Deputy wants to lift cap on contributions
Saturday 6th September 2008, 9:30AM BST.
AN ATTEMPT will be made to make high earners pay more social security.
Deputy Matt Fallaize (pictured) wants to amend this month’s Social Security report setting out benefits and contribution rates. He is seeking to increase the upper earnings limit for employees to the same level as employers.
That would mean paying from 2009 social security on earnings up to £115,128 a year instead of the department’s recommended £69,108. He could even go as far as calling for a limit to be abolished altogether.
‘I will be moving at least one amendment to raise the upper earnings limit on employee contributions,’ said Deputy Fallaize. ‘I’m meeting Social Security next week to discuss figures and the ramifications, but at the moment I will try to equalise the upper earnings limit by making the employee the same as the employer, but there may be scope to go further than that.’
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Thank heavens for a deputy that can see the wood for the trees. This subject is almost taboo, it would seem. I wonder why?
The more wealth you have, the more responsibility you should shoulder.
It’s about time Guernsey woke up and supported Deputy Fallaize’s initiatives.
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Nope. Time the island woke up and ensured his ideas come to nought.
Compared to when the upper limit was moved from £35k or so, they are already paying an additional £1800 each, annually. Matt’d have them paying another £2000 each.
Self employed upper earners are already paying an additional £3500 each, in return for … well, absolutely nothing.
Easier than public sector pension reform though, eh?
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Those poor, poor upper earners, eh?
Let’s just pick on those earning £18k and take away their reward for public sector working.
This is exactly the mentality that is perpetuating the third world policies of wealth disparity.
It is failing us.
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If the limits were abolished and everyone paid contributions pro-rata then certain initiatives such as complete free health/dental care for all could be looked at. It would not be the end of the island if high earners were asked to pay their share.
Not sure why very high earners should have a limit on their contributions when they are least likely to notice it (compared to most of the island who do earn under £69k pa).
Could someone explain why there is an upper limit of £69K? Do high earners really need help?
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I am a high earner who would end up paying considerably more if the cap was removed but I do find it hard to come up with any good reason why there should be a cap, or at least a cap as low as £69k, other than the cap seemed to be previously set at the level at which social insurance and pensions could be funded across the board. Raising the cap to say £125k would probably be easier to get through the House as a concept as opposed to abolishing a cap altogether.
But let’s not be under any illusions here. It wouldn’t really be a social insurance contribution and would be nothing other than an increased earnings tax, effectively raising the rate of income tax for high earners very considerably. It won’t be popular, of that you can be sure, even if it is hard to find a good or fair reason not to do it.
If it was coupled with enhanced social benefits for all, including a better deal for the self-employed who really don’t benefit much from the current system, then it would be far more palatable. In other words, those of us who would be paying a lot more would probably be happier if we could see the extra “tax” being used usefully, such as to ensure that student loans are never needed.
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So upper earners get the privelege of paying more SS..surely they already contribute more by paying more income tax and, hopefully, spending their higher earnings in our bars, shops and services?
In a few years this SS contribution has increased by a handful of £,000′s for some employees…without any personal benefit…I reckon they are already pulling their weight on behalf of the island so is this about serious politics or good old fashioned envy…you decide.
If these stealth taxes are allowed to creep upwards, for any section of the community, they will encourage the States to spend unabated…how about some focus on cost control, value for money and accountability…before the tax and spend brigade start charging!
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I am impressed with David’d comments as a higher earner who would be affected by such increases. I am a lower earner so would not be affected. A point I would like to stress is that increases in contribution for Social Security should go to Social Security and not to pay off mistakes or blackholes. If one section of the community are to see a dramatic increase then they should at least see something for thier money. Perhaps it should fund programmes to assist getting people back into work, child care, etc etc. It would be a terrible shame to see any rises squandered needlessly as it appears much of our funds are. But Social Security needs to ensure it is making the most of any funds it recieves and is not just paying ‘dole bludgers’ more to live off our hard earned taxes.
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Lawrence – I’ve often read your less then subtle digs at the finance industry; spoken from someone who must have a real issue with Guernsey’s biggest income generator. You speak of third world wealth policies, even with the darkest red tinted glasses how can you even relate to the problem in areas like Zimbabwe in comparison to Guernsey.
I started my life like many in Guernsey working for the states and like many left because I wanted to be self employed
So now I’m an upper earner, but I work 60+ hrs a week, I have no paid holidays, I have no pension, no sick leave, unlike you in the “Public Sector”, but yes I earn a more.
Like most I have a house, children which I and my wife support and like most we aren’t well off because of it. We don’t get any other relief, like cheap fuel or free doctors just because we are high earners.
So what do we get from increased fees, well nothing, only the knowledge that the State dependent families with every increasing children will be able to have a few more children with the states having the spare cash to cover them.
What will really happen is that the economy will stop; people who can leave will, the rest will stop going out to eat, buy holidays, cars etc or simple won’t do work on their properties. Also house prices will drop because people will be paying so much more to the states they won’t be able to afford their Mortgages. But that’s all right with the additional money from the high earners the states can build another 500 houses to help these people out.
On a final note, for all those that can remember, or remember being told (in my case) just remember the tomato industry. Because of a few greedy decisions this went from being the islands biggest income to a mere hobby in a matter of a few years.
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So the economy would stop and all the rich would leave?
Oh dear. We need more high earners like David who are able to see how divisive this appeasement to wealth really is.
Wealth should be taxed proportionately, coupled with governance that understands financial management, then maybe we can all benefit from an industry that has nothing really to do with local endeavour and everything to do with foreign companies exploiting anachronistic tax regimes.
