The immorality of the 50p rate
Sep 2011 16

The 50p tax rate harms the poorest in society most. It can do so in two ways: their jobs may cease to exist or never be created; and because the poor end up paying a larger share of the total tax take. It is time for the Government to stand up for what is morally just and get rid of the 50p rate.

When you increase tax on the rich, they have less money to spend. So they cut back. What do they cut back on? They may reduce spending on luxury objects: not buy that painting or that antique chest. This is likely to be a minor change – their house may be full already. Or they may reduce spending on services. Restaurants may suffer in a minor way. Minor, because the rich still have to eat and typically do not have much time to cook for themselves.

Or perhaps they cut back on domestic staff: the window cleaner, the cleaner, the cook, the gardener. Precisely those jobs for which you do not need university degrees or a long CV. In other words: the jobs for the less well-off are the most likely to be dispensed with. Sometimes full national insurance paid jobs will be replaced by cash-in-hand jobs. Full time may become part-time – now entitling the cleaner to claim housing and other benefits. This is the trickle-down effect; so often derided, but a daily reality for those who have not many opportunities at the best of times.

A large number of studies have shown that if you cut tax for the highest earners, they end up paying a higher share of the total. The opposite is true, too: when you increase their taxes, the less well-of pay a higher share. This is because paying for tax experts who can find methods to avoid taxes becomes a more lucrative alternative than to pay the increased tax. In addition high earners (and companies) will flee – either in person, or with their capital. There is a lot of evidence that this is happening in the UK right now. Those who are no high earners therefore end up paying a larger share of the total tax take.

All this is made worse by the fact that the rate was introduced as a political measure. The fact there needs to be a review on whether it raises money demonstrates that there was no work done before its introduction to prove it would raise money. We need to say this loud and clear. Taxing high earners more does not make the rich suffer much: it’s the poor who end up poorer.

JP is a City of Westminster Councillor, former Conservative Party European Parliament Candidate for London, and the Adam Smith Institute's Head of Programmes.



  • Sick of the South

    Here’s a novel idea – Let’s keep the 50p and cut VAT and raise the income tax threshold to £10,000 p.a instead.

    Surely someone earning, say, £20,000 a year is just as likely to celebrate a sudden increase in disposable income by buying a meal, paying for their windows to be cleaned, or buying a new car as someone earning £200,000 a year?

    There are also a lot more people earning £20k a year and, crucially, they aren’t all clustered around London and South East England so the benefits of any extra money arriving into the economy wouldn’t be limited to one, already affluent, part of the country.

    Maybe wealth can trickle up as well as down?

    • Blarg1987

      Added to that it is less likely to go abroad aswell boosting the local economy and increase growth.
      Where do they get the idea that tax evaders will sddenly be willing to pay more tax if it is at a lower rate suprises me, if you are going to evade tax, you re going to evade as much as possibl not what you think is reasonable.

      • Orac54

        Which is the same as saying there’s no point in having a 50p rate of tax, because it raises nothing. Just makes Socialists feel better.

        • Blarg1987

          Not necessarily, there are certain areas where taxes can not be avoided, and so that is where it can increase revenue, but I do agree loophols do need to be tightened as well.

          • Orac54aq

            I’d agree about VAT, but only raising the tax threshold to £10k if the process by which those earning  just over £100k lose any form of threshold thereafter is also cancelled.

        • Steve Collins

          So easy to band about innaccurate epithets such as ‘Socialists’.

          Believe it or not, just because one disagrees with right-wing politics doesn’t make one a Socialist.

  • Steve Collins

    “The 50p tax rate harms the poorest in society most”

    I’ve read some tosh on this website, but this, JP, takes the biscuit.

    Why don’t we follow your argument to its logical conclusion – let’s not tax the rich at all and make low-moderate earners take on all of the tax burden.

    In TPAland that will mean that all that money will merrily trickle down to the poorest. Except that it won’t. ‘Trickle down’ is derided because it’s discredited. It fails to take into account that one overarching trait – human greed.

    In the 19th century we had the great philanthropists whose moral code allowed them to distribute their vast wealth for the good of the common man. This moral code has now been largely replaced by the materialistic ‘me’ culture that dictates that the wealthy hoard their money and devise ever more ingenious ways to keep it for themselves.

