Since we’ve already discussed death in what I’d do If I’d be dead in 10 years, I thought it would be time to cover taxes.
Taxes, taxes, taxes.
It seems everyone has an opinion on them. That is to say not many people like paying them. In addition, everyone disagrees on what they are spent on.
Yet most of us agree taxes are beneficial. Moreover, we quite like living in a developed country. We appreciate the security provided by the armed forces, the police and the judicial system. And the infrastructure that allows lets us get from A to B, and provides electricity, water and internet to our homes.
But like most things in life, taxes are not simple. We have a myriad of wealth, income and consumption taxes here in the UK – all aiming to collect money for Her Majesties Revenue and Customs. Or Hector the Tax Inspector if you are of a certain vintage like me.
Around the country, people hold many different views on taxes – some taxes are considered fair and just, others are pilloried and some are open to abuse. We have a conservative government who are keen on law taxes currently, and a Labour opposition who are keen to raise taxes.
Now my personal views are all over the place – I don’t subscribe to any mainstream political viewpoint on taxes.
My libertarian views on Income Tax
So here is the place where I admit that my views on income tax are towards the right side. I fully believe we should pay income tax, but the progressive nature of this tax is what I take issue with. People earning just over £46k are brought into the higher rate of tax (40%) currently, and those earning over £150k pay the additional rate of tax (45%).
So why do I take issue with the progressive nature? Mainly as it is an income tax, taxing money that is earned through effort. And for most of us, the more we work time-wise, the more income we get. And this the more we are taxed. I feel it drives the wrong behaviours and does not encourage people to work more or strive to increase their income, as then the tax burden increases.
In summary, I believe we should all pay income tax but I feel the UK is too progressive at the moment. And this might not be having the desired effect of raising more money for the exchequer, but of encouraging people to work less.
My socialist views on Inheritance Tax
Whereas I am much more left wing on inheritance taxes. As inheritances are unearned income and not as a result of individual effort, I feel inheritances should be taxed more. I would happily support increasing inheritance taxes – and 100% does not sound too extreme to me.
We live in such a divided country with such wealth inequality. By allowing people to pass on their wealth, we are simply perpetuating these inequalities. And yet many people seem aghast at the idea of inheritance taxes. We still have a tribal and feudal system at play in the UK, where people want to ensure their own get a head start.
And that feels deeply uncomfortable to me. I firmly want a society where we have equality of opportunity and who your parents are does not matter.
As well as income, dividend and inheritance taxes, individuals also get hit with many indirect consumption taxes. We often forget about these taxes, and just attribute them to the goods and services we purchase. Examples are VAT at 20%, insurance premium tax, fuel duty, stamp duty and many more.
These taxes are much more difficult to quantify and qualify – some are designed to target luxuries such as VAT. Yet with the tampon tax and the whole court case over whether a Jaffa cake was a biscuit or cake, there is clearly still much controversy here.
My conservative view on pensions and ISAs
The UK also has amazing tax deferment on pensions. These are wrappers designed to fund your post-work life. You can defer paying income tax on up to £40k each year and put that cash in a pension. That can then grow tax-free until your pension access age (currently 55, likely to be 58 when I get there). And then on the way out of the pension many years later you have to pay your income tax.
In my opinion, pensions are great. They benefit both the government and individuals. The high level of tax deferment allows you to save up for your life after work. And the government gets the reassurance that you are planning to support yourself in the future.
ISA’s are a more complex beast to categorise. They are tax-exempt savings schemes where you can invest £20k each year. They are tax exempt for everyone, but only people with cash to save can benefit. And only high earners get the maximum benefit of £20k per tax year. Hence only people in my position are able to max them out and gain the maximum benefit from them.
Nonetheless, they encourage people to save by offering tax incentives to do so.
Simplicity Would be Better
Most of all, the complexity of HMRC’s tax code is mindblowing. Once you get beyond the PAYE system, it is stunning how much complexity and loopholes there are. And this complexity, no doubt well-intentioned to drive behaviours the government of the day wanted, no longer seems fit for purpose. The complexity allows it to be open for abuse and exploited by people attempting to minimise taxes.
To conclude, I believe in taxes. I believe we all need to pay our taxes and contribute to the country we live. Similar to vaccinations, we all need to comply so we can protect those less able to contribute at the moment.
While I personally disagree with the complexity and nature of some of the taxes we have today, I still believe in taxes. And that we should all happily pay our taxes. As Bitches Get Riches points out, they are our annual fee for membership in civilisation.
As the level of poverty in the UK increases due to austerity, as seen in this Guardian article something needs to be done. Are we paying enough tax? Is the government spending tax revenues correctly?
Hence I am pro Universal Basic Income, something I am keen to see trialled more and more in the UK.
Over to you
- What are your thoughts?
- How would you describe your position on tax?
- Do you feel taxes are fair?