By Tom Guyton-Day and Edited by Martha Evans
Credit: @SophieJane96x
Recently Momentum put out a social media post – hardly my favourite people…, presumably in an attempt to ease back the middle classes who had been scared away by talk of 80% income tax rates. They suggested instead, the enemy was not those earning £150,000 a year and instead the trillionaires that flitter between London, the Channel Islands, and the far-flung East on their ‘holidays’ or lifestyles as they’re better termed – my words not theirs’.
Many then decided to reply about the rate of tax being too high for those earning £150,000 – one woman pointed out that someone earning that much might look to pay just over £51,000 in tax. A staggering sum! I then, of course, laughed because the idea that someone earning £150,000 a year would actually pay any income tax at all bemused me. They don’t.
Credit: Matt lamers
People earning that much money, to be frank, employ men in grey suits to fiddle with their accounts and drive through their earnings – first into a consultancy firm (Bob’s LTD, for example). Let me explain:
This £150,000 (we’re going with that figure because Momentum did. I could have chosen anything above £90,000 realistically) moves through Bob's LTD as turnover or revenue. In a traditional business this is usually income from sales of a product or service and it's the same with Bob's LTD - just in the form of one very large contract.
The company presumably has vast “costs” – a car for example, to drive to “business meetings” and other costs such as a lawn mower to keep the “business lawn” looking nice. These “costs” then offset the turnover of the “company”, lowering the amount of “net profit” (revenue – all costs) the company makes – which is what is actually taxed in the end. So basically, they run their household as a business in the land of paperwork. Though, in reality most people run their household like a business – just one that sort of floats, neither sinking nor flying. Just floats. The people running Bob’s LTD are not wrong - the people that designed income tax are.
This £150,000 (we’re going with that figure because Momentum did. I could have chosen anything above £90,000 realistically) moves through Bob's LTD as turnover or revenue. In a traditional business this is usually income from sales of a product or service and it's the same with Bob's LTD - just in the form of one very large contract.
The company presumably has vast “costs” – a car for example, to drive to “business meetings” and other costs such as a lawn mower to keep the “business lawn” looking nice. These “costs” then offset the turnover of the “company”, lowering the amount of “net profit” (revenue – all costs) the company makes – which is what is actually taxed in the end. So basically, they run their household as a business in the land of paperwork. Though, in reality most people run their household like a business – just one that sort of floats, neither sinking nor flying. Just floats. The people running Bob’s LTD are not wrong - the people that designed income tax are.
Credit: Jinen Shah
Generally, the aim of this imaginary person is to lower their tax bill and so, they lower their “net profit” by using their “business costs” to offset and lower this margin of profit. Anything from tractors to swimming pools can theoretically be counted as “costs”. Generally, the idea is to end up at zero profit or even a loss – and therefore… zero tax. I put all those terms in quote marks because there is no business – it’s just an accounting exercise, a common one at that.
What I therefore propose is a scrapping of income tax altogether which unfairly targets those earning between the ranges of the working-class income and the upper middle-class income, and women specifically within those thresholds and instead, we should raise the rate of corporation tax significantly which seems to include traditionally male purchases that can be easily be used to offset their tax bill.
People say we should better regulate those crossing the boundary lines between corporation tax and income tax but my answer to that is – we’ve been trying to do this for a while and still people slip through the gaping cracks. It’s impossible to regulate this type of tax avoidance without employing a vast civil service that costs to employ. This, or abandon the rule of law - but that’s a dangerous path and one I’m keen to avoid.
The regulate argument also fails to compensate for the fact, people earning £80,000 a year can end up paying more tax than high flying billionaires which to most readers sounds ludicrous but is in fact reality...
I’ll leave it to the economists (which I am actually qualified but too lazy) to figure out what that rate of tax should be on this new improved corporation tax, but presumably higher than it is right now. Everyone would therefore run their household as a business – as they basically do already and have “costs” which run up against their turnover, lowering yearly “profit” or savings in reality. Why are we pretending that families don’t run their outgoings through puppet companies like above when they often do...? Why are we also pretending that family incomes and outgoings don’t usually follow much like a business, anyway.
