Labour's 50p tax equation

les

I am still waiting to hear what they will CUT!

Pot Head

Is that all they get paid, no wonder we get such numpties in politics!

Matthew Oliver

There are a number of interesting policy differences between the candidates - which is why Unlock Democracy are launch a Vote Match (www.votematch.org.uk) for the Labour party leadership next week.

Our last version had 1.2 million users - be interesting to see if there is public demand for this version. Stay tuned.

Chris lancashire

Labour still hasn't learnt. All they know is how to tax and waste. Should this idiotic idea happen I happily predict it will reduce the tax take; just as the £150k/50p will. I look forward to a sensible government once again returning the top rate to 40p.

Jonathan_T

Why not ask the obvious question - what other taxes would Labour raise / spending cuts be made to cover the loss of revenue from extending punitive taxation?

Neil

Given that the personal allowance is tapered away at £100k the marginal tax rate up to about £113k is 1.5 times the headline rate i.e. 60% at the moment.

Reducing the 50% threshold would mean a marginal rate between £100k and £113k of 75%. Add in 2% NI from next year and (in the future) 4% graduate tax and you have a marginal rate of 81%.

Britain is open for business.

James Sproule

Perhaps the IFS could be persuaded do some analysis to show that the 50p tax cost more in terms of tax avoided than it raised in revenue. But then again, perhaps this is not on the IFS’s agenda.

TrevorsDen

Nor would it raise any more money as people would start avoiding it; and the economy would suffer.

Labour are always going to come up with these ideas when in opposition; its a Pavlov dog whistle to their supporters.

But we can see the effect Blair had on his party. Now that he is gone labour are reverting to type.

The LDs really should start looking to pick up the Labour Blairites.

justathought

Rather than put the rate up to 50% for those earning over £100k I would instead prefer that it should be targeted that those who have benefited most from the bailout, and limited for one year.

Bankers and especially banks have done fairly well through the taxpayer and as Barclays and HSBC have shown they are now able to go on a spending spree around the world, with the rewards of the bailout.
I do not buy this idea that suddenly they will all move abroad for what would be a short one year tax just until the governments finances are restored (okay maybe a couple of years!) We should appeal to their patriotic spirit, a bit like war bonds.

James Sproule

Two thoughts justathought.
HSBC has been run very conservatively, so did not need to get bailed out. So I assume you are happy for them to proceed buying assets around the world at knock down prices.
As to Lloyds, lest we forget the reason they needed a bailout. Lloyds was pushed into taking over HBOS in order to save the government the embarrassment of another Northern Rock (The deal was negotiated at a drinks party, but no less than G Brown himself). Why don’t we tie Brown’s own pension to the fate of the deal he was so keen to push?

libertarian

errr Barclays and HSBC didn't get a bail out. If you are referring to the effects of QE then ALL of us suffered the long term bad effects of that

justathought

@james Sproule

I accept that some of the banks did not receive a direct bailout however the banking system in general all benefited. For example the BOE rate is half a per cent yet the banks are able to lend on mortgages at over 5 per cent. The spread is actually greater than before the recession! I understand the spread for personal loans is even more.

I am wholly in support that our banks need to be successful. I do not support 'bank bashing' however we have exceptional need to raise tax revenues .

The extra bank tax should not be punitive but perhaps they will benefit from the good pr and the confidence that reducing our national deficit will bring in stabilizing our sovereign debt.

The other good thing about a banking industry tax is that it is easy to collect and hard to avoid.

Simon Stephenson

chris lancashire : 5.32pm and James Sproule : 5.57pm

Labour is only tangentially concerned about Laffer Curve type effects. They'll be aware that there might be a bit of short-term dislocation as a number of high income earners up-and-off with their businesses, but there's no way a bunch of socialists are going to go soft on confiscatory taxation just for the sake of looking after the health of a capitalist economy.

Labour have successfully peddled the myth that they've become a pro-capitalist party content with smoothing the rough edges of the market economy. This is bollocks. The moment they see the opportunity to take up where Brown left off, they'll waste no time in doing so.

Never, ever allow yourself to be misled into thinking that any Labour policy is really about what they want you to believe it's about.

alexsandr

50p tax band is the politics of envy. simples.....

Fex Urbis

It's already happened by getting rid of personal allowances for anyone earning over £100K a year; you end up effectively paying 50% on anything over the £100k mark.

Sunder Katwala

It is premature to say this will probably be Labour policy soon. The post is mistaken to say Ed Miliband is in favour. He has not said that; he has said he favours making 50p at 150k 'permanent' rather than reversing it after 5 years (David M's position).

If it were, opponents to the policy can argue that it is economically wrong-headed, counterproductive, but there is no evidence to support the claim that it would be electorally unpopular or would destroy a broad alliance. YouGov found 61% for and 18% against last year, with ABC1 voters 60-21 and Tory voters 57-27 in favour and LibDems 69-13 (Lab 68-11). It has 58% support in the south, and in London. (I think it would probably be a little more popular this Autumn, given the context of the cuts debate).

If Labour did go for this, the Tories would be cautious and somewhat timid about opposing it (as they were on 45p at 150k, then 50p at 150k), which would be further complicated by this ex-LibDem policy retaining some popularity on the LibDem left.

If advocacy of this was linked to some popular issue of opposing an unpopular spending cut or enabling some tax cut lower down, it would be politically a difficult googly, whatever most people here may think about the economics of higher tax at the top.