Taxation discussion

[island]

Moderator Note: posts #1 - #20 originally in this thread:

Times article - Commuters face big increase in fares

Saw this just published in 'The Times', have to say I'm rather peeved. Yet again the rail passenger shoulders the burden whilst motorists get an easy ride, because political expedience. Is this government in any way serious about combatting climate change or more interested in winning votes...

www.railforums.co.uk

A 10% windfall tax on net worth would raise £1.5 trillion, paying all covid debt off, and raising enough to reinvest in a green economy.

Ah, that nonsense again, assuming that the published “net worth” of ”rich people” 1) exists; 2) is liquid and 3) is within the jurisdiction, like a cow bursting to be milked.

 

[miami]

Ah, that nonsense again, assuming that the published “net worth” of ”rich people” 1) exists; 2) is liquid and 3) is within the jurisdiction, like a cow bursting to be milked.

Of all people. The bulk of assets are in housing (typically unearned gains over the last 20 years denied to people under the age of 40) and pension funds.

Clearly wealthy people don't like this idea though, far better to increase the marginal tax of train drivers who can't afford to buy a house from 69% (plus employer NI) to say 80%.

 

[35B]

Of all people. The bulk of assets are in housing (typically unearned gains over the last 20 years denied to people under the age of 40) and pension funds.

Clearly wealthy people don't like this idea though, far better to increase the marginal tax of train drivers who can't afford to buy a house from 69% (plus employer NI) to say 80%.

So I know someone who is sitting on a paper gain of ~£1m on the house he purchased 45 years ago for £15k, and still lives in. That doesn't mean that he's got cash to pay any such windfall tax, as the increase in house price (a) has nothing to do with changes he's made to the house and (b) is completely independent of his free cash position.

Of course, you could insist that he sells up in order to meet the tax bill, but you then have the unintended consequences - including downward revaluation of houses as prices fall - of that particular tax.

 

[miami]

I'd be happy with a 10% charge on the house so that it's only collected when it's disposed of.

If I work hard and make an extra £22k a year I find almost half of that vanished in tax before it even hits my bank account.

His neighbour who's working 50 hours a week is paying £24k a year in rent, but this guy is paying nothing and has actually been making £22k a year in capital gains. To have the same disposable income as your millionaire on a modest pension, the neighbour would have to be earning something like £70k a year and paying well over £20k a year in tax.

 

[Bletchleyite]

I'd be happy with a 10% charge on the house so that it's only collected when it's disposed of.

Isn't that basically inheritance tax?

 

[island]

I'd be happy with a 10% charge on the house so that it's only collected when it's disposed of.

So this ”windfall tax“ of yours doesn’t take in any money for how long then?

If you were talking about changes to inheritance tax/capital gains tax as respects housing, I’d be more open to listening.

 

[35B]

I'd be happy with a 10% charge on the house so that it's only collected when it's disposed of.

If I work hard and make an extra £22k a year I find almost half of that vanished in tax before it even hits my bank account.

His neighbour who's working 50 hours a week is paying £24k a year in rent, but this guy is paying nothing and has actually been making £22k a year in capital gains. To have the same disposable income as your millionaire on a modest pension, the neighbour would have to be earning something like £70k a year and paying well over £20k a year in tax.

So, in other words, to equalise the treatment of capital gains and wage income? And what guy is this who's paying nothing and making £22k? Because if it's his landlord, I'd be very surprised indeed.

 

[miami]

So, in other words, to equalise the treatment of capital gains and wage income? And what guy is this who's paying nothing and making £22k? Because if it's his landlord, I'd be very surprised indeed.

The guy who made £1m in 45 years. £1m/45 = £22,200 a year

 

[6Gman]

I'd be happy with a 10% charge on the house so that it's only collected when it's disposed of.

If I work hard and make an extra £22k a year I find almost half of that vanished in tax before it even hits my bank account.

