FabSwingers.com > Forums > Politics > It’s all very quiet
It’s all very quiet
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"Some very, very (very) large manufacturers are starting to prepare for hard times, possibly layoffs (as seen from the inside)." Yea, across the UK and Europe. The only positive thing for manufacturing at the moment is the increase in spending on defence, I know a company in Telford that builds tanks is taking on more staff | |||
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"For years, we've been living in a frothy bubble paid for with borrowed everything. It's as if the bills are coming due. Tax collectors and coffin makers should be okay." It’s looking that way. Pensioners and investors have lost a lot with the current tariffs imposed and it looks like other countries are retaliating. I spoke to a friend yesterday that owns an online selling business and she said it’s completely dead. Worst 30 days in the 8 years she’s been trading | |||
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"On the news this morning. London falls out of top five wealthiest cities in the world as millionaires flee capital. That will take a long time to get back, if it ever does "That will never happen, they will threaten to leave but it is a proven fact they wont, so lets tax them and tax them some more. Oh, just read the story, they have left and took their money with them 
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"There's a lot of uncertainty about future prospects so most people are being sensible and trying to either reduce their debt or build up a reserve in case something bad happens to them. As for the government, UK debt is now at about 100% of GDP but nobody wants to pay more tax or see cuts to public services so what are the government supposed to do? There's little room for manoeuvre so we perhaps all need to be stoic for a while. There are no silver bullets." Stoic. You mean... Austerity? | |||
"On the news this morning. London falls out of top five wealthiest cities in the world as millionaires flee capital. That will take a long time to get back, if it ever does "and because they contribute nothing they won't be missed either.  | |||
"Stoic. You mean... Austerity?" No, I'm not a Tory. Perhaps you have a bandolier of silver bullets you could donate? | |||
"Stoic. You mean... Austerity? No, I'm not a Tory. Perhaps you have a bandolier of silver bullets you could donate?" So what did you mean about us all being stoic for a while? | |||
"So what did you mean about us all being stoic for a while? " That moaning about the state of things when none of us have any realistic suggestions about how to improve matters is at best pointless. Don't get me wrong, I'm still all up for debate. As a left-wing green internationalist I'd like to see a moderate redistribution of wealth from the rich to the poor, investments in better education and green technology and more international cooperation but these ideas seem to have been roundly rejected by UK voters in recent times. So we have to deal with reality. | |||
"So what did you mean about us all being stoic for a while? That moaning about the state of things when none of us have any realistic suggestions about how to improve matters is at best pointless. Don't get me wrong, I'm still all up for debate. As a left-wing green internationalist I'd like to see a moderate redistribution of wealth from the rich to the poor, investments in better education and green technology and more international cooperation but these ideas seem to have been roundly rejected by UK voters in recent times. So we have to deal with reality. " Redistribution of wealth from the rich to the poor is certainly becoming a slogan, thanks to born again populist left voices like Gary Stevenson, but what does that actually look like in practice? I have yet to hear a proposal that doesn’t collapse under the weight of its own ideology. | |||
"Redistribution of wealth from the rich to the poor is certainly becoming a slogan, thanks to born again populist left voices like Gary Stevenson, but what does that actually look like in practice? I have yet to hear a proposal that doesn’t collapse under the weight of its own ideology." OK let's look at VAT. It hits poor people disproportionately because they spend a much higher proportion of their income than rich people do. The government could slightly reduce VAT and offset it against an increase in higher rate income tax. A simple and moderate but useful rebalancing of taxation away from the poor and towards the rich. If you are relatively well off you can take advantage of capital gains allowances. This raises your tax-free allowance by £3,000 per annum. And the tax is only 18% rather than the 20% that poor people pay. If you are even better off you can employ an accountant to exploit all the wonderful tax avoidance schemes. Most poor people I've spoken to haven't got a clue about tax. Many think that if they go a penny above a tax allowance threshold then all their income or inheritance will be taxed at that rate. Some public education on these matters could help change opinions but you're not going to read about such things in the Daily Express. | |||
"Redistribution of wealth from the rich to the poor is certainly becoming a slogan, thanks to born again populist left voices like Gary Stevenson, but what does that actually look like in practice? I have yet to hear a proposal that doesn’t collapse under the weight of its own ideology. OK let's look at VAT. It hits poor people disproportionately because they spend a much higher proportion of their income than rich people do. The government could slightly reduce VAT and offset it against an increase in higher rate income tax. A simple and moderate but useful rebalancing of taxation away from the poor and towards the rich. If you are relatively well off you can take advantage of capital gains allowances. This raises your tax-free allowance by £3,000 per annum. And the tax is only 18% rather than the 20% that poor people pay. If you are even better off you can employ an accountant to exploit all the wonderful tax avoidance schemes. Most poor people I've spoken to haven't got a clue about tax. Many think that if they go a penny above a tax allowance threshold then all their income or inheritance will be taxed at that rate. Some public education on these matters could help change opinions but you're not going to read about such things in the Daily Express. " What you’ve outlined here are minor tweaks to the existing tax system, not a genuine structural redistribution of wealth. What often happens in these conversations is the mixing of ideology with economics. You say VAT disproportionately impacts poorer people because they spend more of their income, and that’s true. But what’s often left out is that wealthier people spend far more overall, and as a result, they pay more VAT by default. You’re also right that greater public understanding of finance would help, but as you say, you won’t find it in the Daily Express, and nor will you find it from the likes of Gary Stevenson. | |||
