Employer has £100 to pay on wages.
New Secondary NIC rate = 13.8% + 1.25% = 15.05%. So the max. gross wage he can pay out = £100 ÷ 1.1505 = £86.92
New Primary NIC rate = 12% + 1.25% = 13.25%, add on official basic rate of tax 20% = 33.25%.
£86.92 less 33.25% = £58.02, an overall tax bill of £42 = 42%.
If you factor in VAT, which takes one-sixth of earnings in the productive economy, it's closer to 52% overall. It's far worse if you also have Student Loan Repayments or Working Tax Credits that are being clawed back.
Wednesday, 8 September 2021
Welcome to the new basic rate of tax - it's 42%
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38 comments:
"It's far worse if you also have Student Loan Repayments or Working Tax Credits that are being clawed back."
or live in Wales.
So far as Social Care is concerned, the benefit is at homeopathic dilution. Shame the same cannot be said of the taxation.
B, true, or Scotland.
D, yes, apparently all the hoped for revenue is going to disappear into the NHS Black Hole.
"What happened to the £350 million a week?" is the obvious question.
Another one is, "Assuming many care workers were EU citizens who have since left the country, how on earth is this going to be staffed, short of massive pay rises?" (admittedly, pay rises for low paid people are much to be welcomed in and of themselves).
"...(admittedly, pay rises for low paid people are much to be welcomed in and of themselves)...." Only if proportionate value is added by said workers. Better to slash taxes on employment and wealth creation.
""What happened to the £350 million a week?" is the obvious question."
I think you answered that in an earlier post "wasting ... money on crap and dishing out billions to ministers' friends and families". Lets face it it was never going to be spent on anything else, let alone the NHS.
L, I would have thought that it would depend on the elasticity of demand, so care services, the customer, which is ultimately the state, will end up paying, but in the hostility, sorry, hospitality trade, businesses are going to suffer.
And I thought Covid was going to save us a bob or two on nursing homes :/
What is the additional deadweight loss to the economy from the tax rise?
B. Ah. But why in care work need the customer be the state?
Bj, good point.
Phys, a per cent or two?
L, the state is responsible because people expect it to be. It's a self-fulfilling assumption.
MW Yeah. But not me...I never believed that 'cradle to the grave' stuff - in fact it depressed me. Thinking that 'the state' 'cares' about you is simply delusional.
L, some people rack up huge care charges, others don't. It's just a risk we all face.
So really we need a low-cost mass insurance scheme. The easiest way to do that is via the tax system. Having got that far, to prevent rent seeking by the private sector if it were out-sourced, it also sort of makes sense for the government to provide the care as well (or just as good, to only give taxpayers money to private providers at capped prices).
Government provided care might be a bit rubbish, but it is a fraction of the cost of what private companies would charge. Like the NHS, it costs one-third of what the Yanks have to pay. Taxpayer funded and govt provided care is just an extension of the NHS, there is some logic to it.
"But not me...I never believed that 'cradle to the grave' stuff - in fact it depressed me. Thinking that 'the state' 'cares' about you is simply delusional."
Me neither, but us old farts are out of date. Consider the fuss that was made about the sate not providing enough welfare, so that some people had to resort to food banks. FFS, it's all charity, it's just that state charity is no longer seen as such any more.
"So really we need a low-cost mass insurance scheme. The easiest way to do that is via the tax system."
One answer would be to return National Insurance to being an insurance scheme and put back some connection between what you pay in and what you get out, i.e. if you don't pay anything in, you get nothing out. Of course, if we had a CI/Basic State Pension scheme that was funded separately out of general taxation, this would be a lot easier, so the state pays for a very basic provision of support and social care through the NHS and if you want anything more you pay through contributing to NI.
MW. The comparison NHS / US System are not tenable. The US system is an even worse mess than the NHS. The layers upon layers of flawed interventions and state protected / created monopolies etc have made things even worse.
I do not agree that there is as much 'rent seeking' in non-state sector as is supposed. In any event the land component of that would be dealt with by LVT Man.
If you provide all this through government bureaucracy the winners will be / are always, and only, the government bureaucracy. There is never any real accountability. It descends into not care providing but care rationing. And gets away with massive producer capture. Witness the NHS.
Do the YPP 'plan' and denationalise the whole Damn' thing.
There's another factor here. Although annual fees may be high, the overall cost of care is often modest - because people die. Our experience working in this market is that if you go into a nursing home you might survive three years. If a residential home maybe five years.
Round here that'd be sort of £190K (less all your existing income and benefits)to maybe £315K less continuing benefits. There are of course outliers - my godmother for example - who was in care for 10 to 12 years, but she was self funded (maiden lady with excellent pensions and entitlements and good savings and investments). In other words you probably would not 'spend all your house' anyway.
Forgot to add a bit about how we know this about survival times. On factor being that immediate needs / LTC annuities have a yisld of about 30%... i.e. you gets yer money back in three years. Or, the insurers expect a survival age to be less than three years from purchase.
And what's more this whole the state pays for LTC thing has massively killed off the immediate needs annuity market. There used to be several - may 6 or so outfits - offering these plan. Now there are two...
