I wrote an article for a women’s magazine recently. In it I noted that, if you earn £30,000 a year, your take-home pay comes out at around £10 an hour. I later got an email from the magazine’s sub-editing department, saying my figures didn’t match with their calculations.
I think I know why. It’s because they think that someone getting £30,000 a year pays income tax at 20% and so, after accounting for the tax-free allowance, takes home about £25,000. Assume 40 hours work a week and that gives you about £12 an hour. The trouble is, no one pays tax at just 20%. Up to an income of £844 a week (or nearly £44,000) they also pay national insurance at 11%. So for £30,000, you end up at about £10 an hour. (See www.thesalarycalculator.co.uk if you want to see how much NI gets taken from your own salary.)
And that’s just the beginning. Take your post-payroll-tax earnings down to the shops and odds are another 50% will disappear in taxes of one sort or another before you get your purchases home. Not convinced? If Michael Van Clarke has his way you soon will be. Van Clarke, a London hairdresser and – like all business owners – an involuntary tax collector, has started issuing all his customers with a full tax receipt, one which shows exactly how much of their bill goes to him and how much to the state.
The result isn’t pretty. Of a bill of around £100, about £48 is made up of taxes – think VAT, staff national insurance bills, rates, climate change levies and landfill tax. “People just don’t understand how much tax they are paying,” says Van Clarke. “It is at least twice what they think.”
I think he’s on to something here. One of the reasons our government gets away with its endless overspending and inefficiency is our lack of anger. Most of us can’t work out how much the state takes, so we don’t hold them accountable enough for it.
If Van Clarke gave someone a bad haircut he’d never hear the end of it. But when the state fails to educate our children properly, to empty our bins on time or even to ensure that nurses are nice to our grannies, we just shrug and move on – even although the government takes 30% plus of our salaries and then half the price of every haircut. Maybe if every single receipt we got (including those at the fuel pump) reminded us of just how much tax we were paying, there’d be less shrugging and more campaigns for lower and better government spending.
Our cover story this week is on the US property market. I’m far from bullish on the market, but I think it’s fair to say – as even our über-bear James Ferguson almost says – that in many areas of the US, prices are now roughly where they should be. If I wanted a house in rural Florida (which I do) and I had time to go and look for one (which I don’t) I’d probably buy one in time for Christmas.