Every budget speech I can ever remember has come under attack by political opponents but George Osborne's 2012 budget has stayed in the news several weeks after his red box moment on the steps of Number 11 Downing Street.
One of the biggest issues remaining in the headlines is Income Tax. I hold onto one key principle when it comes to income tax which is that I believe that we should do our very best to have low tax rates to enable individuals to decide how to spend the highest possible proportion of their income. I believe this goes hand in hand with another of my political principles which is to limit the role of government in society to only necessary services.
I believe that most income tax payers want to 'keep' the biggest proportion of their hard earned income. It makes sense right? If you actually took the time to work how much of every £1 you earn goes to the government by way of all taxes including income tax, council tax, VAT, road fund licence etc it would be quite depressing. It is actually no wonder some people try and avoid paying tax. I wonder how many self employed people who get paid mainly with cash actually pay tax on all their earnings?
Anyway, I digress slightly. The reason I had to write this blog today is that I keep hearing Labour politicians and others on the left of politics talking about how important it is that high income earners pay a 'fair' level of income tax. What do they mean by fair? The answer is that they believe that if you earn more then you should pay more.
This is like saying that if you earn £200,000 (two hundred thousand pounds) a year and I earn £20,000 (twenty thousand pounds) a year that you should pay more for a Big Mac at McDonalds or pay more for 3 bedroom terraced house than me because you earn more and that would be fairer. I am not sure many people would agree with this example of fairness. In an ideal world I would argue that we should all pay the same fixed amount of tax to fund the government. It's a club that we all have to join whether we can contribute financially or whether we need it to support us by way of the welfare state.
However, I can accept the principle that those earning £200,000 a year can afford to pay more income tax than those earning £20,000 a year. Let's imagine for a moment that we had a simple tax system that required us all to pay 10% of our income in tax. The person earning £200,000 would pay £20,000 and the person earning £20,000 would pay £2,000. Thus the higher income earner in this example would be paying 10 times the amount of tax than the lower income earner. I would argue that this is not particularly fair but I would say that if you are earning £200,000 a year you could probably accept that £20,000 would go in tax.
When Labour politicians say that they want high income earners to pay a fair amount of income tax they aren't making the case for the £20,000 in tax that my example provides above. They are actually saying that these individuals should a higher percentage of their income in tax as well. Forget my example of the person earning £200,000 a year. How about a person earning just over £34,370. This is the level beyond which a person in the UK pays 40% (rather than the basic rate of 20%) up until £150,000 where they are then required to pay 50% for every additional £1 earned. Just think about that for a moment. Earn £1, give 50p to the government. I wonder if a child would think that fair if you taxed their pocket money at 50%?
Surely having to pay 40% or 50% of your income above £34,370 is a massive disincentive to improve your career and earn more money. If people aren't working hard to improve then the impact is that companies become less competitive, the public sector becomes more wasteful and the overall standard of living in the UK declines. This is bad for everyone. In a global economy it's our team (UK) versus their teams (All other countries).
The table below shows some example salaries and how much of your income you would keep under the current UK income tax rules for 2012-2013.
We should encourage people to aim for the top and be proud of those that make it. Not everyone can earn footballer or bankers salaries but that doesn't mean we should begrudge them their income. My view is simple: If you want to earn a big salary it's up to you to aim high, work hard and do your very best. I solute achievers from all backgrounds.
I am not sure I fully understand why the Labour Party and others on the left have such hangups against people they refer to as 'the rich'. I can only assume that they are jealous and see the argument as a class war which they conveniently call 'fairness' to appeal to the masses.
I consider their behaviour to be unpatriotic. They should be ashamed.
GilesTweets.com / 21st April 2012.
About the author:
I was born in Somerset in 1975. Educated in average state schools. My parents divorced in 1981 and when my Mum remarried we moved to a notoriously bad council estate in Milton Keynes. I lived there for much of my youth. Whilst my family have a rich history dating back to 1066 they are all hard workers but not rich in monetary terms. Whatever I achieve, however good or bad, I achieve not because of a silver spoon in my mouth but because I am determined.
