Let’s tax the rich to pay for the NHS, social care, and everything, right?
The general elections are approaching, and politicians will do anything to get our votes.
It’s a popular sentiment and an argument that appeals to a broad mass of people, most of whom don’t believe they are rich.
But what does ‘rich’ really mean?
Who are the rich among us, and how do we tax the truly wealthy?
As usual, the wealthy devil is in the rich details.
Are the rich in the top 1%, 5%, or 10%?
For quick reference:
→ If you’re earning £45k, you’re in the top 25% of earners.
→ If you’re earning £65k, you’re in the top 10% of earners.
→ If you’re earning above £100k, you’re in the top 2% of earners.
→ If you’re earning above £181k, you’re in the UK’s top 1% of earners.
Of course, it also matters how you earn your income. A £45,000 salary is hardly comparable to £45,000 in dividends or investment income. Governments can tax three things:
1. Income Tax (e.g., PAYE): Evidence shows that this can discourage people from working.
2. Consumption Tax (e.g., VAT): Hits poorer people hardest because they spend more of their income on day-to-day expenses.
3. Wealth/Assets Tax (e.g., tax on property and investments):
Should ‘rich’ be based on assets? How do you define assets?
My 89-year-old patient’s house is now worth £1M after 60 years.
She also owns a rental property, which she bought with her late husband 30 years ago, a police officer, and brings in £6,000 annually plus pensions. Is she rich?
What about the 80-year-old retired plumber who saved and invested all their life, with no juicy work pension, now receiving income from rental properties, bonds, and dividends? Rich?
Let’s bring it home: A 48-year-old Anaesthetic Consultant working for the NHS earns £130k per annum after 28 years of training and work.
Despite this, they fall into the 60% tax trap and have no assets and no investments. If they lose their license today, they will have no income. Are they rich?
How easy is it to tax the top 0.5%, who are often quite mobile and can move countries?
They have clever tax loopholes, along with bright accountants, brilliant lawyers, and influential lobbyists to help them.
According to Henley Private Wealth Management, the UK is projected to see 9,500 millionaires leave in 2024, more than double the number in 2023.
The UAE, with its zero income tax, luxury lifestyle, and golden visa programme, is set to attract 6,700 new millionaires this year alone.
“Tax the rich” is an easy and lazy argument that sounds popular with politicians, but I think it’s a conversation that needs to be had.
Who are the rich?
Regardless of government policy, doctors and healthcare professionals must be aware of our finances and the massive impact taxes could have.
It’s crucial to ensure that what we pay in taxes is fair and not more than what we have to pay.
Of course, there’s always the option of paying more than our legal obligations if you feel that way—it’s called charitable donations. Oh, and guess what? That’s tax deductible as well.
Sorry, I don’t have all the answers. I would like to know if you have any thoughts. These are just some random reflections from my morning walk yesterday.