Why, yes, idiot is indeed idiot

There are three things to note. First, the lower half of the income distribution (broadly earning less than £24,000 pa in the year in question) get 10% of all pension tax relief.

The so-called middle-income earners (earning £24,000 to about £54,000 in that year) enjoy 40% of tax reliefs.

And the top 10% of earners, all earning over £54,000 pa) enjoy 50% of all tax relief.

Yes, OK.

In other words, tax relief for those best off – which is nothing more than a straightforward state subsidy for their savings which increases the wealth divide in the UK as a result – costs £27 billion a year.

Ahhhh. Well, you see, there’s this lifetime thing? Pensions savings are made over a working lifetime. And wages change over a working lifetime. It’s not exactly unusual that older people make more money than younger. Which is why we do adjust for age when considering income at times.

We’ve also the fat that pensions are indeed part of that wealth divide. But then we also nee to consider lifetime effects. The 21 year old just starting work has no pensions savings. The 65 year old just retiring has the most he’s every going to have. We thus really o need to look at age adjusted incomes and age adjusted wealth.

But the Senior Lecturer doesn’t know enough economics to know this, does he?

11 comments on “Why, yes, idiot is indeed idiot

  1. He’s missed the best point an alleged progressive can make, which is the drop in employees NI from 12% to 2% when income goes above around 42k.
    There’s an income range above that level where your effective tax rate drops, as you can pay the 2% NI, defer 40% income tax, and draw that part back at 20% later in life. Earn less than the NI change point, and you pay 12% NI, defer 20% income tax and draw it back at somewhere between 0-20% later in life.
    All complicated by the tax-free lump sum, and the personal allowance withdrawal above 100k, but it really needs simplifying out. Even a flat system would be better than the current one which is regressive in some income ranges and with good planning.

  2. And as you frequently point out, Tim, pension tax allowance is tax deferred. The people with the biggest pension pots are going to be paying the most tax when they start receiving their money.

  3. Of course, the true beneficiaries of state largesse when it comes to pensions are public sector workers.

    So, in Spud’s world at the top rate of tax a private sector worker puts in 55p and the state puts in 45p.

    In the same situation, to get the same gold plated pension, the state would need to put in £1.10. Probably more.

    Will spud condemn this?

    Will he fuck.

    Wanker

  4. Most wealthy people have maxed out the lifetime allowance and therefore get zero tax relief on pension contributions. Rather than acknowledge this his reply is that wealthy people don’t pay tax

  5. Surely the reason higher income people get more tax relief is because they have a higher amount of tax from which to be relieved.
    The obvious solution to this would be to switch to a poll tax where everyone pays the same amount. Sure it might not be all that popular amongst those getting low tax relief, so maybe we ask them which they prefer.

  6. @perry

    Indeed. It’s a standard response from the left.

    + The rich don’t pay tax.

    – but the wealthiest 1% pay 27% of all income tax

    + That’s because they earn so much.

    – but proportionally the wealthiest 1% earn around 12% of total recorded income. They are paying over twice their “fair share”.

    + But they should pay even more. They hide all their income and fiddle their taxes.

    – have you any proof of that? I mean actual proof?

    +. The rich don’t pay any tax.

  7. Hold on, he’s describing the bottom half of the top half as the middle? 50%-75% is “middle”???

  8. “but proportionally the wealthiest 1% earn around 12% of total recorded income.”

    AndrewC, wealth and income are two different subjects.

  9. @Gamecock

    OK, “proportionally the highest earning 1% earn around 12% of total recorded income.”

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