Income tax rate: Balls takes the gloves off

Ed Balls’ announcement that Labour will restore the 50p rate on those earning more than £150,000 is a “politically savvy manoeuvre”, but it is wrong economically, says The Independent on Sunday.

True, raising taxes on the rich is electorally popular: 60% of voters support it, according to a Survation/Mail on Sunday poll. But the reason the government reduced the top rate from 50% to 45% in 2012 was that, according to HMRC figures, the yield was “almost statistically insignificant”.

This view is supported by the Institute of Fiscal Studies (IFS), which says “the best evidence we have still suggests that raising the top rate of tax would raise little revenue and make, at best, a marginal contribution to reducing the budget deficit”.

The IFS also points out that Labour’s claim – that those paying 50p income tax paid around £10bn more over three years from its introduction in 2010 – was based on projections rather than final numbers.

Then there’s the fact that tax revenues have increased since the 50p rate was dropped, says Boris Johnson in The Daily Telegraph. The top 1% earn 13% of income, but pay a “record 30% of all income tax”. This is “a classic example of what economists call the Laffer curve”: a cut in rates producing more revenue.

But Balls would rather have “the exquisite pleasure of seeming to stick it to rich people than stimulate the growth and investment that actually produces more taxation”.

One of the reasons for this is that he has no experience of business or how the economy works.

Neither he nor Ed Miliband understand that our economy and society, “our ability to pay for the poorest and neediest – depends entirely on the willingness of a relatively small number of people to put in the back-breaking hours that will create the companies and drive the innovation that will employ the people whose payrolls yield the taxes that pay for the whole damn caboodle”.

Nonsense, says Polly Toynbee in The Guardian. The yelps of protest – including those from the 24 captains of industry who wrote to The Daily Telegraph claiming the tax rise will “have the effect of discouraging business investment in Britain” and put the “recovery at risk” – are simply the “shriek of self-interest dressed up as national interest”.

The gap between the rich and the poor is growing. Do we want Britain to “grow ever more socially unjust”?

We don’t, but crushing entrepreneurs and damaging the public finances by raising taxes is hardly the answer, says Allister Heath in The Daily Telegraph. True, we have a complex and broken tax system and the “status quo” may not be right, but that does not justify a tax rise “rooted in envy and pseudo-egalitarianism”.

The best way to unleash entrepreneurial spirit, nurture talent and retain capital is the reverse: lower taxes for all.

  • eddiegeorge

    This ongoing MW justification of excruciatingly low tax rates for the super rich is becoming very irritating. If the objectives of MW are purely to pander to the greed of this small part of the population than that needs to be made clear so that the rest of us can cancel our subscriptions and stop reading the misinformed and prejudiced articles in MW. A 50% tax rate should only be the start for those who successfully steal more than £150 000 from the economy. When Blankfein guzzles $23million of real money, growing at over 10%/a, then a tax rate of well over 100% is appropriate, his accumulated wealth should be reducing rapidly, not increasing. Considering that he heads the most openly criminal organisation in the world, a long term jail term for him and his accomplices is even more appropriate. His organisation and similar gambling dens have done absolutely nothing useful for mankind. They have taken huge swathes of capital from productive sectors of the economy to speculate in their gambling den and to feed their limitless greed and lack of concern for humanity. When faced with insolvency, their accomplices in government and the central banks allowed a rescue where the trillions of dollars of gambling debts became socialized. Now the few citizens left in the productive parts of the economy are expected to continue labouring for ever decreasing minuscule incomes in capital starved enterprises with no income from their savings so that the casino moguls can continue unchecked. Unfortunately our apparently democratically elected government representatives only pander to the limitless greed of the moguls for the scraps from the table to finance their next election. And so the cycle of deceit, lies and misinformation continues.

    It is high time that there were mass protests to eliminate this limitless greed from society so that the rest of humanity can return to a more equitable system. MW needs to decide if it is with the majority or the criminal few.