"What you’ve outlined here are minor tweaks to the existing tax system, not a genuine structural redistribution of wealth. What often happens in these conversations is the mixing of ideology with economics. You say VAT disproportionately impacts poorer people because they spend more of their income, and that’s true. But what’s often left out is that wealthier people spend far more overall, and as a result, they pay more VAT by default. You’re also right that greater public understanding of finance would help, but as you say, you won’t find it in the Daily Express, and nor will you find it from the likes of Gary Stevenson." Of course rich people pay more tax than poor people. I was talking about the relative proportion. Rich people don't spend all of their income every month like poor people do, so they pay a far lower percentage of their income on VAT. | |||
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"What you’ve outlined here are minor tweaks to the existing tax system, not a genuine structural redistribution of wealth. What often happens in these conversations is the mixing of ideology with economics. You say VAT disproportionately impacts poorer people because they spend more of their income, and that’s true. But what’s often left out is that wealthier people spend far more overall, and as a result, they pay more VAT by default. You’re also right that greater public understanding of finance would help, but as you say, you won’t find it in the Daily Express, and nor will you find it from the likes of Gary Stevenson. Of course rich people pay more tax than poor people. I was talking about the relative proportion. Rich people don't spend all of their income every month like poor people do, so they pay a far lower percentage of their income on VAT. " I agree, but they also pay far more in taxes. We also need to define wealthy, wealth, rich and poor. These words are used with very little common understanding between the people discussing the subject of wealth, rich and poor, we are perfect examples of that. | |||
"OK let's look at VAT. It hits poor people disproportionately because they spend a much higher proportion of their income than rich people do." This is a foolish circular argument that deserves more ridicule than it gets. By definition, poorer people have less money than richer people. Anything that a poorer person buys will cost them more (as a proportion of their income) than it does a richer person. A poorer person in a pub will pay more for their pint (as a proportion of their income) than the richer person they are drinking with. Poorer people aren't "disproportionally hit" by VAT, they pay more for every single expense they have (as a proportion of their income), taxed or not. "The government could slightly reduce VAT and offset it against an increase in higher rate income tax." Slightly lowering VAT won't change the fact that the poorer people still pay more (as a proportion of their income) than richer people. You could reduce VAT to 1%, and poorer people would still pay more (as a proportion of their income). And of course richer people buy more things, and therefore pay more VAT (in absolute terms), so lowering VAT will save richer people more money than will be saved by poorer people. If you think that the rich should pay more, just increase higher rate income tax. There's no point in lowering VAT, because that won't achieve the aim you've stated of reducing the VAT disparity (as a proportion of income). | |||
"If you think that the rich should pay more, just increase higher rate income tax. There's no point in lowering VAT, because that won't achieve the aim you've stated of reducing the VAT disparity (as a proportion of income)." I said that the higher rate of tax should be increased to pay for a reduction in VAT. This would shift the tax burden by a small amount from poor people to rich people while being fiscally neutral. I'm not talking about some tax revolution because voters aren't open to that. They've been trained for decades to think that tax is a bad thing no matter what. So I'm talking about a minor tweak that would give a little help to those at the very bottom. | |||
"If you think that the rich should pay more, just increase higher rate income tax. There's no point in lowering VAT, because that won't achieve the aim you've stated of reducing the VAT disparity (as a proportion of income)." "I said that the higher rate of tax should be increased to pay for a reduction in VAT." You did say that, in your second paragraph. Your first paragraph stated that VAT "hits poor people disproportionately". If you're now going to claim that your first paragraph was entirely unrelated to your second, I'm going to suggest that you may not be debating in good faith. | |||
"If you're now going to claim that your first paragraph was entirely unrelated to your second, I'm going to suggest that you may not be debating in good faith." Poor people pay a higher proportion of their income on VAT than rich people. By lowering VAT and raising the higher rate of income tax to compensate for the subsequnet loss to government coffers the result would be a redistribution of wealth from the rich to the poor. How is this argument not in good faith? | |||
