KWC fees.

[A fool and his money.....]

On 8/30/2024 at 11:28 PM, Chinahand said:

Tax rich people not education.

I agree with you there in principle, however we don't tax the rich with any kind of proportionality here, not even close.

It's entirely possible for a minimum wage earner to pay top rate income tax and a tax capper earning millions to be paying a lower rate.

As far as I'm aware, there's no plans to change any of that, in fact I'd be amazed if there were in the near future.

With that in mind, taxing private education is about as close as we're going to get to taxing the rich anytime soon. There may be the odd exception as you point out, but the vast majority of people who send their kids to KWC are rich by most people's standards. 

I don't remember the same uproar when they removed tax relief from university fees a few years ago, no doubt affecting many more people than charging VAT on private school fees.

Nor the idea that student loans aren't available for Open University study here, and OU students are required to pay their fees upfront before attempting to claim any support.

I think you have the right idea not wanting to tax education - I just think you're coming at it from the wrong end. If you're going to give tax relief, first make sure the full range of education is available to all. This is a much more worthwhile endeavour than subsidising private education for very few wealthy people.

[Chinahand]

Thanks for the reply AF&HM.

You made me go and lookup the income distribution for the Island from the Earnings Survey:

https://www.gov.im/media/1384089/earnings-survey-2023-publish.pdf

 

It's interesting. The average full time wage is £902 per week nearly £47K a year.

The richest 10% who earn on average about £140K pa pay 36% of the total full time income tax take.

While 50% of it is paid by people earning over about £64K pa who make up about 15% of full time workers.

People earning below £30K pa make up 36% of full time workers and only pay in 10% of the income tax take from full time workers.

These figures are about right, I've had to fudge the numbers a bit as I had to eye ball the percentages, and use the average income figure to get the top earning figure as the chart tops out at about £80K per year and so only include approx 90% of people.

The figures pass the sniff test with full time employees contributing about £220million in income tax to the government purse. The total income tax take (full + part-timers) is £313million.

Trying to understand what is fair is hugely complicated, but if you compare the income distribution of the Island to the UK

https://www.gov.uk/government/statistics/shares-of-total-income-before-and-after-tax-and-income-tax-for-percentile-groups

   You get this:

The Island's tax policies have created wealth and do result in the poorest 10% being considerably better off than their UK counterparts.

There are more than one way to skin a cat and it isn't obvious to me that the Island's tax policies disadvantage the poorer members of our community, but realise this is a hugely complex issue and so using averages is challenging.

 

[Ringy Rose]

It’s always a balancing act.

I earn just about £50k. I pay just about £3k a year in income tax.

A tax capper earns, say, £10M and pays £200k. 

As a percentage they pay much less than me, but I won’t pay as much tax in my entire career as they will in one year. 

I still think that for the optics they should have increased the tax cap when they increased the tax rate and when they dicked about with the tax free earnings for those earning more than £100k. 

[manxman8180]

7 hours ago, Ringy Rose said:

It’s always a balancing act.

I earn just about £50k. I pay just about £3k a year in income tax.

A tax capper earns, say, £10M and pays £200k. 

As a percentage they pay much less than me, but I won’t pay as much tax in my entire career as they will in one year. 

I still think that for the optics they should have increased the tax cap when they increased the tax rate and when they dicked about with the tax free earnings for those earning more than £100k. 

No dog in this fight but not to forget that a tax capper, in order to pay the capped amount of £200k pa, also needs to elect to pay that for a minimum of 5 years.  So by signing up, they are committing to a minimum of £1m in Income Tax.

The proportion argument still stacks up of course, but when you put it into context....it's not insignificant.

[Two-lane]

30 minutes ago, manxman8180 said:

they are committing to a minimum of £1m in Income Tax.

What is the penalty if they just leave before their time is up?

[Two-lane]

Everyone pays taxes. How taxes are levied varies. For example, here property tax is a percentage of the value (or similar). In other countries it can be by building area or land area. In some countries there are no property taxes - everything is done via income or other taxes. There is no "correct" way.