His neighbour who's working 50 hours a week is paying £24k a year in rent, but this guy is paying nothing and has actually been making £22k a year in capital gains. To have the same disposable income as your millionaire on a modest pension, the neighbour would have to be earning something like £70k a year and paying well over £20k a year in tax.

He hasn't been taking a capital gain though. And may never do so.

 

[miami]

So this ”windfall tax“ of yours doesn’t take in any money for how long then?

Cash flow isn't a problem, it becomes an asset on the books against the £1t we've borrowed to keep wealthy boomers safe.

Isn't that basically inheritance tax?

A ridiculous tax that's avoided. Inheritence tax valued £5b last year, but the country's wealth was £15,000b. That means 0.03% of wealth was taken as inheritence tax per year.

Treadmill taxes are the bane of this country, they are the tool that is used to let the rich get richer and the poor stay poor.

The wealthiest 1% of households hold about 20% of household wealth, the top 5% of hold approximately 40%, and the top 10% hold over 50% of wealth

So what do we do? Tax wealthy peoples income (capital gains, dividends) at a far lower rate than working peoples income (income tax and NI), while allowing far more loopholes to avoid paying tax.

Look what happens when a train driver does some overtime

Avanti spend £1138
Emplyoer NI takes £138
Employee NI takes £20
Income tax takes £400
Child Tax takes £180
Student loan takes £90

Leaving £310.

Now look what happens if that's a profit instead
Avanti profit £1138
Corp tax takes £228
Dividend tax takes £63

Leaving £847.

He hasn't been taking a capital gain though. And may never do so.

Anyone else wanting to live in that house would have to spend £20k a year on rent, and save another £20k a year to match the increase in net worth.

 

[PeterC]

The guy who made £1m in 45 years. £1m/45 = £22,200 a year

The house next door to mine was sold for about £200,000 more than I paid for mine 20 years ago. By your arguement somebody has come along and given me £10k a year for the last 20 years. So far I haven't seen a penny.

 

[miami]

The house next door to mine was sold for about £200,000 more than I paid for mine 20 years ago. By your arguement somebody has come along and given me £10k a year for the last 20 years. So far I haven't seen a penny.

Yet when you sell you'll have £200k

Your other neighbour who wasn't able to buy 20 years ago, and instead rented for the last 20 years, won't have that £200k when he moves out.

 

[6Gman]

Yet when you sell you'll have £200k

Your other neighbour who wasn't able to buy 20 years ago, and instead rented for the last 20 years, won't have that £200k when he moves out.

Except that whatever property they move to will probably have gone up by a similar amount so there's no gain to tax.

 

[alistairlees]

If my house declines in value will I get a tax credit?

 

[JB_B]

Look what happens when a train driver does some overtime

Avanti spend £1138
Emplyoer NI takes £138
Employee NI takes £20
Income tax takes £400
Child Tax takes £180
Student loan takes £90

Leaving £310.

Now look what happens if that's a profit instead
Avanti profit £1138
Corp tax takes £228
Dividend tax takes £63

Leaving £847.

I'm not sure what you mean when you say 'if that's a profit instead' - can you explain what two possible situations you're comparing here and from whose point of view?

( It would also be helpful if you could explain how you worked out the figures. For example, there isn't any such thing as 'Child Tax' - do you do you mean high income child benefit tax charge? or maybe net loss of CTC/UC or maybe child support ?)

 

[Camden]

Fantasy figures meets resentment politics. In this case you're either a "wealthy boomer" or hard done to via "treadmill taxes'". But it's the same dogmatic deliberate and often brutal over-simplification that's destroyed Venezuela, Zimbabwe and others.

Thank God Labour didn't worm their way in, given their current form.

 

[PeterC]

If my house declines in value will I get a tax credit?

That did happen (drop in value that is) in my street as they had built too many one bed houses.

Yet when you sell you'll have £200k

Your other neighbour who wasn't able to buy 20 years ago, and instead rented for the last 20 years, won't have that £200k when he moves out.