"If you think that the rich should pay more, just increase higher rate income tax. There's no point in lowering VAT, because that won't achieve the aim you've stated of reducing the VAT disparity (as a proportion of income). I said that the higher rate of tax should be increased to pay for a reduction in VAT. This would shift the tax burden by a small amount from poor people to rich people while being fiscally neutral. I'm not talking about some tax revolution because voters aren't open to that. They've been trained for decades to think that tax is a bad thing no matter what. So I'm talking about a minor tweak that would give a little help to those at the very bottom. " It would but very small. 4/5% extra rent increases on average £1300 a month rents, uncontrollable energy and food costs I’d argue are a bigger problem especially for less well off. | |||
"If you're now going to claim that your first paragraph was entirely unrelated to your second, I'm going to suggest that you may not be debating in good faith." "Poor people pay a higher proportion of their income on VAT than rich people. By lowering VAT and raising the higher rate of income tax to compensate for the subsequnet loss to government coffers the result would be a redistribution of wealth from the rich to the poor. How is this argument not in good faith?" Every single penny that a poorer person pays out is a higher proportion of their income than it would be for a richer person. That argument is not at all related to VAT, other than VAT being a thing that people pay. You've started the conversation by talking about costs as a proportion of income. You then move on to suggest lowering VAT and increasing higher rate tax to make up the deficit, and claim that this would benefit poorer people, because they'd pay less money in real terms. You've now moved on to talking about costs in absolute terms. So you're starting with a claim about unfairness in proportional terms, and then proposing a fix that will have no effect on proportionality. Either you don't understand your own argument, or you're deliberately conflating two separate concepts in the hope that no one will notice. | |||
"Every single penny that a poorer person pays out is a higher proportion of their income than it would be for a richer person. That argument is not at all related to VAT, other than VAT being a thing that people pay. You've started the conversation by talking about costs as a proportion of income. You then move on to suggest lowering VAT and increasing higher rate tax to make up the deficit, and claim that this would benefit poorer people, because they'd pay less money in real terms. You've now moved on to talking about costs in absolute terms. So you're starting with a claim about unfairness in proportional terms, and then proposing a fix that will have no effect on proportionality. Either you don't understand your own argument, or you're deliberately conflating two separate concepts in the hope that no one will notice." Sorry you've lost me. You are either a genius that someone like myself has no chance of understanding because you are so intelligent or you are a blithering idiot. | |||
"Sorry you've lost me. You are either a genius that someone like myself has no chance of understanding because you are so intelligent or you are a blithering idiot." Let's see what everybody else thinks. | |||
"There's a lot of uncertainty about future prospects so most people are being sensible and trying to either reduce their debt or build up a reserve in case something bad happens to them. " I think, fundamentally you are on to something there. . World events would seem to indicate there are several storms brewing. Some have partly arrived. Others are but a hair's breadth away. . Now is the time to be cautious and frugal. A lot of people are asking themselves : - Do I really need that dinner out ? - Do I really need that holiday ? - Do I really need that night out ? - Do I really need that new TV ? . Many are cutting frivolous spending right down and for easily understood reasons. Consumer confidence is at rock bottom across many swathes of society. . In the words of JBJ, "You gotta hold on, to what you've got". . I think many folks are finding most cost-effective ways of socialising, hosting friends at home for example. And many, post-covid and lockdowns have retained that "war-footing" mentality because nothing they see around them would seem to indicate it's time to make hay. The sun most definitely ain't shining. (Perhaps it does on TV. A-ha !) | |||
"Every single penny that a poorer person pays out is a higher proportion of their income than it would be for a richer person. That argument is not at all related to VAT, other than VAT being a thing that people pay. You've started the conversation by talking about costs as a proportion of income. You then move on to suggest lowering VAT and increasing higher rate tax to make up the deficit, and claim that this would benefit poorer people, because they'd pay less money in real terms. You've now moved on to talking about costs in absolute terms. So you're starting with a claim about unfairness in proportional terms, and then proposing a fix that will have no effect on proportionality. Either you don't understand your own argument, or you're deliberately conflating two separate concepts in the hope that no one will notice. Sorry you've lost me. You are either a genius that someone like myself has no chance of understanding because you are so intelligent or you are a blithering idiot." I think you’re being disingenuous here. Your argument for wealth distribution is built on emotive ideology rather than sound economics, and as you rightly said before, most of the general public aren’t equipped to spot the flaws in the detail. You’ve now been challenged on your argument twice and not addressed the points raised. | |||
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"What often happens in these conversations is the mixing of ideology with economics. " economics is just an ideology .... it's merely a branch of moral philosophy that chancers attempt to pass off as science. | |||
