Monday, 30 March 2009

Who employs these people?

Over in the UK, they appear to have a batshit crazy columnist at the Gaurdian called Polly Toynbee.

Her latest incredibly stupid idea is to put a hyper-tax on earnings over say 200,000 quid - a tax of 90%.

Clearly, like many lefties, she has not thought this through.

Let's say Mr Fat Cat is earning $500,000 (I'll shift to dollars here, because I can't be buggered finding the pound sign) and keeping $300,000 of it after taxes and deductions. If Mr Fat Cat is like a lot of people, he'll have a mortgage, and that mortgage will be eating up 30% or more of his after tax income. Let's assume that he has mortgage repayments of $100,000 a year, which if you think about it, is probably unrealistic. Let's crank that up to $150,000 per year, leaving his family of kittens with $150,000 to live on.

Now that sounds grand - $150,000 a year to live on! They can't be allowed to have that much money! Let's tax it!

So the supertax comes in at $200,000. Suddenly the take home pay of Mr Cat drops from $300,000 to $120,000. That's only fair, right?

But Mr Cat has mortgage repayments of $150,000 per year. How is he to continue to make those payments, and feed his family?

He can't. The cat's home is repossesed by the Evil Bank and sold, leaving them with nothing.

I'm sure Polly and her ilk have previously written many columns denouncing banks for foreclosing on people and taking away their houses. But in essence, what she is proposing will do exactly the same to a lot of well paid people. They have living expenses, just like you and me. Just because someone earns a lot, doesn't mean they don't have a mortgage to pay off.

Instead, they will have a mortgage that dwarfs anything you and I have by a huge margin, and they may in fact be paying an enormous amount of their post-tax salary in repayments, because the banks will lend them proportionally more money. It is not uncommon to find bankers living on their salaries and then using their annual bonus to pay the mortgage. No bonus - oops, no house.

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