It is a given, Harry, that the self employed should be given encouragement to keep trading and employing. Local businesses keep the community together. It is no surprise that people feel more disenchanted the more non local business takes over.
The ludicrous situation where the States can’t pay their employees in line with cost of living increases yet bonuses and salaries for the big boys keep increasing must stop.
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Lawrence – my reasoning for suggesting a raising or abolition of the cap is very different from yours. I don’t share anything like the same social views as you, but I do recognise that the current system with the cap in place is simply unfair. I cannot come up with a plausible reasoning for why somebody in my office who earns 50% of what I may earn is having to effectively pay twice the rate of Social Insurance that I do (as a percentage of earnings) when I could easily afford to pay the same percentage as them. Nobody volunteers to pay more tax than they are asked to, but I have yet to come across a valid reason for this particular differential.
Harry – my recollection is that the main reason why the tomato industry died is because oil prices soared in the 1970s and the EU gave a heavy subsidy to EU growers to cover the extra oil costs. As a result, the shops could sell EU tomatoes far cheaper than our cost of growing them. Market forces of supply and demand killed the industry. High labour costs in Guernsey would have killed the industry anyway several years later. Our growing industries today only survive because of cheap imported labour.
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Seems fairly black and white to me. How can one set of people have a different set of rules when they are all part of the same economy. No capital gains, no inheritance and no capital transfer tax and high earners complain about having to pay more in contributions…? Get real…
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What is the value of this proposed change (i.e the extra money taken out of peoples pockets and given to the States?)and what will this increase be used for?
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From the States of Guernsey website:
“What do I get for my contributions?
If you are paying the full percentage rate contribution, most of the money is going towards your entitlement to old age pension. But you are paying for other social security benefits as well, including sickness, unemployment, invalidity, industrial injuries and death. You are also paying towards the prescription drugs scheme, the specialist health insurance scheme and for doctor and nurse consultation grants.”
Perhaps Deputy Fallaize can give some idea as to what the extra contributions that he is proposing to raise will be spent on, and how that fits in with the above statement?
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KC and carts. Are you suggesting that higher earners should not pay the same proportion as lower earners because ‘you don’t know what ity will be used for’?
Is this what we have become? It’s like being in the eighteenth century or something.
If you earn well you should be responsible with it. Paying less tax proportionally than the person that cleans the streets and keeps your quality of life respectable is plainly illogical.
It makes the squeals of the rich when suggestions like this are made ever more childish.
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Lawrence, the point is that Social Security, as defined by the States of Guernsey, is not and should not be a tax. It is contributions to cover items like pension, healthcare etc.
I do pay tax proportionately. It’s called income tax.
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KC
Perhaps you prefer to have to pay uncapped income tax, pay capital gains tax, pay inheritence tax as these seem to fit rather more comfortably with your willingness to pay tax proportionally. No, you don’t.
Many see social security payments as another tax. You don@t but many do.
You see KC money has to be found for all the pet projects that are coming up in the future. It seems fair that those who can afford to pay do exactly that.
Good on Deputy Matt Fallaize for his effort.
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I would prefer a tax on wealth than a tax on income. Income can be massaged to mitigate the tax expense. We’re good at that sort of thing over here. Taxing wealth would be a truer reflection of responsibilty through capital ownership. It would include all unearned income such as house price rises.
But you still don’t explain why upper earners should not contribbute proportionately to the SS pot. As David has highlighted, it isn’t fair.
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Also, I went to University for further education. Because of that I am not in a position to be able to complete the required amount of working years to be entitled to a full pension. However as a “high earner” I will have contributed over the years more than average but ultimately will receive less. Conversely, my father contributed for more than the required amount of working years but receives no more. Tax never appears fair but as KC comments this is not meant to be a tax.
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Stephen John, income tax in Guernsey is uncapped, surely you know that? As far as the taxes that you mention, nobody in Guernsey pays those taxes, they are irrelevant to this conversation. Social Security is not meant to be another tax, although due to incompetence and overspending by the States they are trying to make it that way. Proper accountability and control of spending should be the priority.
Lawrence, how do you propose that those with large amounts of equity in their houses pay this tax? Many would be elderly people who have owned their houses for years. Or are you basically proposing inheritance tax?
I don’t belive that higher earners should pay up to £2,000 more towards Social Security when there would be no increase in the benefits that it purports to pay for. Fairly straight forward. Why do you think they should pay more?
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The notion that tax has to be paid in direct proportion to one’s income or capital is a rather silly left-wing idealogy. David’s contention that it is unfair for him not to pay double that paid by someone earning half what he does is facile. The lower earner probably doesn’t pay anything like half what he does in income tax, due to allowances.
There needs to be a balance, which is something that remains wholly unaddressed by MF’s proposals.
The GSSA proposals are balanced to their requirements to raise only sufficient to pay the benefits and provide pensions, as they should be.
David will presumably pass the cost on to his employer, and won’t notice. Or earns so much that he simply couldn’t care less. Lucky him.
Many high earners work outside of finance, and they will not be so lucky. This will obviously reduce spending power, which is often every bit as marginal as that of a lower earner (except the state won’t house, clothe or feed them). Tax, mortgage, pension, school fee commitments will continue. Most will have been contracted for under more liberal tax conditions. Actual disposable income may well have taken a much bigger hit than that of lower earners.
Lawrence – you haven’t given a reason as to why they should – after all they’ll use less services and be less reliant on the state later in life. I do not think you can even begin to grasp the concept of “fair”. A wealth tax will discriminate against savers, as opposed to spenders. Spend and the state looks after you – save and the state robs you blind. No incentive there to do well.
