3 ms·

Im not convinced by those figures; it doesn't reflect my experience of paying tax here in the uk (for example: I am above averagely paid and still not hitting t

by ErrantX 17y ago

Im not convinced by those figures; it doesn't reflect my experience of paying tax here in the uk (for example: I am above averagely paid and still not hitting the 13,000 quoted here)

gjm11 17y ago
He's looking at total tax revenues. Some things you might not be taking into account, from most likely to least: 1. Corporation tax. You wouldn't be paying that directly. 2. Value added tax. You do pay that kinda-directly, every time you buy something with VAT on it, but unless you keep more careful records than most people it's hard to assess just how much you pay. 3. National insurance. Effectively an addition to income tax that doesn't get reported as income tax and that (unlike income tax) is regressive rather than progressive. Back of envelope: Consider someone paid £30k/year (modestly above the national average). They'll pay about £7k in income tax and a bit less than £3k in national insurance. The corporation tax rate is comparable to the income tax rate, and nationally profits are something like half of wages, so probably this person's share (so to speak) of their employer's corporation tax is about £3k or so. Call it £3k. This person's take-home pay is about £20k. Perhaps half of that will go to things like food, utility bills, mortgage/rent payments, etc., that aren't subject to VAT, leaving £10k; perhaps they'll manage to invest £3k of that, leaving £7k; then VAT at 17.5% on the remainder is about another £1k. So, crude estimate: this person accounts for about £14k of tax. That seems to fit well enough with Mankiw's figures.
- ErrantX 17y ago
  Ah gotcha. I included NI but not the other two. Based on the tax I'm paying currently your figures do seem about right. EDIT: actually your income tax figure might be a bit high. I'd say it's about 4.5-5K
  - gjm11 17y ago
    Personal allowance is ~£6.5k, leaving £23.5k. Then basic rate is 20% of that which is, er, £4.7k. I have absolutely no idea where I got £7k from. Sorry about that. So yes, my numbers are too high by ~£2k. So presumably it matters that I didn't include some other more obscure taxes -- inheritance tax, stamp duty, import duties, etc. Key point: there are lots and lots of taxes, and what Mankiw is looking at is the ratio of total tax revenue to GDP, or population, or whatever.
    - ErrantX 17y ago
      Oh yes, sorry, I wasn't querying the total :) just thinking out loud as it were. (thinking tangentially are we including employers contribution to NI as individuals tax? because that could account for any defecit)
      - gjm11 17y ago
        I was deliberately not including it, because I was thinking the employer's contribution is quite a bit smaller than the employee's. But I was wrong; they're about the same size.
        ErrantX 17y ago
        Yeh that surprised me too. I found a nifty tool to help work it all out actually: http://listentotaxman.com/ http://listentotaxman.com/
fhars 17y ago
You forgot to take VAT and other indirect taxes into account.

by ErrantX 17y ago

Im not convinced by those figures; it doesn't reflect my experience of paying tax here in the uk (for example: I am above averagely paid and still not hitting the 13,000 quoted here)

gjm11 17y ago

He's looking at total tax revenues. Some things you might not be taking into account, from most likely to least: 1. Corporation tax. You wouldn't be paying that directly. 2. Value added tax. You do pay that kinda-directly, every time you buy something with VAT on it, but unless you keep more careful records than most people it's hard to assess just how much you pay. 3. National insurance. Effectively an addition to income tax that doesn't get reported as income tax and that (unlike income tax) is regressive rather than progressive. Back of envelope: Consider someone paid £30k/year (modestly above the national average). They'll pay about £7k in income tax and a bit less than £3k in national insurance. The corporation tax rate is comparable to the income tax rate, and nationally profits are something like half of wages, so probably this person's share (so to speak) of their employer's corporation tax is about £3k or so. Call it £3k. This person's take-home pay is about £20k. Perhaps half of that will go to things like food, utility bills, mortgage/rent payments, etc., that aren't subject to VAT, leaving £10k; perhaps they'll manage to invest £3k of that, leaving £7k; then VAT at 17.5% on the remainder is about another £1k. So, crude estimate: this person accounts for about £14k of tax. That seems to fit well enough with Mankiw's figures.

ErrantX 17y ago
Ah gotcha. I included NI but not the other two. Based on the tax I'm paying currently your figures do seem about right. EDIT: actually your income tax figure might be a bit high. I'd say it's about 4.5-5K
- gjm11 17y ago
  Personal allowance is ~£6.5k, leaving £23.5k. Then basic rate is 20% of that which is, er, £4.7k. I have absolutely no idea where I got £7k from. Sorry about that. So yes, my numbers are too high by ~£2k. So presumably it matters that I didn't include some other more obscure taxes -- inheritance tax, stamp duty, import duties, etc. Key point: there are lots and lots of taxes, and what Mankiw is looking at is the ratio of total tax revenue to GDP, or population, or whatever.
  - ErrantX 17y ago
    Oh yes, sorry, I wasn't querying the total :) just thinking out loud as it were. (thinking tangentially are we including employers contribution to NI as individuals tax? because that could account for any defecit)
    - gjm11 17y ago
      I was deliberately not including it, because I was thinking the employer's contribution is quite a bit smaller than the employee's. But I was wrong; they're about the same size.
      - ErrantX 17y ago
        Yeh that surprised me too. I found a nifty tool to help work it all out actually: http://listentotaxman.com/ http://listentotaxman.com/

fhars 17y ago

You forgot to take VAT and other indirect taxes into account.