"By reducing VAT and increasing the higher rate of income tax to cover the cost of the decrease in VAT one can shift the tax burden from the poor to the rich independently of the overall amount of tax raised." Agreed. "The objection has been raised that poor people spend a greater proportion of their income on everything which is true but the government doesn't set the price of everything. It does however set the rate of VAT." It doesn't matter what level VAT is set at, poor people will be paying more (as a proportion of their income) than rich people do. Your argument about proportionality doesn't justify cutting VAT, because that wouldn't address the problem that poor people will still pay more (as a proportion of their income). If you can't see the logical flaw in your argument, then I've run out of ways to explain it to you. | |||
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"I can see how raising the higher income tax can pay for a cut in VAT and see that those on the higher rate would in effect be paying for this cut in VAT. However the cut in VAT will benefit everyone and benefit the rich to a greater degree as they tend to buy more things and more expensive things. The VAT cut would help the proportion of income spent by the poor but it would also benefit the rich in the same way. Unless the rich are charged more for the same products than the poor are charged I don't see it helping at all. That said I am no economist and suspect there is more to it" No, you've got it spot on. | |||
"I can see how raising the higher income tax can pay for a cut in VAT and see that those on the higher rate would in effect be paying for this cut in VAT. However the cut in VAT will benefit everyone and benefit the rich to a greater degree as they tend to buy more things and more expensive things. The VAT cut would help the proportion of income spent by the poor but it would also benefit the rich in the same way. Unless the rich are charged more for the same products than the poor are charged I don't see it helping at all. That said I am no economist and suspect there is more to it" so you don't get that the well off will pay the same amount of tax overall so they'll be happy and the less well off will have to spend less out of their wages on purchases so they'll be happy too .... basically same overall tax take , but the burden has been distributed more fairly .... what's not to get?  | |||
"I can see how raising the higher income tax can pay for a cut in VAT and see that those on the higher rate would in effect be paying for this cut in VAT. However the cut in VAT will benefit everyone and benefit the rich to a greater degree as they tend to buy more things and more expensive things. The VAT cut would help the proportion of income spent by the poor but it would also benefit the rich in the same way. Unless the rich are charged more for the same products than the poor are charged I don't see it helping at all. That said I am no economist and suspect there is more to it" "so you don't get that the well off will pay the same amount of tax overall so they'll be happy and the less well off will have to spend less out of their wages on purchases so they'll be happy too ..." That's not quite right. The poor would pay less tax, so they'd be happy. The rich would have to pay enough extra tax to cover what they no longer pay in VAT, plus whatever all the poor people no longer pay in VAT, so the rich will be paying a little bit more than before, and they won't be so pleased. We all understand how this works. Rich pay more, poor pay less, the same amount goes to government. But the idea was introduced with the justification that the poor are unfairly impacted by VAT because they pay more (as a percentage of their income). Making the suggested change will help out poor people, but there will be absolutely no change to the fact that poor people still pay more (as a percentage of their income). The suggested justification for the change is not being addressed by the proposed change. | |||
"I can see how raising the higher income tax can pay for a cut in VAT and see that those on the higher rate would in effect be paying for this cut in VAT. However the cut in VAT will benefit everyone and benefit the rich to a greater degree as they tend to buy more things and more expensive things. The VAT cut would help the proportion of income spent by the poor but it would also benefit the rich in the same way. Unless the rich are charged more for the same products than the poor are charged I don't see it helping at all. That said I am no economist and suspect there is more to it so you don't get that the well off will pay the same amount of tax overall so they'll be happy and the less well off will have to spend less out of their wages on purchases so they'll be happy too ... That's not quite right. The poor would pay less tax, so they'd be happy. The rich would have to pay enough extra tax to cover what they no longer pay in VAT, plus whatever all the poor people no longer pay in VAT, so the rich will be paying a little bit more than before, and they won't be so pleased. We all understand how this works. Rich pay more, poor pay less, the same amount goes to government. But the idea was introduced with the justification that the poor are unfairly impacted by VAT because they pay more (as a percentage of their income). Making the suggested change will help out poor people, but there will be absolutely no change to the fact that poor people still pay more (as a percentage of their income). The suggested justification for the change is not being addressed by the proposed change." yes it is .... you're just talking bollocks for the sake of it | |||
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"I can see how raising the higher income tax can pay for a cut in VAT and see that those on the higher rate would in effect be paying for this cut in VAT. However the cut in VAT will benefit everyone and benefit the rich to a greater degree as they tend to buy more things and more expensive things. The VAT cut would help the proportion of income spent by the poor but it would also benefit the rich in the same way. Unless the rich are charged more for the same products than the poor are charged I don't see it helping at all. That said I am no economist and suspect there is more to it so you don't get that the well off will pay the same amount of tax overall so they'll be happy and the less well off will have to spend less out of their wages on purchases so they'll be happy too .... basically same overall tax take , but the burden has been distributed more fairly .... what's not to get? "What's not to get is that the situation of the poor paying a higher percentage of their income for items than the rich has not changed. Both the poor and the rich will benefit from the cut in VAT and even though the rich income has gone down a bit it does not change the overall outcome which is the same as before | |||