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Bob, what is the point of earning large amounts of cash if you don’t spend it? Watching a balance sheet of portfolios rise month on month may give people a kick, but it ultimately useless to society.
Comparing someone who earns £18k with someone that earns £180k and your assertation that the reduction in spending power is as hard hitting is utter nonsense.
Saying that the rich should be taxed less because ‘they use less services’ is also nonsense.
The little old lady in her mansion should pay more tax because she is taking up valuable land that is obviosuly too much for her.
Doing well is not being rich. Doing well is being part of a successful and functional community.
By removing this cap the message is sent out that Guernsey is trying to be fair, and not pander to the old fashioned view that the rich are somehow ‘better’ than the poor, and so deserve less rules and regulations.
Wealth disparity, and the underlying ideology that amassing fortunes is important, needs addressing if we are to sustain a high quality of life for all amid dwindling resources.
The wealthy need reining in and reminding that their riches are distorting life adversely for the majority.
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Lawrence, the old marxist idea that by accumulating wealth one is somehow robbing the poor is just nonsense. Wealth is often, as you state, invested in portfolios – largely equity based portfolios where the money is being directly reinvested in businesses and industry, thus supporting the economy and providing jobs. A tax and spend strategy reverses that idea and, ultimately, leads to less investment in businesses and industry and higher unemployment. Taxing the rich may satisfy the ‘politics of envy’ but ultimately tax revenues can only fall by making people poorer. Guernsey’s economy provides a clear example of how a low tax regime has benefited island society as a whole. The fact that we have low unemployment and excellent and well funded schools and hospitals is largely due to the success of our low tax strategy. Long may it last.
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CD
The ‘politics of envy’ is purely a capitalist idea that earning more than your neighbour is somehow a measure of success.
It creates division from the majority as they ‘envy’ the material benefits and privileges that our system imparts on the rich.
The low tax regime has NOT helped our education system, why are there so many students in adult literacy classes? The best schools here get charitable status with tax breaks and the new secondary has only just been built, 30 years too late.
Meanwhile we pump raw sewage in the sea, clog up our roads with over powered cars, barricade ourselves against the rising ‘thuggery’ of our youths, put our head in the sand about government mismanagement and fail to see that investment in equity in foreign multinats improves nothing for those in Guernsey.
Better that wealth be spent on the direct community than propping up ideologically unsound big business.
So some of the rich would leave with a more progressive tax regime? Most would stay because they enjoy being in Guernsey because it is Guernsey, not because of their fat wallets.
We cannot afford to keep giving money to the rich so they can hide it away, they do not need it, and society does.
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Lawrence – OK so say we tax the rich, squeeze them till they are all on a par with lower earners. What then? Income tax revenues will fall dramatically, there will be less investment in businesses and therefore less jobs and rising unemployment – all of which places additional strain on government coffers. I agree that there is plenty wrong with society but I do not think that redistribution of wealth cures those ills. Should we look, for example, to China or Russia for a model on how to protect the environment or to provide better governance? I dont think so.
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Of course there is an interesting counter-argument to the GSSA earnings cap, which is that at £69,000 the contributions cover everything that the GSSA is meant to cover, so that there is no need to raise any more, and that everybody earning beneath that figure is actually getting a discount in actual monetary amount terms. There are many ways of skinning the cat.
Social Security contributions should NOT be used to pay for sewage and schools. Whether the money for those items comes from higher or new taxes (GST perhaps ?) or from making other public expenditure savings, or from borrowings, or more likely from a combination of all of those routes, it is not right to dress up such extra revenue-raising methods by GSSA contributions. I would hate to see CGT or IHT or a wealth tax is Guernsey as they just don’t sit well with what has made Guernsey the success that it undoubtedly is, but is the 20% income tax rate sacrosanct ?
I’d love to find out whether the majority would vote for the option of a GST ahead of a rise in personal income tax rates in order to fund the essential capital projects which we somehow need to pay for.
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KC
The point I am making is that more money is needed to finance the various needs of the island.
The money has to come from somewhere, but it appears with few exceptions that those with higher earnings don’t want to make, what many feel, is a more equitable contribution to the financial pot. This might be through higher rates of income tax or any other revenue generating aproach.
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How can those who earn upwards of £69000 a year complain about having to pay the same percentage of Social Security as people that earn £20000 or less?
Its the old story, the more you’ve got, the less you are inclined to part with, this island is totally geared towards keeping high earners happy at the expense of the rest of us.
Deputy Matt Fallaize gets my vote, he is one of very few Deputies that is prepared to try and look after the working class.
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Lawrence,
Your ideas are so out of touch with reality that it’s almost funny.
Guernsey’s tax regime has encouraged businesses and wealthy individuals to Guernsey that have provided a massive boost to the local economy. That money has benefitted people accross the board in Guernsey, although it seems that you are too blinkered by your extreme socialist/communist ideology to recognise that.
If your la la land ideas were implemented the local economy would be destroyed in no time.
What I find most ironic is that you rail against the finance industry yet you work in it…amazing hipocrisy.
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Dear oh dear. The threat of higher contributions really gets up some people’s goat.
Who said anything about taxing the rich until they are on ‘a par with lower earners’? I certainly didn’t. Positions of necessity and responsibility should be rewarded.
I don’t rail against the finance industry per se, I don’t agree with many of its (lack of) ethics. I don’t believe that people working to filter capital towards the top few percent of the population should be rewarded as well as, say, a teacher. I don’t believe in a bonus structure that rewards high risk taking, pass or fail.
It’s all about social justice. The poor and the middle classes are already being ‘squeezed’ and the higher earners are getting richer. I cannot possibly see the logic that this is improving the island.