Sources:
(1) Her Majesty's Revenue & Customs: http://www.hmrc.gov.uk/rates/it.htm#2
(2) The Salary Calculator: http://www.thesalarycalculator.co.uk/salary.php
One of the biggest issues remaining in the headlines is Income Tax. I hold onto one key principle when it comes to income tax which is that I believe that we should do our very best to have low tax rates to enable individuals to decide how to spend the highest possible proportion of their income. I believe this goes hand in hand with another of my political principles which is to limit the role of government in society to only necessary services.
I believe that most income tax payers want to 'keep' the biggest proportion of their hard earned income. It makes sense right? If you actually took the time to work how much of every £1 you earn goes to the government by way of all taxes including income tax, council tax, VAT, road fund licence etc it would be quite depressing. It is actually no wonder some people try and avoid paying tax. I wonder how many self employed people who get paid mainly with cash actually pay tax on all their earnings?
Anyway, I digress slightly. The reason I had to write this blog today is that I keep hearing Labour politicians and others on the left of politics talking about how important it is that high income earners pay a 'fair' level of income tax. What do they mean by fair? The answer is that they believe that if you earn more then you should pay more.
This is like saying that if you earn £200,000 (two hundred thousand pounds) a year and I earn £20,000 (twenty thousand pounds) a year that you should pay more for a Big Mac at McDonalds or pay more for 3 bedroom terraced house than me because you earn more and that would be fairer. I am not sure many people would agree with this example of fairness. In an ideal world I would argue that we should all pay the same fixed amount of tax to fund the government. It's a club that we all have to join whether we can contribute financially or whether we need it to support us by way of the welfare state.
However, I can accept the principle that those earning £200,000 a year can afford to pay more income tax than those earning £20,000 a year. Let's imagine for a moment that we had a simple tax system that required us all to pay 10% of our income in tax. The person earning £200,000 would pay £20,000 and the person earning £20,000 would pay £2,000. Thus the higher income earner in this example would be paying 10 times the amount of tax than the lower income earner. I would argue that this is not particularly fair but I would say that if you are earning £200,000 a year you could probably accept that £20,000 would go in tax.
When Labour politicians say that they want high income earners to pay a fair amount of income tax they aren't making the case for the £20,000 in tax that my example provides above. They are actually saying that these individuals should a higher percentage of their income in tax as well. Forget my example of the person earning £200,000 a year. How about a person earning just over £34,370. This is the level beyond which a person in the UK pays 40% (rather than the basic rate of 20%) up until £150,000 where they are then required to pay 50% for every additional £1 earned. Just think about that for a moment. Earn £1, give 50p to the government. I wonder if a child would think that fair if you taxed their pocket money at 50%?
Surely having to pay 40% or 50% of your income above £34,370 is a massive disincentive to improve your career and earn more money. If people aren't working hard to improve then the impact is that companies become less competitive, the public sector becomes more wasteful and the overall standard of living in the UK declines. This is bad for everyone. In a global economy it's our team (UK) versus their teams (All other countries).
The table below shows some example salaries and how much of your income you would keep under the current UK income tax rules for 2012-2013.
We should encourage people to aim for the top and be proud of those that make it. Not everyone can earn footballer or bankers salaries but that doesn't mean we should begrudge them their income. My view is simple: If you want to earn a big salary it's up to you to aim high, work hard and do your very best. I solute achievers from all backgrounds.
I am not sure I fully understand why the Labour Party and others on the left have such hangups against people they refer to as 'the rich'. I can only assume that they are jealous and see the argument as a class war which they conveniently call 'fairness' to appeal to the masses.
I consider their behaviour to be unpatriotic. They should be ashamed.
GilesTweets.com / 21st April 2012.
About the author:
I was born in Somerset in 1975. Educated in average state schools. My parents divorced in 1981 and when my Mum remarried we moved to a notoriously bad council estate in Milton Keynes. I lived there for much of my youth. Whilst my family have a rich history dating back to 1066 they are all hard workers but not rich in monetary terms. Whatever I achieve, however good or bad, I achieve not because of a silver spoon in my mouth but because I am determined.
Sources:
(1) Her Majesty's Revenue & Customs: http://www.hmrc.gov.uk/rates/it.htm#2
(2) The Salary Calculator: http://www.thesalarycalculator.co.uk/salary.php
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