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"What's not to get is that the situation of the poor paying a higher percentage of their income for items than the rich has not changed. Both the poor and the rich will benefit from the cut in VAT and even though the rich income has gone down a bit it does not change the overall outcome which is the same as before." Wrong, the overall outcome is not the same as before. I'll try one more time to explain my proposal, but some people just can't get beyond the two-handed fool problem. The poor would benefit because the proportion of their income lost to taxation would be lower. Even very poor people who do not pay any income tax. The rich would not benefit because the proportion of their income lost to taxation would be higher because of the increase in higher rate income tax. Although rich and poor both pay the same rate of VAT this proposal puts the entire burden of a reduction in VAT onto higher rate tax payers. So not only would higher rate tax payers pay for the cost of the VAT reduction for poor people they would also have to pay for the cost of the VAT reduction for themselves. The outcome would be that they would be worse off - something that is inevitable if one wants to redistrute wealth. The maths is extremely simple. If say we want to reduce VAT by a quarter then we need to increase higher rate income tax take by a quarter of what the total VAT take is. Now one can argue about whether wealth redistribution is a good idea or not, but this proposal is an easy way of achieving it. There is a certain amount of uncertainty of outcome involved as peoples' behavior can change depending on the fiscal environment, but this is true about any change in taxation. Were this proposal to be implemented it ought to provide a stimulus to the economy as everyone with an income below £50k would have slightly more disposable income and those above the threshold would to some extent be incentivised to not reduce their spending as in effect the more VAT they paid the more their tax bill would be ameliorated due to the VAT rate now being lower than it was. Although obviously they would still be a lot worse off than now. | |||
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"Some good points Whirley. I would add that I think there's a range of opinion amongst rich people. Some are selfish and/or short-sighted but many realise that paying high levels of tax can be positive not only for society as a whole but ultimately for their own self-interest. " The French Revolution wasn’t caused by the poor, it was caused by the rich. | |||
"What's not to get is that the situation of the poor paying a higher percentage of their income for items than the rich has not changed. Both the poor and the rich will benefit from the cut in VAT and even though the rich income has gone down a bit it does not change the overall outcome which is the same as before. Wrong, the overall outcome is not the same as before. I'll try one more time to explain my proposal, but some people just can't get beyond the two-handed fool problem. The poor would benefit because the proportion of their income lost to taxation would be lower. Even very poor people who do not pay any income tax. The rich would not benefit because the proportion of their income lost to taxation would be higher because of the increase in higher rate income tax. Although rich and poor both pay the same rate of VAT this proposal puts the entire burden of a reduction in VAT onto higher rate tax payers. So not only would higher rate tax payers pay for the cost of the VAT reduction for poor people they would also have to pay for the cost of the VAT reduction for themselves. The outcome would be that they would be worse off - something that is inevitable if one wants to redistrute wealth. The maths is extremely simple. If say we want to reduce VAT by a quarter then we need to increase higher rate income tax take by a quarter of what the total VAT take is. Now one can argue about whether wealth redistribution is a good idea or not, but this proposal is an easy way of achieving it. There is a certain amount of uncertainty of outcome involved as peoples' behavior can change depending on the fiscal environment, but this is true about any change in taxation. Were this proposal to be implemented it ought to provide a stimulus to the economy as everyone with an income below £50k would have slightly more disposable income and those above the threshold would to some extent be incentivised to not reduce their spending as in effect the more VAT they paid the more their tax bill would be ameliorated due to the VAT rate now being lower than it was. Although obviously they would still be a lot worse off than now. " I see how the poor will benefit from a VAT reduction and in fact everyone will benefit from a VAT reduction. I see how the money could be raised to pay for it. However the problem put forward that this proposal is meant to solve is that currently the poor have to use a greater percentage of their income when buying goods compared to rich people buying the same goods. If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost | |||
