50p tax isn't just hurting the economy, but Treasury revenues too

TomTom

"the Shadow Chancellor was a political strategist with little interest or expertise in economics"

Yes, I have heard that said by persons who seem to know him well......he certainly shows little economic nous.

It is getting obsessional Fraser your focus on this tax rate. Abolish it but at the same time raise interest rates to the Banking Sector from 0.5% to a rate 10% BELOW the highest credit card rate charged by the financial supermarkets

tb

Along with the 50% tax, can they look at re-instating the personal allowances at £100,000?

TomTom

BTW Fraser, Germany does NOT have a top rate of 45% - there is a Solidarity Surcharge in addition which is 5.5% tax liability

http://de.wikipedia.org/wiki/Einkommensteuertarif#Grenzsteuers.C3.A4tze

jebediah

We're through the looking glass. There is no point in a tax band that loses the govt money.

One person moving abroad who earns say £5 million year, goes from paying £2m a year in tax, to paying nothing. This doesn't count the tax on their spending.

It takes a lot of £150,000 to £200,000 a year professionals who cannot move to bridge that gap.

Not only that, it annoys natural Conservative voters.

Get the numbers, and man up scrap the tax that costs Britain money.

2trueblue

As rightly stated this tax has to stay in place right now as there is worse to come for those further down the tax brackets. Already the tax credit situation is hitting people and the withdrawal of the childrens allowance for those earning £41k+ will be much harder felt than people realise. It is not the time to deal with the 50% tax area as it will be seen as pandering to the rich.

The next big issue is coupling NI with income tax. That will be a disaster so hope Osbourne does his homework first. We all know that the economies worldwide are in trouble so there is very little room to make concessions but doing the spade work beforehand is essential. Liebore need to be brought to book continually about the mess we are in and must not be given any ground. Child poverty grew in those supposed 'good times', education suffered, we all know the list. It must be repeated and repeated as it did not happen overnight and must not be ignored. I might even borrow Darlings book from the library.

Hugo Chav

Fraser,

We are nearing the End Game.

Charles Hugh Smith - 6/9/11:

"Alas, you can't have it both ways, and that is a key dynamic in the Crisis of Advanced Capitalism: if you want to dump your surplus production on America, then you have to accept its paper money in exchange. If you decline that deal, and cease producing a surplus, your domestic economy will implode and your political stability will unravel.

Given the choice, the rest of the world accepts the dollars while complaining that it had a better deal in the good old days. Meanwhile, the U.S. consumer, hollowed out by intolerable debt loads, a declining asset base (the family home) and a domestic economy based on ever-expanding credit, is unable to continue the decades-long buying spree without massive transfers from the Central State, which must borrow $1.6 trillion every year to keep the whole creaky structure from collapsing.

China jumped on the export-model as its engine of growth and political stability, and it guaranteed that stability by pegging its currency to the U.S. dollar, making the renminbi a proxy of the dollar.

In the oil-exporting world, OPEC has lost its cartel powers as non-OPEC exporters gained market share and the cartel divided into those who benefit from investing in the West and those who benefit solely from higher oil prices.

If we put all these pieces together, we have a clearer understanding of the long-term historical forces at work: the global consumer society funded by credit is in its end-game, and is the "Central State as guarantor of private consumption" model in which governments borrow/print vast sums of fiat currency to distribute to their citizenry to prop up consumption.

Once exports go away, then domestic economies the world over implode. Ironically, perhaps, the one nation which doesn't depend on exporting its surplus production for its stability is the U.S.

This is one reason why the Swiss pegging their fiat franc to the Euro will fail to hold back the ceaseless tide eroding the Euro. You can play games with currency pegs for awhile, but ultimately the value and utility of a fiat currency is established by trade, energy and the geopolitical issues outlined above.

If we don't understand trade flows, surplus production, the surplus in labor and the resultant decline in its share of national income, credit and currencies in this Marxist-inspired historical perspective, we cannot make sense of the financial/political crises which are sweeping over the global economy. The end-game is at hand, and we need models that are up to the task of explaining the vast forces now in play."

====

Just a pity that our econo-politico elite don't understand the Long Emergency that really got going when the Rock fell. That was a momentus day in British economic history, a turning point. Look at Martin Wolf demanding more money printing and can kicking, when will he face the End Game? They're going to print but it will not reflate the real economy.

Nickle

Taxes are the problem, not the solution.

That's all taxes, not just those for the rich.

Fergus Pickering

Why on earth must the tax stay in place if it's losing us money. Isn't the sole purpose of tax to raise revenue? Have a mansion tax instead. At least that must make money. Or a tax on Ferraris. Or tax anybody with a foreign name. Or something.

macduff7777

Not sure why the media and commentary are obsessed with the 50% tax rate for the 300K in this country ( unless of course they r part of this number) 2trueblue has it spot on, deal with the tax credit and 41k+ debacle first, b4 rewarding the 300K.

cg

Taxes are the problem, are they? So you never use the roads, hospitals or any other public services? So you don't think we should have armed forces to protect us? So you don't beleive that there should be any safety net whatsoever for those less fortunate thean you? If you want to go somewhere without taxation, try Somalia, I hear it conforms to all of your values.

oldtimer

In opposition the Conservatives commissioned two important studies, chaired by Lord Forsyth and John Redwood, which focussed on tax, business and the economy. It is about time they dusted them off and started to implement the good ideas embedded within them. All this dancing around the 50% tax rate is making Osborne lool more and more absurd by the day.

Occasional Ostrich

Wasn't Pitt's Income Tax supposed to be temporary?

New Britannia

Those who feel that this is not a priority are dead wrong. Getting rid of the 50% rate would benefit everyone (not just the richest 300k who actually pay it). I would have thought this was common sense but apparently not.

