How to reform income tax: end the high marginal rate scandal

Comments

• Womble@piefed.world ⁨7⁩ ⁨months⁩ ago

  FWIW the article does make sense, though the conclusion I'd draw wouldnt be the same as theirs but:

  Jane is earning £60k and claiming child benefit for three children. That’s worth £3,094.

  She’s now in the 42% tax band.6 Jane still pays basic rate tax for her income between £12,570 and £50,270, but now pays 42% tax for everything over that. So her total tax bill is (50270 – 12570) * 28% + (60000-50270) * 42% = £14,643 and Jane takes home £45,357.

  Jane is thinking of working a few more hours to earn another £1,000. She’s in the higher tax band – so in a sane world she’d expect another £420 of tax, and a marginal rate of 42%.

  But that is not the result. Once Jane’s income hits £60,200, the “High Income Child Benefit Charge” (introduced by George Osborne) starts to apply to claw back her child benefit – 1% for every £200 of earnings.

  The marginal rate – the tax Jane is paying on that new £1,000. This is 56.5% – and we will have the same result for all incomes between £60k and £80k.

  The solution I'd draw from that would be to raise the higher rate from 42 to 45-50% and scrap the means testing of child benefits. Makes the tax take more progressive and reduces administrative burden by not having to assess people's income for if they are eligible for child support or not.

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  • tankplanker@lemmy.world ⁨7⁩ ⁨months⁩ ago

    It gets worse if you compare Jane with Janet and John who both earn say 50k each, as they still get that child benefit despite their combined net income being about double what she earns.

    They simply refuse to look at household income, and treat even married couples as singletons living separately for this.

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  • somerandomperson@lemmy.dbzer0.com ⁨7⁩ ⁨months⁩ ago

    What the fuck? Are tax rates being THIS high normal?

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    • Womble@piefed.world ⁨7⁩ ⁨months⁩ ago

      Yes, if you want a social security net and dont live in the world's economic hegemon

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  • rwtwm@feddit.uk ⁨7⁩ ⁨months⁩ ago

    I think the author comes to the same conclusion as you, but then rules it out because Labour themselves seem unwilling to do it.

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• fakeman_pretendname@feddit.uk ⁨7⁩ ⁨months⁩ ago

  I have to say this reads a bit like:
  “I barely earn more than four normal households’ worth of income - and now the government is expecting me to pay for my own children! It’s a scandal!”

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  • Lazylazycat@lemmy.world ⁨7⁩ ⁨months⁩ ago

    I can guarantee if this is posted to reddit it will be reply after reply of people going “what you don’t understand is, £100,000 is the hardest wage to live on!”.

    Ok then mate, swapsies. You can have my 28k and we’ll find out.

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    • fakeman_pretendname@feddit.uk ⁨7⁩ ⁨months⁩ ago

      Yeah, and joined with a few:
      “You don’t understand, I was offered some more paid hours at work, but with the extra taxes at that income threshold, I’d only be working for £35 an hour, which is probably below minimum wage, as far as I’m aware. My life is so hard”.

      Narrator: The minimum wage was actually £12.21 for people over 21 years of age.

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• LodeMike@lemmy.today ⁨7⁩ ⁨months⁩ ago

  Slop meta image

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