The 50p folly

November 29, 2012 3:02 PM

Yesterday’s Telegraph revealed the full extent of the 50p tax folly: the number of people declaring income of £1 million or more in the UK fell by more than 60 per cent in the 2009-10 financial year. Unless it was Gordon Brown’s intention to rid the country of unwanted millionaires, it’s clear the policy has been an unmitigated disaster based on an economic fallacy – that higher rates will guarantee higher revenues.

It also means that someone who may have stayed in the UK and started or invested in a business, creating jobs along the way, could be off doing that somewhere else.

Even the most cursory glance at the abundance of economic literature and real-world examples of the consequences of such a policy change should have set the alarm bells ringing. But the last Government pressed ahead with the flawed plans and the highest earners fled or adjusted their remuneration to avoid this punitive tax.

Brown’s ham-fisted approach to the top rate of Income Tax cost the Treasury around £7bn in lost revenue according to The Telegraph. That's something taxpayers can ill-afford, as politicians tend to hit easy targets with new taxes if they're not getting the revenues they want.

In today’s globalised world, it’s easier than ever to move abroad and take your business with you. This is why the UK needs a lower, simpler and more competitive tax system. The reforms set out by the 2020 Tax Commission show that tax reform should be accompanied by tax cuts. It can also be done so that every group in the income distribution is better off.Yesterday’s Telegraph revealed the full extent of the 50p tax folly: the number of people declaring income of £1 million or more in the UK fell by more than 60 per cent in the 2009-10 financial year. Unless it was Gordon Brown’s intention to rid the country of unwanted millionaires, it’s clear the policy has been an unmitigated disaster based on an economic fallacy – that higher rates will guarantee higher revenues.

It also means that someone who may have stayed in the UK and started or invested in a business, creating jobs along the way, could be off doing that somewhere else.

Even the most cursory glance at the abundance of economic literature and real-world examples of the consequences of such a policy change should have set the alarm bells ringing. But the last Government pressed ahead with the flawed plans and the highest earners fled or adjusted their remuneration to avoid this punitive tax.

Brown’s ham-fisted approach to the top rate of Income Tax cost the Treasury around £7bn in lost revenue according to The Telegraph. That's something taxpayers can ill-afford, as politicians tend to hit easy targets with new taxes if they're not getting the revenues they want.

In today’s globalised world, it’s easier than ever to move abroad and take your business with you. This is why the UK needs a lower, simpler and more competitive tax system. The reforms set out by the 2020 Tax Commission show that tax reform should be accompanied by tax cuts. It can also be done so that every group in the income distribution is better off.

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