All research shows that in areas of high wealth disparity there are more social problems. Models from the US and the UK are failing the public.
There are massive holes in our social provision, patched up by charity and voluntary work. These sectors will get larger because people are too fixed in their money grabbing ways to see that if we are to continue like this then the harsh realities of the two or three tier society will become apparent.
Already people have to think twice about going to the doctor or A&E, what sort of service is that? The schools in this rich, rich island are still churning out illiterate teenagers, what sort of system is that?
I though we were supposed to be the happiest in Europe, with one of the highest standards of living.
Tell that to the sewage slick and the seagulls that pick through the discharge. Tell that to the increasingly large mental health waiting list. Tell that to the majority who receive less than RPI increases, whilst the rich spend more and push inflation up.
No one is talking about the 97.5% tax of post war UK, although many of the same conservatives will hark back to those days ‘when we could leave our homes unlocked and children understood respect’.
Social cohesion is the key to a happy population. We are losing social cohesion because of avarice and an ignorance to the effects of individualist hoarding. There is only one outcome if we take the trends onwards. A tiny percentage holding most of the wealth. Just look at the stats for the US, the home of this disasterous ideology. Very poor show.
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Stephen, I do understand what you are saying, and don’t disagree that the money needs to come from somewhere. What I disagree with is raising the Social Security cap to essentially put up income tax by the back door. If further money needs to be raised then it should be done in an up front manner, such as by introducing GST.
Kevin, if someone earning £20,000 and someone earning £100,000 took out private health insurance with identical cover, would it be fair or reasonable for the higher earner to pay several times that of the lower earner? Of course not. High earners already contribute more than some low earners earn in a year, they certainly do their bit.
Lawrence, I wouldn’t say that high earners are getting richer. The cost of living is rising, yet in the finance industry annual rises often fall below the rate of inflation. You also seem to think that huge risks are taken locally, encouraged by the opportunity to earn massive bonuses. That happens in major financial centers, not Guernsey.
Do you not understand that driving away businesses and the wealthy would lower the investment in schools, healthcare etc.
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KC
There’s no denying that the finance industry has been of great benefit to the local economy but equally it has also had the effect of making the island an incredibly expensive place to live.
This is fine if you are earning an excellent wage and can afford the high cost of living but our government needs to do more to help the lower earners – can you give me a good reason why high earners should not be paying social insurance at the same rate as those earning little?
Having put all the islands eggs in one basket the States are having to do everything they can to ensure that the finance industry stays strong, often at more expense to those that can least afford it.
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KC
Fair comment, you are probably right, the high earners already pay their share of Social Security but I can’t agree with introduction of a GST because once again it would hit the low paid hardest.
Also you say that in many cases people in finance are getting wage increases well below the rate of inflation – what you don’t mention is that most of those that work high up in finance are getting massive annual bonuses — in many cases nearly as much or sometimes more than the lowest paid earn in a year.
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KC
Please explain why raising personal tax burdens for the well off is going to drive away business? Do we want Guernsey to be populated by people who only care how much money they can save? Or do we want people to live here that have the island’s best interests at heart, which entails more than selling off prime land to private developers, exploiting the lower paid and building personal empires for themselves?
And the rich not getting richer??? You think I’m divorced from reality? No high bonus schemes here? I don’t know how I can respond to that. I would imagine some bonuses were ten times that of an annual wage for a lower earner. How can that NOT distort the picture?
I wonder how much added value these high earners bring to the island. I imagine it’s nowhere as much as they think. Yet we kick out good teachers and nurses every five years.
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Kevin
A GST alongside a system of tax credits so that lowest paid do not get hit the hardest (in relative terms) would be easy to introduce. It can completely eliminate that factor which you are quite right to point out. On the face of it the problem is a serious issue, but the solution is an easy and practical one.
To put things into perspective though…Somebody earning £100k and spending £60k of it locally on items subject to GST would pay £3,000 in GST assuming a rate of 5%. Somebody earning £20k a year and spending £6k of it on items subject to GST would pay £300 of GST. A simple tax credit to get back most or all of that £300 of GST paid by the low earner at the tills would achieve that objective, with no tax credit required for the higher earner. Result – a net £2,700 of extra income for the island from those two sample people. Multiply that £2,700 by say 5,000, and assume an average of £1,000 of GST paid by another 15,000 people, and that’s £28.5 million of extra GST revenue without the lower paid sector of the population needing to be hit at all on a net basis.
Those paying GST have a choice what they spend their net earnings on, while the lower paid can only spend it on the bare necessities. Certain items deemed luxuries could bear higher rates of GST. Collecting £40m a year in GST is not out of the question and collecting that gross amount provides more scope for funding the tax credits for the low earners.
I’d far rather pay 5% GST on discretionary spending than pay extra income tax dressed up as Social Insurance contributions, but only if the system of tax credits for lower income earners to eliminate the one negative aspect of GST is introduced as part of the same package. To me that is a much fairer tax package across the board and seems to be the optimum way of collecting a substantial amount of extra revenue to fund vital public expenditure.
It would be even easier to get it approved if the public knew that GST was to be used specifically to fund education and health, from which every single family benefits one way or another. Not so easy to support it if it goes into general coffers to be wasted by superfluous civil servants.
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If the States remove the limit, are they really likely to use this extra cash to increase pensions? I doubt it!
I don’t disagree that it would be fairer for everyone to pay the same proportion of their income, but looking from the high earners point of view, what will they get in return? In monetary terms they are already paying more than the lower earners.