    It doesn’t matter whether the top rate of tax is 50 or 15%, many rich people will still resent paying it and will do all they can to keep all of their cash for themselves. Many of them keep proportions of their wealth offshore, that’s why we haven’ t seen the mythical flight of the wealthy from these shores. They don’t need to leave, they just hide their money out of reach of HMRC.

    Quite frankly it is pretty low that the TPA seeks to portray the 50% tax rate as an assault on the poor. The vast, yawning chasm that now separates the wealthy from the rest of us grows larger by the day and helps to create the imbalanced, sick society that we have today.

    Your campaign wouldn’t be anything to do with protecting the interests of the TPA’s wealthy donors would it?

    • Sick of the South

      Well said.

      If a low effective tax rate on high earners is the key to a thriving economy then why the hell is the Greek economy in such a mess?

      Prior to the current financial crisis tax evasion and avoidance amongst high earners was endemic in Greece and yet this didn’t translate into a the sort of thriving entrepreneurial economy the TPA and the Tories claim will arise in the UK if we scrap the 50p rate. By and large wealthy Greeks, like their counterparts in the UK, either chose to sink their money into property portfolios or move it offshore.

      I doubt top-rate payers in the UK would react any differently.  

      • Trazer985

        The Greek Economy is in such a mess because taxation is calculated by the person. They have a black economy that represents some 35% of GDP and a pension age/package equivalent to getting 5 numbers on the lottery every 2 years, per pensioner. 

        Get your facts straight before you come out with some outrageous tosh.

        The sad fact of the matter is that all the previous jobs created in the past 10+ years, pay rises and pension promises were paid for on a credit card and now the bill is due. Lower taxation is what this country needs, for all. Give people money to spend, they will spend it in local shops, business owners will have more capital and there will be a significant reduction on the burden on benefits and the healthcare and police bills that come to the government. 

        Unemployment creates poverty, poverty induces crime/drinking/smoking which impact government spending in a negative way. 

        Keep blaming the 50% tax payer though, I’m off out the country  as a result of it, so instead of getting the 40% of my earnings, you’re getting 0% of it, my cleaner earns less, my council receives no council tax, and i’ve been to an NHS doctor 0 times in the past 5 years. Go do the math.

        • Sick of the South

          The TPA is arguing that lower taxes for high earners will result in a higher overall tax rate, more jobs and more growth. However, Greece had a tax system in which the wealthy essentially seemed to have paid whatever amount of tax they felt like and far less than they were legally supposed to be paying and this did not translate into more jobs, more enterprise or more growth.

          Conversely, the high tax economies of Scandanvia and the Benelux countries have all managed to keep growing whilst the UK remains stuck in the economic slow lane.

          We only have to look around Europe to see that there’s absolutely no correlation between top tax rates and economic growth.

          As I said below, if the government is pursuing a growth strategy based on tax cuts then the 50p rate should not be a priority. Cuts in VAT, fuel duty and a raising of the income tax threshold would do far more to stimulate the service and retail sectors than handing a tax cut to a few individuals who are already very wealthy.

          Of course you won’t hear the TPA arguing in favour of this because I suspect that very few of the people on low to average incomes who would benefit are also providing substantial donations to the TPA coffers.   

        • Blarg1987

          I think half the problem is that countries where there is economic problems tend to be more morally corrupt as we have seen where you encourage the mantra of greed at any cost it has caused economies to collapse. Now the only way to control this is through taxation as at the moment I don;t see Britains biggest employers who record large profits giving their employess large payrises to encourage economic growth at a time where the economy needs this, but there again may be that is the flaw with the big society, human greed is an over riding factor.

          • Trazer985

            I notice you cherry picked your statistics SOTS to suit your point. How about Switzerland? The Scandinavian countries have a much smaller population, (roughly around the 10% of the UK mark, with some having a lower population than London), so I find them unlikely comparisons.

            We have a culture in this country where success is deemed to be loathsome. The vast majority of higher earners in this country have nothing to do with the banks and yet you will stop at nothing to make them pay more tax for no comprehensible reason. 

            Surely a higher earner will pay more tax on a flat tax rate for all than a lower income earner would, but you aren’t content with that, you want a higher tax rate AND higher tax revenues from someone who took the risk to start a business, employ staff, procure stock and get the economy going. It’s mindboggling. 

            You seem to have a misunderstanding regarding the obligations of large corporate business. It’s first priority is to its shareholders. NOT its staff. 