Stop wriggling, the original point that I was commenting on was that the notional increase in value was a real gain at the time of valuation NOT at the point of sale.

 

[Bletchleyite]

Avanti spend £1138
Emplyoer NI takes £138
Employee NI takes £20
Income tax takes £400
Child Tax takes £180
Student loan takes £90

Leaving £310.

Now look what happens if that's a profit instead
Avanti profit £1138
Corp tax takes £228
Dividend tax takes £63

Leaving £847.

I do agree with that as being an issue. To me all income, whether from wages, dividends or capital gains, should be taxed on the same system, i.e. the income tax system, as all of them involve you as an individual gaining that sum of money.

Yet when you sell you'll have £200k

There are very limited cases when you'll benefit from that, though - downsizing and moving to a cheaper part of the country basically being it, and the vast majority of people do neither of those things. Otherwise it's only sold when it comes to inheritance time, and that is taxed. If you own a house to live in, and move up the ladder through your life (as most people do), a reduction in prices is actually to your benefit as it reduces the size of the "rungs" of the ladder.

Theoretical gains aren't gains, and it's quite right that they aren't taxed. Indeed, stamp duty gets my goat, because it's a tax on the mobility of the workforce, which is just stupid.

If you buy property as an investment and sell it (rather than it being your primary residence), it's subject to CGT or in some cases Income Tax.

Stop wriggling, the original point that I was commenting on was that the notional increase in value was a real gain at the time of valuation NOT at the point of sale.

Very rarely does anyone make an actual gain from their own primary residence. If they're investors it's subject to CGT anyway.

What a house is worth on paper is of no use nor ornament because you need somewhere to live.

 

[JB_B]

I do agree with that as being an issue. To me all income, whether from wages, dividends or capital gains, should be taxed on the same system, i.e. the income tax system, as all of them involve you as an individual gaining that sum of money.

In general, I agree with this. ( IMO George Osborne's partial reform of dividend taxation from April 2016 - creating a more level playing field - was one of the few things he got right. )

 

[Camden]

In general, I agree with this. ( IMO George Osborne's partial reform of dividend taxation from April 2016 - creating a more level playing field - was one of the few things he got right. )

It's not right at all, it's a faulty comparison.

Firstly the figures themselves. Child tax?? NI employers being added to the personal taxation but not on the other column. The personal pay is an overhead of the latter example... There's so much wrong with the examples and how they are not like for like, and in fact incomparable in terms of what they are measuring.

Dividend taxation, not to mention IR35, are dealing with (and have dealt with) completely separate issues. Namely tax avoidance by individuals and to a lesser extent companies.

"Profits" are derived only after a whole host of overheads, much of which is additional taxation such as VAT, NI, compliance with various regulations and acts to keep their employees safe. They're also risk dependent.

We're not a communist country. Companies make profits. If they don't, they go bust. Companies are ultimately owned by individuals, and the profits are theirs to do with as they wish.

The conflation of this and the accumulation of wealth - two entirely different subjects - sums up the muddled, careless thinking of the extreme left, and nods to how their interventions always end with misery.

 

[JB_B]

@Camden

You've quoted my post but as far as I can tell some/most of your reply in post #20 is actually directed toward @miami ( and indeed you repeat some of the points that I made in post #15 above.) Could you clarify which parts are aimed at me so I can respond appropriately?

 

[Xenophon PCDGS]

Of all people. The bulk of assets are in housing (typically unearned gains over the last 20 years denied to people under the age of 40) and pension funds.

Clearly wealthy people don't like this idea though, far better to increase the marginal tax of train drivers who can't afford to buy a house from 69% (plus employer NI) to say 80%.

Of all the plethera of various employment positions that people occupy, why did you choose that of train drivers?

