why did a Labour chancerllor remove it to give the middle class a 2p tax cut?.
ricki