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The Top 10% - Should They Pay More Tax?

There are lots of arguments as to why a progressive taxation system is fair (and lots of counter-arguments).

If you believe that the happiness (or utility) that you gain from moving from £20k to £21 k is bigger than the happiness you gain from moving from £200k to £201k, then a progressive system is fairer (at least, in a utilitarian sense). These theories have been tested and are reasonably robust - the diminishing marginal utility of income.

Also lower taxes for the less wealthy are said to be a better way to stimulate demand than a tax break across the board. This is because the marginal propensity for people to consume falls as their income increases (instead of purchasing goods and services with all their pay, they save it or invest it).

Wiki has a good summary of the pros and cons:
http://en.wikipedia.org/wiki/Progressive_tax#For_implementation
 
I like to think I'm fairly smart, and open, when it comes to these things, but nobody has ever given me an explanation of why higher earners should pay more tax. Lets take this example.

Assume a flat rate of 20%, and tax free amount of £10k, for simplicity (and I haven't got a calculator to hand).

Someone on £10k pays £0

Someone on £20k pays £2k

Someone on £110k pays £20k

Now, it would be safe to assume that consumption of tax-funded services does not increase with earnings I'd say (if anything I'd argue a decrease - rather than go to the library, I just buy books on my Kindle. Rather than queue for an NHS bed, I go Bupa). Why should Mr £110k pay more on the higher slice of his income (lets say an additional 20% on the top £50k to make a higher rate of 40%) - an additional £10k?

Surely the system should be more about finding an appropriate tax-free amount to protect pensioners and those truly unable to work, followed by a fair flat percentage across the board?

And note that 'tax evasion/avoidance' doesn't come into this argument - that's a separate matter, although I acknowledge that the pure economics mean that both service providers and Mr £110k are more likely to be attracted to one another than Mr £20k.
very good post ,agree totally.
 
I dislike Nick Clegg even more with every passing day. He sums up everything that people hate about politicians. This is just another populist, easy-to-please statement that he won't actually fulfil (because he can't). The public aren't falling for him anymore. The rich already pay their fair share in tax (yes there are some in the 1% who avoid millions of tax, they should be chased up but the majority of the "10%" pay what they're meant to). I'm no economics expert but to me, why should people who are successful and who have worked hard for that success fund the money that the Government wastes on benefits for people who can't be arsed to work or aid to countries which don't need it like China and India? If you put up taxes for higher earners you'll put off wealthy investors from investing in the country.
 
The top 10% with children will already be paying more from Jan when child benefit is removed from them.
 
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