[Gllug] [OT] Times Article on ABD was Fighting a virus

[John Winters]

David Damerell wrote:
> On Monday, 19 Feb 2007, Christopher Hunter wrote:
>> Their increasingly desperate attempts to tax everything have resulted in
>> a personal tax burden that is amongst the highest in the world.  If you
>> pay "higher rate" income tax, when you take into account "National
>> Insurance", "Council Tax", fuel duties, VAT and all the rest, you're
>> lucky to see 30% of your earnings!
> 
> Uh, I'm a higher rate taxpayer, and I see about 2/3 - 3/4 of my salary.
> Assuming that every penny then goes on something VATted... no, I can't
> even get close to this 30% figure. Perhaps a passing proctologist will
> tell us where it comes from.

I may be able to explain the discrepancy here, although not having 
access to either of your calculations I'm guessing a bit.

I suspect that Christopher's calculation refers solely to the part of 
your salary taxed at the higher rate.  Of the money in that band, I 
wouldn't be surprised to find that 70% of your earnings goes to the 
state.  Your figure on the other hand I would guess is calculated by 
taking your gross earnings and working out what fraction of that you 
receive net.  Given your result, you can't be very far into the higher 
rate tax bands; the allowances and basic rate band drag the average 
down.  I guess you're also ignoring the tranche taken by means of the 
"National Insurance Employer's Contribution".  This doesn't normally 
appear in any statement of gross salary, but nonetheless is part of your 
earnings and is a large extra hidden tax.

As a general purpose metric I prefer to look at the modal tax band (in 
the case of the UK this is currently 23% IIRC) and then work out what 
percentage of your total earnings (including both bits of NI, and VAT on 
what you buy) in that band goes to the government.  The last time I 
calculated this was when Gordon did his large increases to NI, and IIRC 
this just tipped the figure over 50%.  The figure of 52% or 53% springs 
to mind but I confess it was a while ago and I think he's increased the 
employer's contribution again since then.

To make that completely clear - if I do a bit of work for you, and the 
work is subject to all the usual tax charges (VAT, both slices of NI, 
and Income Tax at 23%) then for each pound which you hand over, the 
government gets 52/53p and I get 47/48p.  The reason we have so many 
different kinds of tax is to disguise quite what a large chunk the 
government is taking.

John
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