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Lawrence, very, very few people would get a bonus approaching that amount in Guernsey. Those that do would be running a business that generates a high level of income. That income would usually come from outside the island. If it’s a regulated Finance business then 10% of that income is paid in tax. On top of that 20% of the staff’s income (excluding allowances) is paid in tax. A large proportaion of the staff’s disposable income is spent on local goods and services, providing employment to many people. Personally I would call that added value!
If somebody very senior in an organsiation receives a £100,000 bonus, £20,000 is paid in income tax.
If competitive (with other juristictions) salaries were not paid, then Guernsey would not attract the people needed to run these businesses. The businesses would need to be based elsewhere. Alternatively if you tax the higher earners excessively then it is hard to attract or retain people. Fairly straight forward really no?
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KC
We can’t fill the vacancies as it is. Companies are being forced to search farther and wider, with higher salary bills, in order to attract anyone here. Why aren’t our talented graduates coming back?
As the demographic ages why aren’t we concentrating on social matters as opposed to business? We can have all the rich individuals in the Island as you like (with their so called wealth generating capabilities – working well in the UK, eh?) but they’re not going to help the old folk much (unless you count the odd ‘charity ball’).
Where are the carers going to come from, where is there financial incentive? These things just don’t happen in low tax for the rich jurisdictions.
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But Lawrence if “companies are being forced to search farther and wider, with higher salary bills, in order to attract anyone here”, then surely that results in even higher income tax contributions being made by them than would be the case for lower-earning individuals. Is that not resulting in extra benefit to Guernsey ? The tax revenue generated from high earners in Guernsey is vital to the community. 10 x higher-earners each paying £30k of income tax is £300,000 towards the cost of running Guernsey. It takes 150 people each paying £2k of income tax to produce the same amount of tax revenue. Who is making the bigger contribution towards paying for our schools, roads and hospitals ? More importantly, how much extra tax would the bloke who plays £2k of income tax each year have to pay if the opportunity to earn the higher levels of income didn’t exist here ? Anyone would think from your comments that the bloke earning £150k a year is making the same tax contribution as the bloke earning £20k a year but getting exactly the same benefits from the public purse. He’s actually paying 15 times more for those public services. And those figures are before taking into account the indirect benefit of the high-earner’s income being ploughed back into shops, garages and local trades, which has a considerable multiplier effect.
I appreciate your stance on social wealth distribution even if I don’t agree with it, but please don’t say that high-earners do not contribute to the local community because that’s very clearly not the case. They would contribute even more with a GST on what they spend.
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Lawrence, you are right that it’s hard to fill vacancies, although that has eased up somewhat recently. That’s exactly why increasing taxes too much for high earners is a bad idea, it would make it even harder to attract people.
Graduates experience a taste for the wider world beyond our small island. It’s natural that some won’t come back due to many reasons. Many do once they start to think about settling down and raising families.
If we concentrate on social matters and not business then the businesses, which generate the revenue to pay for the social services, may leave. That would lead to a big decline in social services and living standards.
Guernsey isn’t a low tax for the rich jurisdiction, it’s just a low tax jurisdiction.
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KC seems to think that Lawrence works in the Finance Industry
With the amount of time he takes in reading and answering his critics comments during normal working hours I doubt that Lawrence has time to do any work at all
I wonder if his employer is aware of this ?
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Trickle down, David?
The rich spend their money in ever decreasing circles. Their economy runs perversly against societal trends.
There is only ‘funnel up’ when that language is used.
How on earth do the low paid benefit from an influx of rich snobs?
Do they shop any more than the rest of us at Safeways? Do they buy more petrol to move a few miles across the Island?
No. They may buy a stake in mooring and other specialist excitements, but the fact remains their cash remains a benefit from low tax and a hindrance to societal advancement.
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Sorry Lawrence I disagree completely. The evidence is all around you.
Our island’s plumbers, carpenters, electricians and other tradesmen have a never-ending flow of work from high-earning open market and local residents. Those same people spend a lot of money in shops and restaurants which would not otherwise be spent. Stands to reason that if they have higher levels of disposal income then they are going to spend more money as they can afford to do so. They may well have an extra car in their family unit and they may well have bigger cars gazzling more gas. Not eco-friendly but where do you think they buy their gas from ? Who do you think sells to them and services their extra vehicle ? That extra revenue is generated by garages and enables them to employ more mechanics and garage shop assistants. Its all “trickle down” in a big way. If you took the top 2,000 to 3,000 high-earners out of Guernsey then garages and restaurants would be closing down left, right and centre and tradesmen would be having a very tough time. There wouldn’t be many office buildings for them to work on either because the growth of the island would come to a complete halt. Flight connections would be drastically reduced and the island would become a ghost town with high unemployment. Tax revenues and social insurance revenues would take a dive and the economic infrastructure of the island would come to a complete halt. High unemployment and resulting social problem would be inevitable.
But hey, whilst I know that sounds like utopia to you, I somehow doubt that its really in the best interests of Guernsey as a whole to share your views.
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David is absolutely right.
Lawrence, you do seem to make some ridiculous statements at times. If you want anyone to take you seriously at least think things through properly instead of posting such rubbish.
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I see that my amendment(s) is generating quite a bit of interest, and there seems a fair spread of opinion about whether it is a good move or not.
I apologise that I have not yet found time to reply to the many questions and comments raised. However, if the Editor is kind enough to allow me the space, I intend to write to the Press next week to explain the reasons for my amendment(s).
In the meantime, should anyone wish to discuss this subject more fully, please feel free to call me at your convenience on 241333 or e-mail at mattfallaize@cwgsy.net
I have had many calls and e-mails on this subject thus far, and I have to say that the majority have been very supportive, admittedly with one or two very forthright exceptions.
