10 thoughts on “Death and taxes”

  1. Posted 17/12/2015 at 15:16 | Permalink

    If someone lives to the age of 95, having left school at 18 and retired at 65, he or she will not necessarily have ‘spent at least 48 years paying less in tax than [they] received in benefits and services.’ I myself retired more than ten years ago; but I seem to be (still) paying very large sums in tax. We could argue about the value of the benefits I am receiving from the state; but if the government offered to cancel all my taxes in return for me paying in full for all the benefits and services I am receiving from the state, I would jump at the offer!

  2. Posted 17/12/2015 at 17:47 | Permalink

    Whatever the situation the stats are not able to pinpoint what is beneficial because conclusions drawn a complete muddle and favour whatever answer the politicians care to provide.

    Does a smoker and heavy drinker have a greater cost to the NHS than an abstainer given that taxes on smoking and drinking are in the ‘tax the rich’ league.

    Do the poor as a Keynesian “aggregate” provide a greater level of revenue to the exchequer than the rich?

    Nobody actually knows because nobody actually cares, It’s just another soundbite

  3. Posted 18/12/2015 at 11:57 | Permalink

    There are a couple of factors that Christopher Snowdon hasn’t taken into account in his analysis. Firstly, people with unhealthy lifestyles are far more likely to suffer poor health during their normal working lives, thus negatively impacting both GDP and tax contributions. Indeed, if you die early, it is much more likely that the taxpayer will subsequently have to support your family. Secondly, he doesn’t take into account that many people are now retiring later or working part time after the age of 65 (and the statutory retirement age is increasing anyway) and so continue to make an economic contribution.

  4. Posted 20/12/2015 at 12:21 | Permalink

    HJ,

    Those points are addressed in the report. The evidence is quite clear that by the age of 65 the average person receives more in benefits than they pay in taxes.

  5. Posted 20/12/2015 at 17:31 | Permalink

    Chris – My points are not addressed (at least not properly) in the report. It says that rising retirement age will not compensate for greater pensions costs, but pension costs are not the whole story as you ignore the greater tax/NI contributions generated by a later retirement age. You also don’t look at costs generated by people dying early and the taxpayer cost of supporting their family.

    Your comment about the average person receiving more in benefits than they pay in taxes before the age of 65 is irrelevant – we are looking at the tax/benefit CHANGES caused by better health and greater longevity.

  6. Posted 21/12/2015 at 10:04 | Permalink

    HJ – The main change that has come about from better health and longevity since the welfare state was created has been a huge rise in the number of people who are old and very old. There is no reason to think that this will not continue to be the main effect in the future. Since 1948, life expectancy has increased by 13 years. When the current reforms are finally put in place, the retirement age will have risen by 3 years. Clearly, the pensionable age is not keeping place with life expectancy and it would be biologically and politically impossible for it to do so.

    Increasing the retirement age will mitigate the cost of ageing to the public purse (and the increased tax/NI is, I agree, one way it will do so) but it will certainly not cancel it out, let alone reduce it on net (which is the claim of those who think extending lives lowers costs).

  7. Posted 21/12/2015 at 10:25 | Permalink

    Chris – You miss my point. It may be that the extra costs of living longer are the bigger factor, but that is no excuse for simply ignoring in your analysis counterbalancing factors such as longer and more productive working lives. You only looked at one side of this equation – and this means that even if you are correct, you may overstate the extra costs.

    Incidentally, your figure of 13 extra years of life expectancy is, on its own, meaningless in the context of this discussion. From that figure alone – which is presumably an average (mean) figure, we cannot tell whether this is mainly because people are living much longer once they get to 65 or whether it is accounted for by, for example, lower child mortality (and lowering of child mortality rates would, per death avoided, have a bigger impact on the mean).

  8. Posted 21/12/2015 at 10:42 | Permalink

    Chris – I have done a little research and come up with the following: “In 1948 period life expectancy at age 65 was 12.6 for men and 15.0 for women. In 2010, this had increased to 18.1 for men and 20.7
    for women”. This puts the increase in life expectancy once someone has reached 65 at less than 6 years over this period – a rather more modest and relevant figure than your 13 year average life expectancy increase. Then take into account the rising retirement age and better health (and therefore productivity) during working lives and the effect on costs may be somewhat more modest than you imply.

    Heres the source: http://www.ilcuk.org.uk/files/Linking_state_pension_age_to_longevity.pdf

  9. Posted 21/12/2015 at 10:45 | Permalink

    Chris – I also forgot to mention that women’t retirement/pensionable age has risen by rather more than 3 years. Not so long ago, women received a state pension from age 60, so their retirement age has increased by more than the rise in their average longevity at age 65.

  10. Posted 25/12/2015 at 06:25 | Permalink

    HJ, you’re quite right that life expectancy at birth is not really the basis of comparison we need, but nor is life expectancy at 65, since more adults used to die before they reached that age but after years of paying contributions to fund other people’s old age.

    Do you have an idea of the comparative life expectancies at age 15 (or 18)?

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