The Swedish health service is organised at a county level. It is not free at the point of use. There is a charge of 100 kr to see the doctor and 50 kr to see the nurse. This acts as a filter against trivial demands for consultations. There are also charges for medicines, with an annual ceiling for all costs of about 1200 kr. The system was working reasonably well until the staff were tempted away to work in Norway for higher salaries. There have also been big problems with IT systems.
Private minor surgery is affordable and quick.
I wonder if this might be a model for denationalisation?
I think the only model for privatisation on the cards at the moment is the US one.
Bayard. I sincerely hope note as the US is not 'privatised'. Is a complete mess of lots of failed interventions, subsidies, special interest groups, state sanctioned monopolies, limits on cross state border selling of insurance, legacy of employer provision thanks to economic idiots like Roosevelt and Galbraith et al. etc etc
Free market is ain't.
Ah, but despite all that, it makes huge sums of money for lots of private companies, and that's what matters.
Has anyone looked at incentives for restoring inter generational care? Now that husband and wife both have to work to compete to buy the houses that used to be affordable on a single salary, there is no house wife/husband to care for their elderly parents after the kids leave.
Bayard. Not 'despite'. 'Because'. It's state enabled crony corporatism gone mad.
OTOH, the state has smashed the birthrate right down, so there are lots of people to look after their elderly parents without having to look after kids of their own. Who exactly will care for them is a matter that goes way beyond the next election, so isn't addressed. Will be interesting to see how the bunfight for young people will pan out. Will my kids take a tax break to go to another ageing country or stay here and pay more tax than young people bribed to come here?
M, one of the reasons given for declining populations* in developed countries is that in Olden Times, you'd have a lot of kids as insurance against infirmity when you're old. With state pensions and NHS, there is no such pressure.
So higher taxes in working age people mean fewer kids (not enough money) and less need to have kids anyway ('the state' will look after you).
* The other one is urbanisation. If you have a farm, kids come in useful for manual labour, not so much if you have an office job. Also, land and housing is much more expensive in urban areas, so people can't afford the space to have kids.
Another reason given for declining populations is that, once women were given the choice whether to have children or not, a lot of them decided not to have them, especially if life was pretty grim and they didn't want to inflict that on the next generation.
If the Tories get in again next time, expect the birthrate to fall even more.
MW - another factor. High birth rates were/are an insurance against infant mortality.
B, yes.
L, also true, but we've overshot.
There's no 'right' birthrate, as long as rents are shared equitably. An ageing population will generally lead to a lower citizen's income for everyone, as opposed to whacking more and more taxation on the working age population to support the elderly.
M, on a philosophical level, sure, it's up to everybody to decide to have kids or not, and if so, how many. And sharing the rents solves or minimises most perceived problems.
On a practical level, a stable population with no baby booms or busts is A Good Thing. Would Georgism encourage that? Dunno, probably yes. Oldies would work longer and housing (and nursery places) would be cheaper.
MW M Maybe we've only 'over-shot' because welfarism. The welfare (warfare) state depends on ever increasing tax base as it is driven by two unaccountable groups - bureaucrats and claimants - neither of whom have any incentive at all to minimise costs, in fact quite the reverse.
In theory a declining population in a free market capitalistic wealth creating society with strong property rights and any (minimal) taxation incident upon rents should get wealthier all the time, as 'capitalism' does its trick of doing more for less every day.
Oh, and I've done my bit - 4 daughters.....
L, you did your bit, I did mine (spread over two marriages).
As to over-shoot, the Daily Mail crowd would say that the welfare state encourages more kids, not fewer, so I don't think that's an explanation.
MW. Without a doubt there are benefits gamers who have children to garner benefits. As there are absentee fathers ditto. I know one or two - through my children. I do not think they are in the majority. Of course if you reward something well you get more of it - unemployment say.
I have a lady friend who lived on a council estate in a local market town. Opposite her house was a house full of a reprobates. The whole of the rest of the estate loathed and despised them.
Mark, we know from the example of the PWIM, that something doesn't have to exist in reality to exist in the popular imagination. The red tops love to find one or two examples of things and then pretend that these are only the tip of the iceberg.
@MW, between NI threshold (£9,568) and income tax (£12,570) it is 32.6% (pl check my working of £115.05 gross £86.75 net). So really not that bad at all until you compare to 0% for pension, ISA, rent, dividend, etc income. And 0% on capital gains as well. Basically anything that does not involve actually producing anything FFS. Luckily they've cottoned on that the vast majority of people who have significant dividend income outside of ISAs and pensions actually get it from working so have slapped them with a (much smaller) 'how d'ya do'. But only on such income over £14,570 (£12,570 + £2k dividend allowance). Total headline tax rate on dividends is then 8.75%, not really clear how much VAT and corp tax is passed on though
M, looks like 25% to me (£87 ÷ £115 = 75%)
That is bloody outrageous that people on such low incomes pay a penny income tax at all. That's barely subsistence level. The personal allowance should be hiked to at £20,000 as a matter of urgency.
@MW terrible maths from me!!
Morally outrageous for me as a matter of private property rights - taking anything away from someone in poverty is a terrible idea, even if you do give some or more of it back via welfare
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