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"I see how the poor will benefit from a VAT reduction and in fact everyone will benefit from a VAT reduction. I see how the money could be raised to pay for it. However the problem put forward that this proposal is meant to solve is that currently the poor have to use a greater percentage of their income when buying goods compared to rich people buying the same goods. If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost" The maximum possible impact would be to set VAT at 0% which would shift about £169 billion per year to those earning less than £50k. But I think reducing the standard rate of VAT by 5% of VAT is probably more realistic. Maybe reducing the lower rate from 5% to 2%. I'd have to do considerable research to come up with a considered judgement on the exact numbers and nobody cares about my judgement anyway. I've spent a very long time trying to explain this. A couple of you have become obsessed with a staw man argument so there doesn't seem much point in continuing to hit my head against a brick wall. | |||
"I see how the poor will benefit from a VAT reduction and in fact everyone will benefit from a VAT reduction. I see how the money could be raised to pay for it. However the problem put forward that this proposal is meant to solve is that currently the poor have to use a greater percentage of their income when buying goods compared to rich people buying the same goods. If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost The maximum possible impact would be to set VAT at 0% which would shift about £169 billion per year to those earning less than £50k. But I think reducing the standard rate of VAT by 5% of VAT is probably more realistic. Maybe reducing the lower rate from 5% to 2%. I'd have to do considerable research to come up with a considered judgement on the exact numbers and nobody cares about my judgement anyway. I've spent a very long time trying to explain this. A couple of you have become obsessed with a staw man argument so there doesn't seem much point in continuing to hit my head against a brick wall." I am simply trying to ask if implementing this plan (in your view) will change the fact that poor people pay more of a proportion of their income buying goods than rich people do buying the same goods? | |||
"I see how the poor will benefit from a VAT reduction and in fact everyone will benefit from a VAT reduction. I see how the money could be raised to pay for it. However the problem put forward that this proposal is meant to solve is that currently the poor have to use a greater percentage of their income when buying goods compared to rich people buying the same goods. If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost The maximum possible impact would be to set VAT at 0% which would shift about £169 billion per year to those earning less than £50k. But I think reducing the standard rate of VAT by 5% of VAT is probably more realistic. Maybe reducing the lower rate from 5% to 2%. I'd have to do considerable research to come up with a considered judgement on the exact numbers and nobody cares about my judgement anyway. I've spent a very long time trying to explain this. A couple of you have become obsessed with a staw man argument so there doesn't seem much point in continuing to hit my head against a brick wall. I am simply trying to ask if implementing this plan (in your view) will change the fact that poor people pay more of a proportion of their income buying goods than rich people do buying the same goods? " Reducing vat by 5% I can’t see will make much difference to a lower income person who is likely paying 50% of their income in non vatable rent | |||
"I see how the poor will benefit from a VAT reduction and in fact everyone will benefit from a VAT reduction. I see how the money could be raised to pay for it. However the problem put forward that this proposal is meant to solve is that currently the poor have to use a greater percentage of their income when buying goods compared to rich people buying the same goods. If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost The maximum possible impact would be to set VAT at 0% which would shift about £169 billion per year to those earning less than £50k. But I think reducing the standard rate of VAT by 5% of VAT is probably more realistic. Maybe reducing the lower rate from 5% to 2%. I'd have to do considerable research to come up with a considered judgement on the exact numbers and nobody cares about my judgement anyway. I've spent a very long time trying to explain this. A couple of you have become obsessed with a staw man argument so there doesn't seem much point in continuing to hit my head against a brick wall. I am simply trying to ask if implementing this plan (in your view) will change the fact that poor people pay more of a proportion of their income buying goods than rich people do buying the same goods? " This is very straightforward, as you point out, if you have less money than someone else, you spend a higher proportion of your income on the daily essentials. However the idea of lowering VAT and increasing income tax above a certain threshold to balance it is flawed. The cutoff would be too sharp, and those just above the threshold would feel it most. To implement a sliding scale of tax would be unmanageable and open to legal avoidance tactics which would undermine the whole process. If we step back from the technicalities of of VAT and tax rates, which confuse the conversation, the ambition is to redistribute wealth. Redistribution already exists high earners and and the wealthy pay more tax, which is redistributed through council services, welfare, housing support, VAT, the NHS, and so on. Some here would like it to go further, but that’s where it moves into political ideology that uses the idea of proportional income and wealth as a measure, not the actual amount being paid. It drives a narrative but not really the actuals, for example, the top 1% of earners already pay around 28% of all income tax, and the top 10% pay around 60%.. It should come as no surprise that the very wealthy and their money are starting to leave the country, because many believe that this government is is going to tax them more and more, tax collection will be significantly impacted if this trend continues. Influencers like Gary Stevenson are making a success of promoting the wealth distribution message, by tax, although he never really offers up a solution just an ideology that people can hang their virtue from. However his repetitive phrases and slogans are now being echoed across social media, which to his credit is effective messaging. But I can’t help feeling that, beyond the rhetoric, he comes across as self serving and a bit bored, in need of something to do. If we get back to the idea of reducing VAT to help those who earn - have less. I mentioned it is overly complex and open to avoidance, so it doesn't support a structured solution, but it can feel right because taxes are being lowered on side and raised against those who have more on paper, it appeals as ideology more than practicality. The simplest way to achieve the same outcome, in a cleaner and more simplistic way, would be to increase benefit payments on a means tested basis. Same outcome but without the ideological fanfare. | |||