I am continuing to work on the exact wording of the amendment(s) and must submit it by the deadline of noon on Tuesday. In the meantime, I shall continue to follow the debate here.
Matt
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Ah, the apocalypse argument.
Who said anything about taking the top 3 or 4 percent of top earners out of Guernsey? All I am suggesting is a tax system based on social responsibilty.
If you earn more you consume more therefore you need to put back more. All this nonsense about the Island shutting down if we don’t let the top 3% get richer whilst the the majority get poorer in real terms is illusionary.
Are you implying that the middle earners don’t enjoy a night out? No, their ability to do so is being eroded by the appeasement of the top few percent.
KC, you may think it is rubbish because of vested interests, but as David says, look around you. The global news is of widening wealth gaps and poorer social facilities.
How can you possibly say that the rich aren’t getting richer? Why are we allowing them to do so? Oh yeah, it’s because they are so revered by morally inept and naive politicians that they get special treatment. And for what?
So they can collect gold pans and vintage cars?
What use is their money? They do the same things as I do, they don’t eat more or drive more or employ more services. The plumbers and carpenters will still find work doing essential jobs. We all need houses to live in. There is no mythical status to being rich, it just means you have more money to waste. And wastage is the key here. Can we afford to have this cash wasted?
When I look around at Guernsey I see foreign contractors doing jobs for the foreign wealthy. This does not help the Guernsey average at all.
If trickle down existed, David, America would be some sort of dreamland. It isn’t. It is bankrupt beyond imagination, it has one of the worst social development records in the first world and it harbours extremism as bad as the die hard Wahabists it relies on to prop up its industries.
The logical conclusions to following their model is that Guernsey will need foreign investment to keep the rich happy and the buses running on time.
Is that a good place to be?
Rather a modest, honest Island than one based around 3% milking the poor.
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When I say consume more, and seemingly contradicting a later paragraph, I mean consuming more of things that are not Guernsey derived, and so the benefit to the Island is minimal.
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I wondered where you all were. Hello. and Hello Matt. Please dont do this before I turn my toes up! I am quite dizzy with the obesity of the bills I am having to contend with right now. Do you know the cost of a pot of polish for my Rolls?
You can charge everything that moves when I have gone but just wait a little longer.
That said, it is a simple equation but a bit of a broad brush – the funding for the Health service. I wonder whether there is not a better way of making sure that everyone who needs it gets the medical attention without fuss. If you can afford it then you must pay or have private insurance to cover it. If you cannot afford it then the cost should be exigible from general revenue. It is for the Exchequer (this one can add up) to take account and ensure that these priorities and care for the elderly are treated as such and that we are all taxed accordingly. I believe many could afford to pay for their health but do not, other than through their contributions. Specific taxes always complicate and we could well abandon this one. What do you say?
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Hes got cahones a UK would have just doubled everyones council tax rich or poor- Good for him!
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Anyone understand what “Hes got cahones a UK would have just doubled everyones council tax rich or poor- Good for him” means?
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Lawrence
You have misunderstood. I wasn’t suggesting these people would leave. I was summarising where Guernsey would be without them, seeing as you value their contribution to the local economy as being so limited.
You say “if you earn more, you consume more, and so you should put more back.” That is already the case. Its called income tax.
Of course the rich are getting richer. I wasn’t aware that this wasn’t allowed. But if they are getting richer then they are consuming more and are also paying more income tax. They are also ploughing back their after-tax earnings into property refurbishment and engaging tradesmen to make a good living as well.
You say that our tradesmen would still make a living from doing essential jobs. Absolutely correct, but do you think that Guernsey’s tradesmen would make even a fraction of what they are able to earn today from fixing drain blockages and replacing fuses ? Their opportunity to earn a very good living rather than merely existing comes from rewiring and replumbing houses, making bespoke furniture, laying underfloor heating and building extensions. Who do you think engages them to undertake such work ? Your suggestion that its foreign workers doing work for foreigners is utter garbage. Its Guernsey tradesmen who learned their trades from Guernsey apprenticeships at the College of FE and who are doing work mainly for Guernsey people who have built up successful careers for themselves and who paying their income tax all along the way. Yes of course some of the customers of the local tradesmen are open market residents and foreign local market licenceholders but are they not also paying income tax ?
I suspect that our local tradesmen, particularly those who are self-employed, are amongst the best paid tradesmen in the Western world, net of tax. The reason for this is because of the long-term success of the Guernsey economy. Yes they have high house prices to contend with and yes they have to work very hard to achieve it, but the opportunity is unquestionably there to make an exceptionally good living as their own self-employed bosses, compared with their peers elsewhere in the world. Ask an electrician in somewhere like Bolton or Huddersfield to compare notes with his Guernsey counterparts. If that’s not evidence of how the trickle-down effect works in Guernsey then I really don’t know what is.
I think you need to take your socialist or communist blinkers off because they are clearly preventing you from seeing the facts regarding the local economy. We know that you don’t like the Guernsey economy and how its derived and that’s your perogative. But when you try to express your views based on utter fiction rather than facts they lose all credibility.
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On reading all the comments above, there are many that are still missing a serious point. There are high earners and high self employed earners. What is the difference you ask, well for one the self employed individual pays both the employee and employer rate minus one percent, so in fact a self employed individual would actually pay 30.5% tax (20% income & 10.5% Social). And yes it’s a tax however worded.
He gets no sick pay (well not for many many weeks), no increased pension, and no money when business is slack.
