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Taxing the wealthy, point of discussion.
(297 Posts)This is the view of the guardian - I thought it worth a discussion.
Taxing the rich: essential for economic fairness and growth
Powerful vested interests are trying to stop the wealthy from paying their fair share.
Denis Healey is often misquoted as saying he wanted to “squeeze the rich until the pips squeak” in the 1970s. He never actually used that phrase. What Labour’s finance spokesman did predict, however, was that his proposed top tax rate would spark “howls of anguish from the 80,000 people” wealthy enough to pay. With Labour in power again, it seems plus ça change, plus c’est la même chose. On Thursday this newspaper reported that Rachel Reeves, Healey’s successor in the Treasury, was looking at taxing the rich more by increasing capital gains tax. That would be a very good idea. Yet “howls of anguish” fill the airwaves and can be found on newspaper front pages. Ms Reeves should ignore them.
For decades the rich have projected ideas that support their interests, notably by reframing political language to valorise “wealth creators”. Post the financial crisis, this has been a harder sell. But plutocrats won’t easily give up their muscle, privileges and wealth. In Britain, the grossly unfair distribution of power fuels the effort to protect 3,000 individuals in private equity from Labour’s plan to make them pay their fair share in tax. It’s absurd to think that successful capitalists require an annual state subsidy of £188,000 just to perform their roles. However, this is probably only the beginning of Labour’s efforts. On paper, Britain’s tax system seems relatively progressive, with a headline rate of 47% for those earning over £3m. In reality, nearly a quarter of this ultra-wealthy group pays less than 12% in taxes.
The true scale of income inequality in the UK has been obscured by the methods the wealthy use to generate income. Current measurements exclude the capital gains from selling or shutting down businesses – one of the primary ways the rich earn money and benefit from lower tax rates. A 2020 study found that the top 1%’s share of total income had stayed steady at 14% since 1997. However, when capital gains were included, that figure rose to 17%, with the bulk of the increase concentrated among the ultra-wealthy.
Ms Reeves should act to make Britain more productive. This week, the Institute for Fiscal Studies highlighted how the current tax system discourages investment, undermines productivity, and ultimately makes the country poorer. To reform capital gains tax the chancellor should look at the work of researchers from the Centre for Analysis of Taxation (CenTax). Their latest paper provides a blueprint for necessary reforms. It proposes aligning capital gains tax rates with income tax rates, introducing allowances to incentivise productive investment, taxing the increase in an asset’s value when it is inherited, and implementing an exit tax (common in major economies) to prevent individuals from dodging British taxes on gains made while residing in the UK. In total the package would raise £14bn.
Capital gains tax has morphed into a driver of inequality. The top 5,000 taxpayers account for over half of the taxable gains, receiving an average of nearly £7m each. In fact, the benefits per capita are four times higher in London compared with poorer UK regions. Creating a low-poverty, low-inequality society requires, as the Beveridge report declared in 1942, much more than “patching”. But powerful vested interests are pushing to make opposition to taxing the rich a key element of UK economic policy. Ms Reeves must remain committed to building a fairer and more productive economy, and taxing the rich is essential to achieving that goal.
I don't fear a brain drain. There are plenty of intelligent people ready to fill the gaps. Nor do the wealthy spend large proportions of their wealthy supporting the British economy. Spain already tax the wealthy. Most of the rhetoric around what a loss it would be to tax the wealthy doesn't hold up to scrutiny. If they simply paid their taxes at a commensurate rate as those on PAYE do, that would not only be fair but would generate substantial amounts.
ronib
Wyllow3 The taxpayer is saving £8k for each child educated in the private secondary sector.
That has to be factored in too.
It's far more complicated than you think, Ms Reeves!
Allira
GrannyGravy13
Looks like charging VAT on school fees is going to benefit the elite schools…
It just has not been thought through clearly.
Decisions which may seem very simple to governments may have repercussions which they haven't thought of.
Yes, I agree the points raised on elite schools needs to be addressed! Thank you for raising it GG13.
Wyllow3 The taxpayer is saving £8k for each child educated in the private secondary sector.
GrannyGravy13
Looks like charging VAT on school fees is going to benefit the elite schools…
It just has not been thought through clearly.
Decisions which may seem very simple to governments may have repercussions which they haven't thought of.
When money is needed for State Sector schools, I really cannot see why us the tax payers as a whole should subsidise private schools for the few. Because that's what is happening.
I have no problem with them at all, btw, just cant see the justification for the current situation to remain.
The super rich avoid taxes in various ways not available to most of us. Stopping this sort of practice would be a good starting point. It does seem that many of the super rich have left ot are in the process of leaving this country. If they are rich because they are entrepreneurs then the country may lose out from a business point of view as well as tax collection.
The unfairness in the system is what riles me, the big businesses not paying their fair share etc. What financial incentives will be offered to these so called future investors that the govt is trying to attract?
I would be happy to pay more in a flat rate increase in taxation but am against the targeting of certain groups as in pensioners and WFA or taxes on savings of those who have worked hard and saved all their lives or pension pots of people who have tried to make provisions for their later lives.
fleurpepper the point I have struggled to make is that for some parents in socially worthwhile occupations but who chose not to become lawyers, accountants, bankers or such - probably because they have a low boredom threshold - will struggle to fund private school fees. So for the Labour Party to close down choice is not a good idea. I would much rather the private sector was open to many more families where State provision fails to meet individual needs.
