Fair tax: Maybe rich people should pay it too."

[JohnD]

Certainly not everyone

I can see you find it awkward to admit that prosperous people often have substantial dividends and capital gains, and poor people generally don't.

If you have an investment portfolio of £100,000 with an average yield of 2.5%, on top of your ISA and pension fund, are you a prosperous person or a poor one?

 

[diy_fun_uk]

You have to wonder what the overall moral of the story is. Two people earn the same income from proverbial cradle to grave. Person A lives their life renting and just spends spends spends. They spend it as quickly as they earn it, leaving an estate of zero. Person B is more cautious with their income, they buy a property, they make some investments over the years and so on. They end up being subject to capital gains tax throughout their life and inheritance tax on their demise, having already paid tax throughout their life. Oh, and having to fund their own care, which person A avoids thanks to sending it as quickly as they earned it.

 

[JohnD]

You have to wonder what the overall moral of the story is.

Do you? Really?

Two people receive the same income.

One of them pays a lot more tax than the other.

Is that fair?

 

[Mottie]

Oh, and having to fund their own care, which person A avoids thanks to sending it as quickly as they earned it.

There’s a hell of a difference between a council funded care home and a private one. Do you think the two examples you give will get the same care?

 

[motorbiking]

Do you? Really?

Two people receive the same income.

One of them pays a lot more tax than the other.

Is that fair?

So if person A pays 45% tax on most of his income and person B pays 20% it isn’t fair?

I think we agree.

 

[diy_fun_uk]

I can see you find it awkward to admit that prosperous people often have substantial dividends and capital gains, and poor people generally don't.

If you have an investment portfolio of £100,000 with an average yield of 2.5%, on top of your ISA and pension fund, are you a prosperous person or a poor one?

I don't find anything awkward to admit. Of course poor people don't have substantial dividends and/or capital gains ... they're poor.

How are you defining the 'investment portfolio'? How much are they paying into the ISA year on year? Is it a private or public sector pension?

Someone could own let's say a flat worth £100k. They put £1k pa into an ISA. They work for NHS and have a public sector pension.

Prosperous? Nope.

 

[JohnD]

Someone could own let's say a flat worth £100k. They put £1k pa into an ISA. They work for NHS and have a public sector pension.

Is there some way in which you think that is relevant to low tax rates on dividends and capital gains?

 

[JohnD]

So if person A pays 45% tax on most of his income and person B pays 20% it isn’t fair?

I think we agree.

And these two people (as you quoted) receive the same income?

How much is it?

 

[diy_fun_uk]

Is there some way in which you think that is relevant to low tax rates on dividends and capital gains?

Are you the new Pat Ex? Pat, is that you??

End of conversation ...

 

[JohnD]

That's a "no" then.

 

[diy_fun_uk]

There’s a hell of a difference between a council funded care home and a private one. Do you think the two examples you give will get the same care?

I think we had this same discussion in another thread a while back. Certainly up here in Scotland, if your capital assets fall below a certain threshold, that doesn't equate to being thrown into a sh1thole of a nursing home.

 

[motorbiking]

When my Nan needed a nursing home, she went to the same facility as those getting it free on benefits.

 

[SirGalahad]

We are back to the original question. Why is capital gains taxed differently to earnings.

Because investments have risk, businesses fail, investors need incentives to create, otherwise everyone thinks small and nothing happens.

In the beginning Amazon was like any other small business. Buying and selling on a small scale. Nothing Stopped JohnD or SirG or Mottie or me from starting Amazon.

Another false argument risk, failure has nothing to do with it. For example people can lose their jobs so they should be taxed at the same rate as CGT?

"CGT is a tax on the profit when you dispose of an asset that has increased in value"

Low rates of capital gains tax on business income lead to large tax savings but do not boost investment | Institute for Fiscal Studies

Our new research shows that company owner-managers respond to changes in income taxes by adjusting how and when they take money out of their company and not by changing the amount of income they create or how much investment they do.

ifs.org.uk

 

[motorbiking]

90% of startups fail, 20% of employees leave within 3 months. Not the same risk at all.

An employee doesn't risk his assets or investment when he accepts an offer of employment. Investors do account for costs when deciding to invest, just as an employee considered tax and NI when working out if he likes the job offer.

 

[SirGalahad]

90% of startups fail, 20% of employees leave within 3 months. Not the same risk at all.

An employee doesn't risk his assets or investment when he accepts an offer of employment. Investors do account for costs when deciding to invest, just as an employee considered tax and NI when working out if he likes the job offer.

Not the same rewards either. So another false equivalence - you do rack them up.

You read the IFS link? Or too scared?