Apr 2009 22

Some of you may remember that back in November, upon learning about the top rate of income tax was being increased to 45%, I said that Alistair Darling had sounded the death knell of ambition in this country.

Well today, things just got a whole lot worse. The Chancellor announced that anyone in Britain earning over £150,000 per year would pay 50% in income tax.

There are three big problems with this proposal:

1) The message it sends to potential investors. By ramping up taxes on the rich, this Government is saying it plans to punish success, and discourage high earners. We're in a deep recession, Darling admits that, and the best way to get us out of it is to get as much FDI flowing into the country as possible. All this sky-high tax rate will do is convince multinational companies that locating in Britain is a mistake. The Chancellor spoke today about doing the right thing for business, about rebuilding the financial services industry and taking real steps towards getting Britain back on the right financial track. Turns out, this was all just rhetoric, his announcement today will produce quite the opposite result on every account.

2) The truth about people who earn over £150,000 is that they tend to have highly transferable skills, and thus will avoid paying this tax by simply relocating to a country that has a less punitive tax system. The Times has labelled it 'the brain drain' – I have to say I agree. If there is one surefire way to chase our wealth creators and entrepeneurs from the country, this is it.

3) It will lose the government money. Last week, the IFS calculated that raising the top level of tax to 45% would not bring in the estimated £1.6 billion, but probably half that, if the Government is lucky. This should have caused a re-think on the part of the Treasury. But their flawed logic instead caused them to increase the tax further, instead of decreasing it. Hot of the press is a CEBR report showing that even when combined with the increased tax on pensions, this proposal will lose the Government £800 million. Thoroughly ill thought out, then.

This proposal will be shown for what it is in years to come: petty political point scoring at a time when people are crying out for real help from their Government.

  


  • jr

    I thought it was £150k?

  • Chris P

    Why the hell do we keep punishing success?
    Fine, hammer the bastards that got us in this mess (of course, that would also mean the Dear Leader and his friends Mandy and Darling knocking the hell out of each other) but a blanket purge of everyone who has reached this level?
    Collective punishment is what it sounds like to me.

  • Hardeep Singh

    ‘Collective’ being the word for sure…. :(
    It’s the mindset of good old fasioned Labour, nothing articulate just the same tired policies that they revert to whenever they’ve run out of spending other people’s money.
    What’s also more telling is not just the isolated debacle of the short sighted budget but the missing gmeplan into both the near and longet terms. Sure push up the tax on some high earners where they’ll think the expense of moving elsewhere isn’t worth the saving in comparison to the rise in tax but to slap on this rate of taxation will have people rushing for the airport! “Quick let’s leave before they introduce a boarding tax, take-off tax and in flight enjoyment tax”…
    …. “Oh no is that Polly Toynbee on the check-in desk, we’re doomed and no window seat either!” :)

  • Mimi

    Please don’t forget the people who already pay tax of 50% – graduates! My marginal rate is 40% IT, 1% NI and 9% student loan repayments. (Fine, student loan is not strictly tax but since student grants used to be funded from tax, and the withdrawal of grants was not offset with a cut in tax, I think it counts)

  • http://ericthefishking.blogspot.com/ Eric The Fish

    The politics of envy is morally superior to the politics of greed and tax avoidance, which the self-appointed TA advocate.
    Still, at least you get to see your names in lights, eh?
    Maybe we should erect an artwork on top of the Gherkin in your honour (paid for by public subscription, of course.