[Politics] Gary's Economics

[Uh_huh_him]

possibly. what is the issue, that there is too much wealth or that it's concentrated? because in my view it doesn't really matter who owns the assets, i'll still have to pay the electricity bill who ever owns the powerplant and grid infrastrucutre, i'll still use the restaurant or pub regardless who owns the building or makes some profit from that business. Stevenson is continuously equats all wealth and assets to "the rich", which is false. if his argument is based on false premise, how can the solution deliver a meaningful change?

The meaningful change is required, because for 50 years we have been sold the dream of "trickle down" economics being the most effective way of managing economic policies.

We are coming to a point where that dream has come unstuck.

The middle classes have been well served by this, by being allowed to push any spare income into ISAs and buying into a system that taxes people whose income comes from Assets which are taxed at a lower rate than those that work for their income.

Now we are in a situation where the Assets have increased in value significantly, but wages haven't grown at the same rate.
This has led to a disparity in the ability for individuals and Governments to pay for the goods and services required.

Something needs to change.
Unfortunately the only people who have the capacity to make the necessary sacrifices to improve society are the ones with the power and ability to oppose those changes.

 

[dsr-burnley]

I caught up with this video today, successfully and irrefutably debunking the “you can’t tax the rich, they’ll move away” nonsense.

You simply move from a residence based tax system to an asset ownership based tax system. Simples.

I haven't got 15 minutes to listen to him, so can anyone explain how (to the Britain's richest billionaires for example) if the Hinduja brothers leave the country, how can we tax their holdings in overseas companies? I get that we can tax companies that are on the London Stock Exchange for as long as they don't decide to go to a foreign stock exchange, but otherwise what's his solution?

They used to have ACT - Advance Corporation Tax - where companies had to deduct UK tax from dividends which they could then deduct from Corporation Tax. Is that what he's suggesting?

 

[chickens]

I haven't got 15 minutes to listen to him, so can anyone explain how (to the Britain's richest billionaires for example) if the Hinduja brothers leave the country, how can we tax their holdings in overseas companies? I get that we can tax companies that are on the London Stock Exchange for as long as they don't decide to go to a foreign stock exchange, but otherwise what's his solution?

They used to have ACT - Advance Corporation Tax - where companies had to deduct UK tax from dividends which they could then deduct from Corporation Tax. Is that what he's suggesting?

Why would we want to do that?

I mean, god speed the Hinduja brothers wherever they reside, but why would we be interested in taxing individuals who aren’t UK residents owning non-UK assets? We would want to take the value of their overseas assets into account when assessing their overall wealth (if they owned UK assets) but not levy taxes on non-UK investments.

I’m interested in encouraging UK residents to own UK assets so that wealth being generated in this country is spent on and in this country.

I’m interested in ensuring that when the wealth that owns UK assets becomes overly concentrated it is taxed at a discouragingly high, frankly punitive rate, rather than punishing those trying to bring security to themselves and their families, and I’m interested in making UK investment more attractive to UK capital and less attractive to global money which has no specific regard for our wellbeing as long as the income keeps rolling in.

I’m interested in rebuilding our middle class and encouraging social mobility from working class to middle class. Not perpetuating a nation of serfs to Goldman Sachs and JP Morgan.

It’s easy enough to determine whether an organisation is operating in the UK.

Multinationals keep track of sales etc. in each market. Again, size and wealth of multinationals taken into account in such a way that encourages companies to split into separate entities where they’re huge sprawling behemoths with their fingers in all pies, or even insist on UK subsidiaries being separate legal entities.

I’m perfectly content to wave goodbye to billionaires, they’re a symptom of a broken system.

 

[albionalba]

It’s easy enough to determine whether an organisation is operating in the UK.

Is it though? I don't know the answer but (according to MSM) there always seem to be ways around this and it's difficult to know what to believe...

 

[chickens]

Is it though? I don't know the answer but (according to MSM) there always seem to be ways around this and it's difficult to know what to believe...

Well if it turns out it isn’t, then just do what other countries do and insist on anyone operating in the UK start an independent UK subsidiary. No UK subsidiary, no access to the UK market.

 

[Uh_huh_him]

this ignores the largest group of ownership is ultimately owned by pensions and investment funds, which the middle classes own. yes there are individual with large

This element has been a concern of mine.
i.e. has the growth in the value of assets actually just been going into Pension funds (based on the performance of my personal pension fund over the past 5 years clearly not!)

Thought I'd google what percentage of the FTSE is actually held in pensions:

Seemingly not according to the ONS

The breakdown, between UK individuals / UK others/ rest of the world has changed dramatically in the past 30 years.

It would be interesting to understand which sectors, a Wealth tax would be applied to.

The breakdown looks like this:

So no the majority of wealth is not held in Pension funds.

 

[beorhthelm]

Seemingly not according to the ONS

The breakdown, between UK individuals / UK others/ rest of the world has changed dramatically in the past 30 years.