I speak as one of the few website members (as many will be aware) who actually can speak with authority on having financial assets of many types that at the age of 75 have been accrued from differing sources, including large legacies as well as those financial assets from normally accepted sources. House prices, like many other items, are subject to market forces and in certain areas, such as that of the "Cheshire Golden Triangle" where we lived from 2004 to earlier this year, such areas always will command a premium. You may well dislike such frankness, but reality is what actually exists and is not what your political aspirations decree.

Money and property is nothing when like I, having a wife aged 79 who has been afflicted with Vascular Dementia since 2018, cannot enjoy our final years of life in the way we had hoped.

 

[Bald Rick]

Child Tax takes £180
Student loan takes £90

Are all Avanti drivers ex Students with loans to pay back?

And what is Child Tax? I’ve never seen that before.

 

[birchesgreen]

Are all Avanti drivers ex Students with loans to pay back?

And what is Child Tax? I’ve never seen that before.

Maybe child support payments?

 

[Camden]

@Camden

You've quoted my post but as far as I can tell some/most of your reply in post #20 is actually directed toward @miami ( and indeed you repeat some of the points that I made in post #15 above.) Could you clarify which parts are aimed at me so I can respond appropriately?

None, just expressing why I think it's faulty and not to be agreed with

 

[JB_B]

Maybe child support payments?

Yes, that's certainly one possibility - as I mentioned upthread there are others - without more info it's hard to tell.

 

[Bald Rick]

Maybe child support payments?

Possibly. But that’s not a tax.

 

[oldman]

It may be a reference to this: If either you or your partner earns between £50,000 and £60,000 a year before tax, you'll have to pay a portion of your Child Benefit back in extra Income Tax. I don't know the details but it is effectively an increase in the marginal tax rate for some people, which I guess may include some drivers.

I agree with the point that we tax income too much and wealth too little but taxing wealth is a problem when so much is in land and housing. A proper tax on these instead of council tax would be a start.

 

[35B]

Are all Avanti drivers ex Students with loans to pay back?

And what is Child Tax? I’ve never seen that before.

I suspect it's the clawback of Child Benefit for Higher Rate Taxpayers - or, in other words, the recouping of a benefit.

It may be a reference to this: If either you or your partner earns between £50,000 and £60,000 a year before tax, you'll have to pay a portion of your Child Benefit back in extra Income Tax. I don't know the details but it is effectively an increase in the marginal tax rate for some people, which I guess may include some drivers.

I agree with the point that we tax income too much and wealth too little but taxing wealth is a problem when so much is in land and housing. A proper tax on these instead of council tax would be a start.

And over £60k means you pay 100% of Child Benefit back. It often looks particularly bad because one partner receives the benefit, and the other pays the tax (says he with feeling!).

The guy who made £1m in 45 years. £1m/45 = £22,200 a year

Ok, I follow.

It's my father. And he's made not a penny yet, because the gain in house price has yet to crystallise. Therefore, his wealth is entirely notional, and any windfall tax would be wholly unrelated to his ability to pay a tax.

Oh, and for what it's worth, despite my own vested interest, I've no particular issue with his ultimate gain being taxed, as it is quite literally unearned income. He happens to live in an area where prices were depressed 45 years ago because the local authority wished to demolish everything and replace them with flats, and now 3 bed houses with attic extensions routinely go for over a million.

 

[packermac]

So I know someone who is sitting on a paper gain of ~£1m on the house he purchased 45 years ago for £15k, and still lives in. That doesn't mean that he's got cash to pay any such windfall tax, as the increase in house price (a) has nothing to do with changes he's made to the house and (b) is completely independent of his free cash position.

Of course, you could insist that he sells up in order to meet the tax bill, but you then have the unintended consequences - including downward revaluation of houses as prices fall - of that particular tax.

And also assuming he had a mortgage then for some of that time he would have been paying between 12.87 and 14.87% interest. I know so was I. How many of people these days are paying that rate! Highest rate this centuary was 5.5%