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"Reducing vat by 5% I can’t see will make much difference to a lower income person who is likely paying 50% of their income in non vatable rent" This idea is not a panacea. Not everyone pays 50% of their income in rent and other policy options could be used to address high rents. | |||
"I am simply trying to ask if implementing this plan (in your view) will change the fact that poor people pay more of a proportion of their income buying goods than rich people do buying the same goods?" "Of course it wouldn't. I'd appreciate it if anyone can point out where I claimed it would, as I sometimes do mess up my phrasing and would welcome the opportunity to learn where I went wrong." You started your first post on the subject with: "OK let's look at VAT. It hits poor people disproportionately because they spend a much higher proportion of their income than rich people do." You then followed on with your proposal to cut VAT. Placing your proposal immediately after the first paragraph, gave the impression that you thought your proposal would solve the problem in the first paragraph. | |||
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"However the idea of lowering VAT and increasing income tax above a certain threshold to balance it is flawed. The cutoff would be too sharp, and those just above the threshold would feel it most." The higher tax rate only applies to income above the threshold. So if your income is say £51k you only pay extra tax on the £1k. "The simplest way to achieve the same outcome, in a cleaner and more simplistic way, would be to increase benefit payments on a means tested basis. Same outcome but without the ideological fanfare." But it wouldn't be cleaner or simpler because to achieve exactly the same outcome your scheme would involve processing many millions of applications and even more millions of money transfers. The beauty of my proposal is that there would be almost no overheads. Retailers would have to adjust some of their pricing labels but this is routine anyway. And for most businesses a VAT reduction would be simply a matter of changing a variable in a spreadsheet or corporate database. Also I do not understand your point about ideology. If the outcome is the same how does massive bureaucratic overhead make it less ideological? | |||
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"If I have this correct, you have an unvoiced assumption that poor people spend all of their money on things, and rich people put lots of their money into savings. Have I understood that correctly?" More or less. Having in my long and rather colourful lifetime been both very poor and very rich (by most people's standards at least), then I can say that when I was poor I had to be extremely careful not to become homeless or have the electricity cut off. I actually failed on both counts in the late 1970's. But when I was rich I was putting large sums of money into shares, pension funds and property. | |||
"Having in my long and rather colourful lifetime been both very poor and very rich (by most people's standards at least), then I can say that when I was poor I had to be extremely careful not to become homeless or have the electricity cut off. I actually failed on both counts in the late 1970's. But when I was rich I was putting large sums of money into shares, pension funds and property." I'm going to say that you're an exception. Many people at the low end of rich will spend all of their income. It's not hard to spend £100k a year on a mortgage for a posh house, payments on a new car, flash clothing, school fees for the kids, and eating out in fancy restaurants. Your proposal will make poor poor people's lives better by reducing the amount they pay on VAT, but it will do much more for those that are better off. Someone earning and spending £100k is likely to be better off under your proposal, despite being 'rich'. The problem I see with your proposal is that the extra income tax burden will not be evenly spread. The vast majority of the increase in income tax will be paid by just a few hundred people, with those lower down the income scale not paying much extra at all, despite being 'rich'. I feel that your proposal will be seen as not doing that much for poor people, but significantly reducing costs for richer people. Of course the very rich will have to pay extra, and won't see much benefit from that spending. And those that do lose out are the ones that can easily afford to up sticks and go live somewhere else. | |||
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"[qoute]I am simply trying to ask if implementing this plan (in your view) will change the fact that poor people pay more of a proportion of their income buying goods than rich people do buying the same goods?[/qoute] Of course it wouldn't. I'd appreciate it if anyone can point out where I claimed it would, as I sometimes do mess up my phrasing and would welcome the opportunity to learn where I went wrong. " Similar to the other poster I read your original idea in the same way as him. Then in one of my replies I put: If the proposal was put in action poor people would be a bit better off but crucially would still be paying a greater percentage of their income compared to rich people, therefore the problem remains. I can only assume in your original claim that you meant it would help the situation a bit but not solve it. If not then I'm lost Your reply did not address this question at all hence why I repeated the question. I now understand that your claim is this would help but not solve the problem, which is what I eluded to previously. Anyway it is an interesting idea | |||