View attachment 200475

appreciate the data, and confess i thought the pension ownership was far higher than that. though two points, that's FTSE ownership not all assets (i'm now suspecting the pension ownership may follow similar pattern) and i did cover my arse mentioning investment funds. Stevenson is claiming rich individuals own everything and that has increased. see that middle graph, the decline of the private individual portion of ownership goes against that. he does interchange with corporations owned assets as it suits, but it makes his simple position more complex because there's more consequences.

lets get back to the brass tacks, how is all that wealth supposed to be taxed and what will that solve? will taxing a large land owner mean the prices of wheat and beef go down? will taxing large property portfolios mean cost of a 3 bed semi drop 20%? will it mean lower rents or higher wages? he doesnt say how, very detailed on specifics around the problem as he sees it, very light on implementation.

 

[Uh_huh_him]

appreciate the data, and confess i thought the pension ownership was far higher than that. though two points, that's FTSE ownership not all assets (i'm now suspecting the pension ownership may follow similar pattern) and i did cover my arse mentioning investment funds. Stevenson is claiming rich individuals own everything and that has increased. see that middle graph, the decline of the private individual portion of ownership goes against that. he does interchange with corporations owned assets as it suits, but it makes his simple position more complex because there's more consequences.

lets get back to the brass tacks, how is all that wealth supposed to be taxed and what will that solve? will taxing a large land owner mean the prices of wheat and beef go down? will taxing large property portfolios mean cost of a 3 bed semi drop 20%? will it mean lower rents or higher wages? he doesnt say how, very detailed on specifics around the problem as he sees it, very light on implementation.

Stevenson isn't claiming to have all the answers.
He is just bringing attention to the economic trends of the last 30 years and it's real world consequences.
His message is that the rich are getting richer and the poor are getting poorer and that differential is escalating.
These are not contentious statements.

To get that message across, he has to simplify the message. To "the wealthy" and provides examples of individuals, but he knows that the reality is more comp[ex and says so in his more detaled videos.
This is the same approach that Politicians take when they pretend that the UK economy is the same as a household budget and cuts are necessary to "balance the books".

The main fiscal arguments of the last 40 years have been:

• Governments are wasteful and private companies are more efficient
• The rich are the wealth creators and deserve tax breaks for the good of the country

After the past 30 years of globalisation, we now see that the "wealth creators" don't care about the good of the country, they just want the best return on investment. Therefore the tax breaks for the wealthy are not leading to Growth in the UK economy in general, just increasing value of it's assets, which are increasingly owned by non UK individuals.

The main real world impact of this is the gap between wages and house prices.
This is Stevenson's main area of concern and something the government will need to address at some point

Governments need to wise up to the fact, that the financial levers of Income tax, stealth taxes and Austerity have been wrung dry.

Stevenson's aim is to get the concept of a wealth tax being properly debated.
It will take far more than one former trader to devise the policies necessary to achieve that.
He knows that.
But all the time the governments are trying to achieve growth, by cutting spending and allowing asset prices to increase, we are going backwards.

 

[albionalba]

But all the time the governments are trying to achieve growth, by cutting spending and allowing asset prices to increase, we are going backwards.

....and encouraging overseas ownership under the premise of inward investment

 

[Uh_huh_him]

....and encouraging overseas ownership under the premise of inward investment

Precisely.

Government Policy is based on "Fiscal Rules" and Political groupthink which have proven to be counter-productive.

There is little use in UK assets growing in value, when the benefit of that growth is predominantly held by offshore entities.
Of the dwindling numbers held by UK individuals, they are taxed at a lower rate than people working for that income.

There is a need to change the levers available to Government to recover dwindling revenues.

It seems to me that an obvious one is drastic changes to the way NI is recovered.
At present it hits the low paid and employers disproportionately.
Whereas anyone living off investment income pays nothing.

NI is 18% of the Government revenue.
it is effectively Income tax, only the more you earn the lower the rate is.
Call it what it is and just add it into the Income tax rate.

Then you could tax workers and people living off passive income at the same rate.

I really don't see what is unfair about that.

 

[Machiavelli]

Precisely.

Government Policy is based on "Fiscal Rules" and Political groupthink which have proven to be counter-productive.

There is little use in UK assets growing in value, when the benefit of that growth is predominantly held by offshore entities.
Of the dwindling numbers held by UK individuals, they are taxed at a lower rate than people working for that income.

There is a need to change the levers available to Government to recover dwindling revenues.

It seems to me that an obvious one is drastic changes to the way NI is recovered.
At present it hits the low paid and employers disproportionately.
Whereas anyone living off investment income pays nothing.

NI is 18% of the Government revenue.
it is effectively Income tax, only the more you earn the lower the rate is.
Call it what it is and just add it into the Income tax rate.

Then you could tax workers and people living off passive income at the same rate.

I really don't see what is unfair about that.

Worth adding that NI was 5% when Thatcher came in and it was the first tax to be raised all in the name of cutting income taxes which were very progressive at that point.