            The Big Society is a nice idea, and would work if it wasn’t for human nature, but there are too many people that want to see someone else sacrifice before they do, so it’s like some charitable mexican standoff. 

            I agree that a VAT cut would be useful and I’m still at a loss to understand our oil prices compared to the rest of the world. However, while some corporations charge the government £20 for a lightbulb, it makes me wonder what the point of paying any tax at all is. 

          • Steve Collins

            We do not live in a society where success is deemed to be loathsome – that’s nonsense.

            We live in a society where those with the ability to pay, pay more than others. This has always been the case, because it makes sense and is morally right.

            If we really lived in a society where success is loathsome, then how come the gap between the very wealthy and the rest of us has grown exponentially for more than a generation?

            I work for an organisation that represents the interests of small to medium-sized entrepreneurs, many of whom are wealth and employment creators that fall into the 50% tax bracket. Out of our 2,000 members I do not know of a  single one that  is leaving/has left the country because of it.

            Indeed, I pay 40% tax on a (small)proportion of my salary – this doesn’t bother me because I can afford it and times are tough for everyone.

            Ultimately I would like to see the 50% rate go. However, before that happens I want to see VAT reduced and the tax threshold raised.

            The TPA has got it the wrong way round, principally because they are looking after the interests of their donors, not the vast majority of ordinary taxpayers, whom they falsely claim to represent.  

          • Blarg1987

            I do agree on your last point but as you highlighted big companies first priority is to share holders hence my point of corporate greed, but other examples are where you have care home staff on minium wage while owners drive around in bentleys who have no obligation to shareholders who as you say run services for a profit first and service second are examples of where the greed culture has gone wrong.
            Now untill there is a dramatic change in society where public services are run as services and not profit we will always have this problem and as a consequence only way to tackle it is via higher taxation. I accept both sides have to compromise but it will take at least a generation if we started the change overnite which unfortunaetly wont happen.

          • Frankos

            It is possible and quite common to have a highly efficient and saisfactory private service that operates at a profit.
            It is also possible and very  common to have a public sector run service that is both inefficient and bad value for tax payers money.
            Operating for profit does not preclude care or service in the same way the public sector is often an expensive failure.
            A pragmatic approach rather than an ideological one is needed

          • Blarg1987

            Although I partially agree with you, I think examples such as the railways, recent energy utilities and the Southern cross care home scandal, as well as the banking sector have shown examples of where things have gone wrong in the private sector which have shown a lack of effienct service or lower costs. And been expensive to rectify. But no system is perfect and thats why I believe we need to move away from a system of greed to a system of service.

          • Frankos

            For every example in the private sector I could cite exam,ples in the public sector of MRSA, Doctor Shipman style abuses , gross inefficiencies and poor service.
            The problem lies with the individuals employed at the sharp end not which organistaion they work for.
            Incidentally I don’t think this comment box  could get any more narrow.

          • Frankos

            wrong

  • Adam

    Cite your sources, Taxpayer’s Alliance. Let’s see these ‘studies’ and who they are funded by. In fact, let’s see who YOU are funded by.

    http://www.guardian.co.uk/politics/2009/oct/09/taxpayers-alliance-conservative-pressure-group

    As if you are concerned about the most vulnerable.

    • Frankos

      So highly intelligent people who have earned millions of pounds don’t want to to have it  frittered it away on useless government projects .
      What a shocker!
      The government only earns our tax if it spends it wisely –something miserable Labour failed to do and something the Coalition aren’t convincing us on yet.
      I think you’ll find that the Unions fund the Labour Party too–another shocker!
      The most vunerable are better off being employed by rich people with more spare cash than sitting on their arses being funded by the taxpayer

  • Tough but Fair

    You guys are precious
    Most rich are not born rich, they are made rich, you bully then when you are young, soccially stigmatize them because they are not pretty girls or big athletes.
    You go have pints with your friends, while they are bettering themselves.
    Now, your prime is when you are bellow 30, their prime starts at around 30, when after 24 years of hard work they reach the top and now you want them to support you?
    The drunks? partygoers? the guys that left them aside?
    You want us to pay extra tax so that you can have it easier?
    F*** OFF, go milk a rock and see how that works out
    The problem is simple:

    NUMBER OF POLITICIANS IN GOVERNMENT = LOTS OF WASTED CASH

    Definition of politician: Someone who loves to spend other peoples money