Thursday, November 24, 2011
Tax tosh of the week: 50p tax rate to STAY
Another day, another report about how the 50% top rate of income tax is BAD for the British Economy. This week it is the respected UK Centre for Economics and Business Research (CEBR). In September it was a group of 20 high profile economists.
Let me be clear I don't WANT to pay over half my income away in taxes - who would. (It's over half, by the way, as most high earners also pay an extra 2% NICs). I don't think the 50% rate is a good thing. BUT equally I cannot, for one moment, imagine that the Coalition Government are going to abolish the 50% rate any time soon. The CEBR report is balanced and fair but it's clearly intended to influence the Chancellor and the Coalition Government. In this it won't succeed.
Now, if someone were to be rather more imaginative, a different campaign might have more chance of success. How about showing what the impact would be of raising the income level at which the 50p rate starts from £150k to say, £250k? Clearly this would reduce the tax take but not by benefiting the 'super-rich' - by definition. It would however reduce the concerns of the vast majority of 'ORDINARY' business owners who MIGHT otherwise feel demotivated by the prospect of paying 50% tax. Remember that the rate is actually higher than this for many people earning between £100k and £150k.
As I've said before though at this stage NO-ONE yet knows how much tax the 50% rate is generating. All the reports, letters in the press and campaigns are based on speculation. The CEBR report admits as much.
I have explained the rationale for my observations and predictions before (see below). So today I will simply present the CEBR with my Tax Tosh of the week award.
5/4/11 - 50% tax rate announced in Budget 2009 but 2 years on and the self employed haven't paid it yet