At some time or other someone though it a good idea for people to pay tax as a percentage of their income. People with higher salaries paid, in absolute terms, more than low-paid people.

Then some rich person came along and said that the system was not fair, because he was paying more in absolute terms, and therefore there should be a maximum amount of tax that should be paid - and above that the money is tax-free. That is good for rich people, but the logic is dubious.

A fair system would be that everyone pays the same amount of tax. That would require an impossible readjustment of wages and incomes.

And the response from the ManxForumers will be that I should be eternally grateful to the rich people who live here and I should tug my forelock in their presence, because without them the island would cease to exist.

 

 

 

 

[Chinahand]

49 minutes ago, Two-lane said:

A fair system would be that everyone pays the same amount of tax. That would require an impossible readjustment of wages and incomes.

Strange thing to say, in my opinion. 

An ideal society has equality of opportunity (everyone can train to be an engineer or try to be a pop star) but not equality of outcome (not everyone has the ability to sign off that a nuclear power station is safe or write a hit song) so people will have different outcomes in their life. 

I fully agree that those with the broadest shoulders should bear the most weight so taxation should be progressive. The debate is what is a reasonable amount to be extracted. There is a point when taxation becomes punitive. 

That isn't the case here at all! 

What is the right balance? I honestly don't have a clue!

[Two-lane]

32 minutes ago, Chinahand said:

Strange thing to say, in my opinion. 

What is tax for? For example, it pays for defence. Each person benefits from that. Why should a well paid person pay more when the benefit at an individual level is the same as for a low-paid person?

If there were no NHS, the only possibility is insurance - and the low-paid person would have to pay the same as a well-paid person.

But that is not how this society has evolved, and the wage structure has evolved to take that into account.

 

[A fool and his money.....]

I completely agree, our tax system should be progressive, certainly to a much greater extent than it is at the moment.

There may be a point when taxation becomes punitive, but we're a very long way from that here. This also doesn't need to be a consequence of a progressive tax system. The rich will always want to be rich- as long as you can be richer by earning more, that's what they'll do.

Another thing is that our equality of opportunity is poor and in my view becoming worse. We have hugely generous opportunities for some professionals to relocate here, perhaps necessarily, and yet have little or no funding for existing residents to train for these professions, especially if they're already working.

As you say the correct balance is complex, but its outcome shouldn't be. At the moment we have a situation where tax is taken from poorer people before they are paid at a rate they have no influence over, whereas richer people have any number of tax efficiency options open to them, many very unfair and well known by government.

I even see some of your logic for opposing VAT on private school fees. I don't completely disagree with your views if they existed in the context of a much more equitable society, but I think to oppose them as we are at the moment is to maintain, even reward inequality, and that's not something I'll ever agree with.

[Chinahand]

1 hour ago, Two-lane said:

Each person benefits from that. Why should a well paid person pay more when the benefit at an individual level is the same as for a low-paid person?

I think you'll find that the rich benefit more from things like the legal and security apparatus of the state than the poor. More things to protect from theft, more complicated affairs to be taken to law.

Business owners have an interest in the education of the workforce.

My main view is simplicity is best. The over complication of the tax system in the UK and US is only in the interests of tax accountants and politicians with their favourites.

 

 

[manxman8180]

16 hours ago, Two-lane said:

What is the penalty if they just leave before their time is up?

I'm not sure tbh - I suspect it will be a legal obligation so able to seek payment.  I guess the reason they have it like that is to stop people structuring income in such a way that they can dump it all in one year and just pay the £200k and then nothing else.

Although if you're rich enough there is always a way to structure 'efficiently' regardless.

[Banker]

17 hours ago, Two-lane said:

What is tax for? For example, it pays for defence. Each person benefits from that. Why should a well paid person pay more when the benefit at an individual level is the same as for a low-paid person?

If there were no NHS, the only possibility is insurance - and the low-paid person would have to pay the same as a well-paid person.

But that is not how this society has evolved, and the wage structure has evolved to take that into account.

 

Spoken like a senior civil servant who wants the same pay rise as someone on minimum wage.