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June 28, 2012

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tellsitlikeitis

"The creation of a ‘solidarity tax’ on the super-rich including tax exiles would help to generate a good civic example and increase a greater sense of fairness."

Hilarious! This from the folks who brought you the most un-civic political campaign in living memory, the hugely damaging attempt to undermine the household charge.

The catch-phrase seems to be: increase tax now, but only on the other guy!

See, in the real world, it doesn't work that way. You can't both pander to the self-serving logic of the masses and also have a sustainable tax base. You have to choose one or the other.

Ciaran

There's nothing wrong with undermining the household charge as was presented by Bigphil et al. They need to re-think that and introduce a site valuation tax instead - a fairer, more stable tax, which also attenuates the likelihood of volatile property markets.

We need more income tax bands in this country - there's too much of a rate jump (0% to 20% to 41%), and someone earning €40,000, and paying the same marginal income tax rate as someone earning €200,000, can't be right. We need more of a sliding scale in our income tax rates. Some need to be paying more tax, others need to be paying less tax, so they can spend it elsewhere (which is why people at the low end of the income scale pay 'not a bob' in tax: they spend it all anyway).

Michael, you would do well not to fall into the trap of using terminology like 'solidarity tax' or 'wealth tax' - you'll only attribute a degree of victimhood to people who are more than able to pay a reasonable amount of tax on their income. You'll also invite certain contributors to pounce on you with bogus figures relating to marginal tax rates, while not informing people exactly what 'marginal tax rate' means. We are not, as certain 'straight-talkers' would have you believe, 'the most taxed people in Europe' - this is borne out by the above figures in relation to our public spending, which has never been as runaway as people would like to think.

tells.it.like.it.is

Cairan, I love your reference to the crooked-talkers not explaining what a marginal rate is. What it is, econo-kindergarten?

Seriously, someone who doesnt already understand a concept as simple and fundamental as the marginal rate has no business getting involved in a debate on tax policy.

On your idea that the undertaxed low to mid-earners spend all their money anyway and this is somehow a valid replacement for paying income tax ... the question is what spending they would cut out if their tax contribution were to increase towards European norms. Would it be on things that are of little or no benefit to the exchequer: the holiday on the Costa Brava, the odd line of coke, their Sky TV subscription? Or would it be zero-VAT-rated spending on food that gets cut? Or would it be high-tax items like Dutch Gold and John Players Blue that are consumed less?

The answer would have a large bearing on the exchequer impact of absolving a large portion of the workforce of any substantial income tax obligations, in the expectation that the money will somehow come back anyway.

Ciaran

Those uppity 'undertaxed' low- to middle-earners spend their money, and said money goes into the economy. Whether or not they spend money on activities which meet with your approval, is immaterial. Placing a larger tax burden on such people does nothing to help the economy.

To reiterate, we need more income tax bands, not just the blunt 20% and 41% rates, the latter of which kicks in too early.

Income tax amounts are down because there is a huge amount of unemployment in this country, not because low earners are sneakily avoiding tax (that, alas, is the hallmark of a lot of our higher earners).

Ciaran

Incidentally, I just deciphered the first part of your last comment 'tellsitlikeitis'/'tells.it.like.it.is' - I know exactly what a marginal tax rate is. My point is, many commentators (usually right-wingers trying to pretend that direct tax rates are draconian in this country) use marginal rates to come up with a bigger percentage than the percentage people actually pay. This debate tactic is utterly misleading, but in most cases, deliberate.

So I guess I'll have to reserve my right to continue to take part in debates on tax policy - sorry!!

tells.it.like.it.is

@ciaran

"Those uppity 'undertaxed' low- to middle-earners spend their money, and said money goes into the economy."

The point was the extent that it "goes into the economy" depends heavily on what they actually spend it on.

My approval or otherwise is irrelevant.

As the indigenous economic effect of someone deciding to discontinue their Sky TV subscription - a foreign corporation gets less money, and maybe they end up bidding less for the next english premiership contract. But the effect on the local economy - close to zilch!

"I know exactly what a marginal tax rate is."

I assumed that you know, and I wasn't questioning your right to debate.

Instead, I was questioning your paternalistic view of the man-in-the-street being tricked by the right-wing commentators using obscure economic jargon to confuse the issue.

In fact, the marginal rate of tax is so fundamental and simple a concept, that to even involve someone who didn't understand it in a debate on tax, would be akin to discussing tax with someone who couldn't grasp what a percentage is.

And the reason those right-wing commentators refer the marginal rate of tax is not to trick the un-wary, rather it's because it's strongly linked to the disincentive effects of high taxation.

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