 

[chickens]

appreciate the data, and confess i thought the pension ownership was far higher than that. though two points, that's FTSE ownership not all assets (i'm now suspecting the pension ownership may follow similar pattern) and i did cover my arse mentioning investment funds. Stevenson is claiming rich individuals own everything and that has increased. see that middle graph, the decline of the private individual portion of ownership goes against that. he does interchange with corporations owned assets as it suits, but it makes his simple position more complex because there's more consequences.

lets get back to the brass tacks, how is all that wealth supposed to be taxed and what will that solve? will taxing a large land owner mean the prices of wheat and beef go down? will taxing large property portfolios mean cost of a 3 bed semi drop 20%? will it mean lower rents or higher wages? he doesnt say how, very detailed on specifics around the problem as he sees it, very light on implementation.

I can’t answer these questions definitively, because policies absolutely can have unintended consequences.

However, if instead of one colossal farm, the upshot was 4-5 family or medium sized farms existed in their place, enabling a greater number of UK based people to earn a reasonable income, is that not a more desirable outcome than AgriCorp Inc. owning a massive chunk of UK farming land?

Similarly, is there anyone in this country who does not believe that our housing market is in need of a hard reset?

I’ve always thought that there should be a hard limit on residential portfolio size. It should be possible for UK residents to own a maximum of 3 residential properties, with non-UK residents either shut out of the market completely, or being permitted to own a single property.

The conversion of our domestic housing stock from places for our citizens to live into a global asset class has driven more frustration and misery than any other policy. I own property, and I’ll gladly take the hit for the sake of my kids and the generations to come.

 

[Uh_huh_him]

Worth adding that NI was 5% when Thatcher came in and it was the first tax to be raised all in the name of cutting income taxes which were very progressive at that point.

I didn't know that.
VAT was also at 8% (for most goods when she came in)

Both NI and VAT hit lower incomes disproportionately
35% of Government revenue comes from VAT and NI

So let's have no more of the "Top 10% of earners pay 60% of the UK tax bill"
It's always been bollocks.

 

[Uh_huh_him]

My P60 has just come through

Last year I earnt £64,747.20
My tax was:
Income Tax £14,896.34
National Insurance £3,304.92
Effective income tax rate 28.11%

My understanding is that if someone lives off dividends from investments which delivers the same yearly income
Their tax bill would be
Income Tax £8,141.05
National Insurance £0
Effective Income tax rate 12.57%

I think the same is true if they live off income from rented properties
My income also provides additional income for the government from Employer's NI contribution.

Would welcome some tax/Finance advisor experts view on this to validate my understanding is correct.
Because on the face of things, it's a f***ing rip off for working people.

 

[Hotchilidog]

My P60 has just come through

Last year I earnt £64,747.20
My tax was:
Income Tax £14,896.34
National Insurance £3,304.92
Effective income tax rate 28.11%

My understanding is that if someone lives off dividends from investments which delivers the same yearly income
Their tax bill would be
Income Tax £8,141.05
National Insurance £0
Effective Income tax rate 12.57%

I think the same is true if they live off income from rented properties
My income also provides additional income for the government from Employer's NI contribution.

Would welcome some tax/Finance advisor experts view on this to validate my understanding is correct.
Because on the face of things, it's a f***ing rip off for working people.

This illustrates the main point perfectly. The tax burden falls disproportionately on working people, whereas those who derive their income from assets just continue to coin it at our expense. This has to change.

 

[Uh_huh_him]

This illustrates the main point perfectly. The tax burden falls disproportionately on working people, whereas those who derive their income from assets just continue to coin it at our expense. This has to change.

If my assumptions are correct..

@beorhthelm would you know whether my assumptions on passive income are correct?

Also I assume that any Dividends held in an ISA would be exempt from tax?
Is that correct?
If so then it would be reasonable to assume that by using the ISA allowance every year, the overall tax burden can be further reduced.

 

[beorhthelm]

If my assumptions are correct..

@beorhthelm would you know whether my assumptions on passive income are correct?

your assumptions look about right, highlighting the benefits of lower rates lower band tax payer. once on the higher band, dividends are taxed at 33%. it illustrates how well pensioners do out of the current tax and should be paying more.

 

[Uh_huh_him]

your assumptions look about right, highlighting the benefits of lower rates lower band tax payer. once on the higher band, dividends are taxed at 33%. it illustrates how well pensioners do out of the current tax and should be paying more.

It also highlights a fairly straightforward way of introducing a tax on the wealthy doesn't it?

Higher income tax payers are paying 47% on their earnt income, but Dividends on investments only attract 33%.
Surely these should be brought closer together?

Correction:
Higher income tax payers over £50k is 42% against 33%
Upper income tax payers over 125k is 47% against 39.75%

 

[Uh_huh_him]

Another quick Google confirms that US citizens pay tax on earnt income and dividends at exactly the same rate.
It's income after all.

 

[Uh_huh_him]

Another difference in taxation in the US is that Capital gains tax on short terms holding (brought and sold within the tax year) are taxed at Income tax rates.
This seems sensible as it is clearly income within the tax year.

America has lower tax rates (upper rate is 37%) and doesn't have NI

It would be interesting to see how their model would look if applied to the UK.