Where as his equal only pays 26% (20% income & 6% Social) with the probability that the employer will cover the increase, I mean all the employees will happily take a pay cut!!!
So Matt, like they realised the first time round, when they restricted the impact self employment side I hope you take into account the same thought process.
So when talking about being fair to high earners, your going to add £5250 to self employed and £3000 to the employed.
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David,
A quick google on average house prices and average electrician earnings in Huddersfield and Guernsey does not stand up to scrutiny. Basically house prices are double here than in Huddersfield, and electricians don’t earn double.
Not fiction. The poor are getting poorer and finding it more and more difficult to live here. The rich are creaming off the best areas, the best services and the best of all worlds. That is not a right but a factor of the morally inept policies of wealth appeasement.
Hard work has almost nothing to do with it.
Your rose tinted view that the more you earn the more you pay into the state is more fiction than anything I have mentioned. The rich can afford accountants to mitigate tax expense. The proportion taken of their disposable income is negligible, compared to the £18k service industry employee that loses the opportunity to upgrade because of the increasing tax burden caused by this rampant greed.
It is unremittingly unsustainable.
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Lawrence you will find that local electricians earn rather more than you seem to think. Maybe not the younger, employed ones (generally quite rare these days) but certainly the self-employed ones of whom there are many. I know quite a few who make well north of £60k a year and lead a lifestyle which their counterparts in Huddersfield simply wouldn’t recognise. Likewise plumbers and carpenters and other tradesmen.
Its not just about house prices. Its about levels of net disposable income after tax deductions and housing costs, which enable the person to choose how to spend his remaining net income. The poorer electrician in Huddersfield probably has no choices at all in comparative terms.
Do you actually know any local high-earners who employ accountants to mitigate their local tax liabilities ? I assure you that I don’t know any and I am very much in that circle. The tax rate is 20% after available allowances. We don’t actually get offered a separate tax rate, contrary to what you might think.
I think you are simply out of touch with the facts of what actually takes place in Guernsey. There seems to be an underlying assumption in your mind that everybody from the “haves” in Guernsey is cheating the tax system at the expense of the “have nots”. They are not. Whether the tax system itself is fair or unfair is a completely separate matter.
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KC says “Guernsey isn’t a low tax for the rich jurisdiction, it’s just a low tax jurisdiction”
I would imagine may of those who have seen the States take more and more of the earnings might disagree with KC.
Comments such as “…you do seem to make some ridiculous statements at times. If you want anyone to take you seriously at least think things through properly instead of posting such rubbish” are usually trotted out when the writer is somewhat short of good argument.
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The bottom line is that the wealthy see everything right in a system that benefits them over everyone else, yet when moves are suggested to ensure a fairer representation of earnt responsibilities, they suddenly become ‘crackpot’ and unworkable. All of a sudden the true rhetoric comes out and words like ‘communist’ and ‘North Korea’ are used as valid, grown up arguments.
I propose that this current system is ‘crackpot’ and unworkable for the majority, if not for the top 3%.
The dash for riches and the accompanying gaudy excesses and pure selfishness makes a mockery on the community spirit that is unique to island mentalities such as Guernsey.
No amount of ‘charity balls’ and sponsored golf jollies will make up for the fact that the low earners are getting screwed by the establishment.
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Lawrence you may well have a point. You say that the low earners are getting a bad deal and you may be right. I feel that the middle earners are pretty well off in Guernsey in relative terms, compared to their counterparts in many parts of the UK, and that there are many people here who probably would be low earners in the UK who are getting a better deal here because of the much better opportunities to earn a comparatively good salary.
Our top earners do well and our middle earners do pretty well. Some middle earners do far better than they would in the UK. For those who remain low earners its a huge struggle and shows no sign of improving.
The answer ? A better distribution of the tax burden and the best way to achieve this is a GST to tax the spending of the middle and high earners coupled with extra tax credits for the lower paid to eliminate the regressive impact of GST for those low earners.
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Regardless of all this babble about social justice can we stick to the point please…how much will this change raise and what will it be spent on?
If MF wants the curent cap removed then surely he has a detailed plan for the proceeds?
Every penny raised will come directly from curently “disposable” income so what’s the cost to Guernsey residents (the loss to the local economy) and what’s the benefit in terms of improved social services and who is eligible?
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Harry – those of us that can will pass it on – to Lawrence and Matt, let’s hope.
Funny how it’s still OK for employees to make up to £5k from part-time self-employment before they pay any extra GSSA; or have their rental income, dividends, interest left out of account. (Surely it cannot be simply because all civil servants are employees). Funny how the contribution age cuts off at 65 – strange tax, that. Odd in the extreme that the oft-argued necessary perk of the public sector velvet-lined, fur-edged, index-linked pension scheme is exempt from being treated as a perk for the calculation of GSSA – yet company cars or other benefits are/ will be very shortly.
Odd tax, too, that only is on EARNERS. So the hardest workers end up subsidising the idlest -whether they be rich or poor.
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Carts,
As I wrote in an earlier post, I have written a piece for the Press laying out a summary of the case for my amendment and what it would mean for public finances.
I think it may be in today’s Press (Friday), but in any event it should be in before the States debate next week.
I’m sorry that I do not have time to contribute very frequently here, but I’m available by phone and e-mail should anyone wish to take up this or any other issue.
Matt
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The problem as I see it is that SI contributions are being seen by many as a tax, when they were set up as a contribution towards benefits. As such they are supposed to be based on the cost of providing the benefits – the fact that this is collected as a percentage of income is what leads to the confusion that it is a tax. The cap makes perfect sense in the context of a benefit contributin, but no sense in the context of an income tax.