This would also treat a significant issue in business right now, mainly as a result of the tax system being designed around men being the norm rather than men and women, collectively, being the norm. For now – costs such as childcare – anything you can think of that’s currently not claimable against tax, usually products and services women use more than men - would be included in “costs” and come off your tax liability. Men can claim for whisky and dinner, but women can’t claim childcare? Please.
Furthermore, this would also treat the major injustice that the rate of tax paid by someone earning £40,000 is incredibly different to the rate paid by someone earning £150,000. Don’t get me wrong, people earning both £40,000 a year and £150,000 a year are hardly poor but they’re out of a league – frankly leagues (in the measure) - behind those with an income of £3,000,000,000 a year. Hardly comparable. One group sends their children to a nice school and foregoes their holiday – the other has a GDP close to a West African country. Mind blown. So, why does the rate rocket from £20,000 to £60,000 but then basically collapse past £90,000 when people stop receiving income and start receiving income via “dividends” on their share of their “company”.
Momentum is frankly right, the Government should be doing more to tackle the grave injustice the middle class continues to undergo, being squeezed by sinking real term wages and an unfair tax system. Meanwhile, the super-rich skirt, at the pleasure of society often being served by accountants that perhaps may end up paying more tax than these highflying men of the sky - any tax at all. It’s not their fault - it’s the Governments. Scrap income tax and introduce family corporation tax.
For more on this topic and where I got the inspiration to consider the perspective of feminism on the way we deal with tax you can check out "Invisible Women" by Caroline Criado Perez.
What I therefore propose is a scrapping of income tax altogether which unfairly targets those earning between the ranges of the working-class income and the upper middle-class income, and women specifically within those thresholds and instead, we should raise the rate of corporation tax significantly which seems to include traditionally male purchases that can be easily be used to offset their tax bill.
People say we should better regulate those crossing the boundary lines between corporation tax and income tax but my answer to that is – we’ve been trying to do this for a while and still people slip through the gaping cracks. It’s impossible to regulate this type of tax avoidance without employing a vast civil service that costs to employ. This, or abandon the rule of law - but that’s a dangerous path and one I’m keen to avoid.
The regulate argument also fails to compensate for the fact, people earning £80,000 a year can end up paying more tax than high flying billionaires which to most readers sounds ludicrous but is in fact reality...
I’ll leave it to the economists (which I am actually qualified but too lazy) to figure out what that rate of tax should be on this new improved corporation tax, but presumably higher than it is right now. Everyone would therefore run their household as a business – as they basically do already and have “costs” which run up against their turnover, lowering yearly “profit” or savings in reality. Why are we pretending that families don’t run their outgoings through puppet companies like above when they often do...? Why are we also pretending that family incomes and outgoings don’t usually follow much like a business, anyway.
This would also treat a significant issue in business right now, mainly as a result of the tax system being designed around men being the norm rather than men and women, collectively, being the norm. For now – costs such as childcare – anything you can think of that’s currently not claimable against tax, usually products and services women use more than men - would be included in “costs” and come off your tax liability. Men can claim for whisky and dinner, but women can’t claim childcare? Please.
Furthermore, this would also treat the major injustice that the rate of tax paid by someone earning £40,000 is incredibly different to the rate paid by someone earning £150,000. Don’t get me wrong, people earning both £40,000 a year and £150,000 a year are hardly poor but they’re out of a league – frankly leagues (in the measure) - behind those with an income of £3,000,000,000 a year. Hardly comparable. One group sends their children to a nice school and foregoes their holiday – the other has a GDP close to a West African country. Mind blown. So, why does the rate rocket from £20,000 to £60,000 but then basically collapse past £90,000 when people stop receiving income and start receiving income via “dividends” on their share of their “company”.
Momentum is frankly right, the Government should be doing more to tackle the grave injustice the middle class continues to undergo, being squeezed by sinking real term wages and an unfair tax system. Meanwhile, the super-rich skirt, at the pleasure of society often being served by accountants that perhaps may end up paying more tax than these highflying men of the sky - any tax at all. It’s not their fault - it’s the Governments. Scrap income tax and introduce family corporation tax.
For more on this topic and where I got the inspiration to consider the perspective of feminism on the way we deal with tax you can check out "Invisible Women" by Caroline Criado Perez.
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