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" Anyone today making over about £250k can fairly easily avoid income tax. " How is this achieved please | |||
"However the idea of lowering VAT and increasing income tax above a certain threshold to balance it is flawed. The cutoff would be too sharp, and those just above the threshold would feel it most. The higher tax rate only applies to income above the threshold. So if your income is say £51k you only pay extra tax on the £1k. The simplest way to achieve the same outcome, in a cleaner and more simplistic way, would be to increase benefit payments on a means tested basis. Same outcome but without the ideological fanfare. But it wouldn't be cleaner or simpler because to achieve exactly the same outcome your scheme would involve processing many millions of applications and even more millions of money transfers. The beauty of my proposal is that there would be almost no overheads. Retailers would have to adjust some of their pricing labels but this is routine anyway. And for most businesses a VAT reduction would be simply a matter of changing a variable in a spreadsheet or corporate database. Also I do not understand your point about ideology. If the outcome is the same how does massive bureaucratic overhead make it less ideological? " It is the underlying ideology of taxing the rich to give to the poor, the Robin Hood approach. The reason increasing benefits wouldn’t work politically is because it would trigger immediate pushback, people will rightly question why those who choose not to work, or make no effort, should receive free money funded by others. But that’s exactly what your proposal is, just delivered through a different vehicle with the Robin Hood approach lending a feeling of righteousness. What I tend to notice about people who think that taxing the better off to give to the not so well off is a fair and legitimate thing to do, is the arbitrary line in the sand that is drawn on what is thought to be an acceptable income. I find it baffling that anyone feels entitled enough to impose their personal view of what someone else’s income “should” be and what people "should" be happy with. Society needs ambition to succeed. | |||
"How is this achieved please" If you are earning £250k+ then you can easily afford up-to-date professional advice on legal means to minimise your tax bill. It all depends on fully understanding the rules and it's not something available to all, for instance if you are an employee there's little scope. One strategy is to convert income into capital investment in a successful company, preferably your own company. Your capital grows but you aren't taxed on it until you convert and then you get an additional tax free allowance and pay a lower rate of capital gains tax. If you can convert enough of your money into share holdings then you can use your capital investment to underwrite loans at a lower interest rate than income tax. You can gift your money in "inventive ways" and avoid taxation if you are careful. You can move business, your money or yourself abroad and game the rules. To be honest even though such schemes aren't illegal I think rich people should just pay up and recognise that they benefit when society isn't falling apart at the seams. | |||
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"I don't really care how the cost would be distributed amongst people earning more than £50k because anything above that is kind of "surplus" to needs." And this is the problem with all these 'tax the rich' schemes, they rely on other people sharing your opinion of what is 'sufficient', and what is 'surplus'. I happen to agree with you that £50k is enough. But I have a friend that earns about £90k, and spends most of it on educating his children. Who am I to say that he should pay more tax, and cut back on his kids' education? These arguments always come from a position of "I've got enough, so no one else should be allowed to have more". | |||
"I happen to agree with you that £50k is enough. But I have a friend that earns about £90k, and spends most of it on educating his children. Who am I to say that he should pay more tax, and cut back on his kids' education?" If someone wants to spend say £40k a year on private education for their kids that's their choice. Although I vaguely remember reading a study a few years ago that said that some of these privately educated kids struggled a bit at university when up against plebs who had received a public education. Private education at least in the upper echelons of places like Eton, Westminster and Harrow appears to be mostly about networking and building friendships that are useful in later life. Kind of like Gentlemen's Clubs for children. "These arguments always come from a position of "I've got enough, so no one else should be allowed to have more"." For me it comes from personal experiences that have taught me that life at the very bottom of society is extremely difficult while life when you are rich is very easy. | |||
" One strategy is to convert income into capital investment in a successful company, preferably your own company. Your capital grows but you aren't taxed on it until you convert and then you get an additional tax free allowance and pay a lower rate of capital gains tax. " Companies don’t pay capital gains tax What you’re talking about is Business Asset Disposal Relief (was known as Entrepreneurs' Relief) for company held assets 10% CGT rate capped at £1m lifetime allowance for qualifying disposals. The reduced 10% BADR rate of capital gains tax will increased to 14% in April 2025 and will increase to 18% in April 2026 These sorts of schemes are slowly being closed then by the new government. It is becoming increasingly difficult to exit money from LLP / ltd without incurring liability. | |||
"Companies don’t pay capital gains tax " I don't think I said they did. I was talking about an individual selling shares. I'm glad to hear that the various schemes are being shut down. I'm pretty out of date on these matters, are share options still allowed as part of a person's benefit package? | |||