Many of you, Lawrence included, are advocating extra tax revenue which would be largly paid by the highest earners. This would be fair. However that is not what the Social Security contributions are designed for.
If you want to raise extra tax, based on the ability to pay, then just increase the rate of income tax !!!! If the allowances were also raised this could negate the effect on lower earners. Introducing GST would require a tax credit system to compensate lower earners – why add extra complications to the tax system ? GST would also be somewhat volatile – if prices fluctuate then so would the amount of GST paid – how would the credit system adjust realistically to that ? An extra 1% on income tax would be easy to budget for – you would know the extra tax you are paying, and Income Tax could accurately predict the extra revenue.
In conclusion, if what you want to do is increase revenue by fairly taxing people in proportion to their income, RAISE INCOME TAX. Do not try to raise it through increased States Insurance contributions.
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Excellent piece in the Press, Deputy Fallaize, which makes Deputy Maindonald’s rebuttals on a previous page sound like petulance.
Toby, I agree entirely, but the fact remains that those earning higher than £69k are paying less as a percentage than the average earning £23k. This is not a revenue raiser, this is a method of ensuring equality. As Matt has detailed, reduce the States contribution and save money whilst making a political decision that claws back some majority feelgood factor.
Tax should be proportional to wealth, I understand that doesn’t sit well with the wealthy, but it would be a cleaner and simpler method of wealth distribution. So a few percent would up sticks but they would not be the ones with allegiances to Guernsey and so why encourage them to stay? At the levels of wealth we are talking about they would still be able to afford the things that the majority can only dream about (and get themselves into debt trying to emulate them).
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Deputy Fallaize’s letter may be read by clicking the following link.
http://bit.ly/3A5C4S
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Toby you are entirely right. However, they dare not raise the income tax right or fiddle with it (rightly so) so they play around the edges like this. It is dishonest. For once I agree with Sam that we should wait and see how 0-10 works out before considering whether we actually need it. All a bit too much tax and spend for me, which is a concern given that the States have not exactly got a reputation for spending wisely, effectively or efficiently.
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I have read Deputy Fallaize latest comments with great interest. If Insurance contributions are now just another form of income tax why are they collected seperately ? Just add the two taxes together and collect it in one go – surely that would reduce administration costs as well ( or is that too much like joined up government ? )
The only problem I can see with my solution is the employer’s ‘contribution’ – how should this payroll tax be collected in light of zero-10 ?
And perhaps the whole system would be a lot clearer if we stopped calling States Insurance payments contributions, since the States has decided that they are just another tax. And even insurance is highly misleading – States Welfare Tax would seem to be a far more accurate name ….
And why an upper limit at all ? If we are going for a system based on ability to pay remove the upper limit and raise the lower limit to even things out a bit. And abolish the upper limit for empolyers whilst we’re at it, claw back a bit of that lost corporation tax ;)
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‘Tax and spend’ is such an outdated form of verbal abuse on progressive taxation techniques that it surprises me that we, in our highly educated top-of-the-class Guernsey system, have the nerve to keep bringing it up. The spectre of the right wing media forever peddling the notion that taxation is an affront to civil liberties knows no bounds.
How else are we to pay for social infrastructure? It has been proven time and time again that the private sector cannot deliver services cheaply or efficiently. It is granted that central management of social funds can leave somewhat to be desired, but all in all a decent enough job is done.
The concentration must be on using the private sector efficiency model on public sector services.
We, I believe, have no alternative to introduce if not wealth tax (which causes the biggest outrage – get orf my land!), but a fair and responsibility based income tax.
Before that there should be a root and branch overview on salaries. We must reward those who do the best for the running of the island. Start with essential services, then the wealth generators. Without the services the island would stop. Without the wealth generators we’d be more humble and hard working for our way of life, something I’m sure the older generation can remember, luxuries being things earnt after proper application.
Who would you lose first?
Strikes in Guernsey are rare for good reason, apart from the very, very top of the tree the public all pulled together to make things work in the past, any reduction in pay for the public sector was taken on the chin as ‘something that was right’. Hence our adherence to concensus government and parish boundaries. The last thirty, but definitely the last ten, years has seen an explosion of individualism and the sense that ‘I am the lord of all I can buy’. This leads to allsorts of divisions across boundaries that never existed before. It has been proven that this approach to ‘measuring success’ is known to cause and perpetuate mental illness. There is evidence everywhere, by just tuning into the news, that the model is not working.
Deputy Fallaize is acknowledging a wider systemic problem and is making inroads, in a very Guernsey way, to address majority hopes and fears. Can we say the same about our more senior and experienced politicians?
Deputy Maindonald is wrong because she states that an £80k salary is middle income. For that alone her appeal should come to nothing.
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Toby asks “If Insurance contributions are now just another form of income tax why are they collected seperately ?”
Simple ansswer it retains the facade of low taxes by retaining the 20% rate of income tax.
Cynical? Absolutely.
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The word “proportion” is bandied around, particularly by Lawrence, as if it’s no big deal…how about working out the real cash difference rather than the smoke screen of “proportion” …. If I need medical care, regardless of my earnings or contribution I get the same level of service…that is the real prize and one worth funding, whichever way it needs.
The difference in “cost” between the £30k earner and the £100k earner is, in real terms, massively different (a change for some that has been severe and rapid) and this should be recognised, not sneered at as some sort of overdue social justice.
What I want to know is (a) how much more does MF want to take out of the pockets of Guernsey employees’ and (b) what improvement in service will we benefit from in return?
in simple terms I need to know if the States need this money for service provision, can be trusted to spend this extra money wisely and that it is worth losing this cash from local trade/services and retailers?
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