Private Schools, boarding schools in particular give similar education outcomes but have much better personal development outcomes, those leaving are much more mature and confident in a broad sense. Parents can give children at state schools the same advantages but most don’t have the skills or time to do that.
Market Forces do not happen in a vacuum- but are strongly influenced by local politics.
Yes, GG13, that was always clear.
Looks like charging VAT on school fees is going to benefit the elite schools…
Market Forces also mean that those using private services, out of choice, are not subsidised by those who do not have that choice.
No politics of envy on my part.
The private schools round us are not ripping people off. They are not for profit organisations. Money made goes back into the schools. It's very obvious that LA schools ned much more funding.
escaped
It depends what you are expecting from that education, which in private schools goes way beyond the classroom ..........
Facilities, resources and staff:pupil ratio, specialist teachers, teaching assistants etc. Typically, 70% of an independent school's income is spent on staff.
An independent school offering an education for £8k a year might not appeal to parents who want more.
I guess market forces will ultimately decide. If parents deem it worth it to them, they pay.
Most parents have high expectations of education, but have no choice.
Market forces in the UK are veery different to many other countries. In some countries in Europe, for instance, the private sector is almost non-existent. Why? Because State Education is a priority and well funded, and classes are small, and facilities akin to Private Schools in the UK. And because high earners are happy to pay taxes to support this high quality education, because at the end of the day, it creates a better society, less crime, more societal harmony, less divisions, better employment, a great source of well educated and trained workers, and so much more.
My granchildren and all nephews and nieces are at top privte schools, btw, and the fees much higher than the ones stated above (+ all the extras, art, music, sport, trips and those awfully expensive uniforms).
Syracute
Sago
We have some “super rich” friends, their businesses employ hundreds of people, they also have a foundation to help disadvantaged young people.
To stay in the UK would mean they would not have the money to continue their foundation.
They have just sold their home and are going to manage their businesses from overseas.
Their, fishmonger, wine merchant, butcher, dry cleaner, car valets,etc in the local market town will all feel the pain when they have gone!Always the excuse and it shows what sort of people they really are ! There needs to be a world wide initiative to get the ultra wealthy a conscious . They certainly should be taxed higher on the U.K. business that produce the wealth they are arrogant enough to not want to pay taxes on. At least in the USA many ultra rich admit they don’t pay enough tax and request higher taxes !
At least in the USA many ultra rich admit they don’t pay enough tax and request higher taxes !
Really? 😯
Honestly? 😀
www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files
ronib
Allira if there are two high incomes then it’s possible to pay for one child but my granddaughter is to be given the same educational opportunity as her brother. So looking at £60k annually from 11 years.
How does the State manage to pay only £8k a year to provide the same educational services when the cheapest private schools are £16k rising up?
Probably because facilities might be better and classes are smaller so pupil:teacher ratio is less.
Does the £8,000 per pupil include building and maintenance of schools?
Exactly
Sago
We have some “super rich” friends, their businesses employ hundreds of people, they also have a foundation to help disadvantaged young people.
To stay in the UK would mean they would not have the money to continue their foundation.
They have just sold their home and are going to manage their businesses from overseas.
Their, fishmonger, wine merchant, butcher, dry cleaner, car valets,etc in the local market town will all feel the pain when they have gone!
Always the excuse and it shows what sort of people they really are ! There needs to be a world wide initiative to get the ultra wealthy a conscious . They certainly should be taxed higher on the U.K. business that produce the wealth they are arrogant enough to not want to pay taxes on. At least in the USA many ultra rich admit they don’t pay enough tax and request higher taxes !
@floradora9. If the uber rich won’t pay their fair share do we REALLY want or need them here in our little Island? Like others on here I worked in the public sector almost all my working life, paid my tax via PAYE and paid into and am now enjoying a reasonable pension, but that was the deal. Not particularly well paid but looked after in old age. Why should hard working, not very well off people in Britain, doing their bit and paying their tax, in effect subsidise the super rich.
Go to it Rachel tax away and if they leave, well bloody good riddance say I !
It depends what you are expecting from that education, which in private schools goes way beyond the classroom ..........
Facilities, resources and staff:pupil ratio, specialist teachers, teaching assistants etc. Typically, 70% of an independent school's income is spent on staff.
An independent school offering an education for £8k a year might not appeal to parents who want more.
I guess market forces will ultimately decide. If parents deem it worth it to them, they pay.
Of course the very riched should be taxed more than the poor. The gap between the rich and the poor is getting wider daily.
MaizieD the very poorest percentile don’t pay tax to my knowledge?
Richard Branson and a multitude of pop stars refuse to live in Britain under any government because of draconian tax regimes here.
There really isn't a draconian tax regime for the wealthy in the UK, maddyfour. When the millionaire former UK PM paid only 22% of his income in taxes, as opposed to (government figures) the very poorest percentile in the UK paying about 34% of its income in taxes there is something sadly awry.
LizzieDrip that’s one thought but private schools pay staff more than State schools?
Maybe the State needs to go for full equality and pay teachers more?
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