To briefly explain:

Q - how do you encourage economic growth?

A - you cut taxes

what better tax to cut than one which doesn't raise any money? In government speak this is a "funded tax cut".

James de la Mare

cg -
there are two separate problems with tax, not one. They are collecting tax sensibly and spending the revenue sensibly. The trouble is that for many decades the public desire to have somebody else (specially the government) pay for what one wants or needs has overtaken the will to pay enough to satisfy the demands.

First, therefore, you have to reduce the demands for public expenditure, which means reducing drastically the amount of legislation causing the expenditure, then you have to find other ways for individuals to pay for the services they need or want which are not the essential services for the whole community (ie. the military, the diplomats etc.) which all must pay for. That might mean benefits, loans, subscriptions to public services, direct payments out of income, or whatever.

A tax system has to be fair, and above all, leave sufficient income with each individual taxpayer for a reasonable standard of living to avoid civil discontent and allow society to run smoothly. If there are gigantic income differentials, that can't be done. The £150K income is six times the national average, and the national average itself is five times the income of the state pension (£100pw).

An evil and stupid situation, the recipients of £150K plus can't possibly need that kind of money for their day to day living costs and it seems entirely reasonable to take half the surplus for the public good. Let them and their supporters and hangers-on in parliament, the city and the press, stop complaining and putting forward absurd arguments about "losing money" and the rest. The government doesn't "lose money" - they simply don't take as much as they might if they controlled the collection arrangements as efficiently as they should.

Edward McLaughlin

These '20 economists' : they wouldn't by any chance be paying the higher rate tax would they? Along with the lamestream media commentators who peddle all this Laffer Curve crap?

Nicholas Hallam

"They believe there is no choice but to assuage the eat-the-rich mood in the country".

So, the Government knows that the 50p rate does not increase revenues, but fears that removing the rate will not suit the mood of the country as it will seem that the rich are not hurting like the rest of us.

One wonders what other policies the Government knows to be wrong but persists with because it lacks the courage to risk unpopularity.

PayDirt

Fraser have you ever wondered why there are a few thousand really rich folk, a few million middling, mostly Westerners, with money to spare and billions hovering around subsistence level? Is it because of the wonderful Capitalist system which has been running for such a long time and is now really really creaking toward some final denouement?

TGF UKIP

As usual Fraser, you decline to address the reality of the matter. Your Pusillanimous Pair may be arrogant shits, but they are devoid of the required intellectual self-confidence to make or sustain any economic or political argument.

Hence in opposition they simply opted to be Blue Labour and went along with "Spend & Borrow" and now in government they opt to similarly acquiesce and go for higher taxes and minimal spending restraint.

Small wonder last year that UK voters were so unconvinced by your mates.

startledcod

@ Fergus Pickering, you say, quite correctly "Why on earth must the tax stay in place if it's losing us money. Isn't the sole purpose of tax to raise revenue?" but then go on to say "Have a mansion tax instead. At least that must make money. Or a tax on Ferraris. Or tax anybody with a foreign name. Or something."

You are missing the point. To misquote Ronald Reagan, we aren't in this unbelievable economic mess because the State hasn't taxed enough but because the State has and is spending too much.

Run me past the moral argument that says the top 10% of tax payers (and you only need earn £47k to be in that elite group) who go to work and contribute almost 55% of the total income tax take should pay for those who choose not to work.

High tax rates and the subsequent distribution of the proceeds are not moral, they are exploitative of both the taxed and the benefit recipient.

The politics of envy, which are stoked daily by economically illiterate, will accelerate our passage down road the road to ruin.

@cg - you just don't get it.

AliC

What the cod said+2

We need HMG to spend less, not steal more people's money (tax...). We need to stop paying people to do no work too. And encourage civil servants to realise that they must pay towards their pensions rather than expecting other hard working people to pay twice (for their own pensions and for the civil service).

Trapped

"It is getting obsessional Fraser your focus on this tax rate. Abolish it but at the same time raise interest rates to the Banking Sector from 0.5% to a rate 10% BELOW the highest credit card rate charged by the financial supermarkets"

This.

Finally someone actually gets it. All the dancing around on personal income tax bands will matter not one bit whilst the financial sector uses the bank of england as a means of supplying themselves with absurdly low rate interbank loans which they then pass on at -much- higher rates to the consumer.

Either the banks need to be pegged so their loan and credit APR is tied to the BoE interest rate *much* more tightly (i.e. no more than 3% over and above the BoE rate) or the interest that the banks pay the BoE has to jump up vastly.

Do this and you can slice the top rate of tax to 40% and the treasury comes out handsomely ahead.

BB

Where's the hard evidence that the 50p rate loses us revenue? You fail to provide any. There's in fact, plenty to suggest the contrary: http://www.guardian.co.uk/commentisfree/2011/feb/22/50p-tax-rate-treasury

Romantically Hard Hearted Perry

Economists and psychologists share at least two things in common: they both practice pseudo-science, - and people, for some bizarre reason, pay attention to them.

As only real life decisions and consequences have any part in an ordered life, so these devious and wretched parasites should be shunted to the periphery of any discussion.

It takes little imagination to clearly see what is laboriously laid out here. Why so much agonising over a straightforward decision?

James de la Mare

AliC (9.24pm) "We need to stop paying people to do no work".

People have always been paid "to do no work". It used to be called living on private means (in the middle classes) or, in the case of housewives, "staying at home looking after the children". It was done out of somebody else's income - now it's done by taxing the income and paying out from a government office.

The absurdity of advocating that, which people cannot seem to grasp, is that we do not need all these people to work. We have less industry now in Britain, and many labour saving aids and developed technology. We have limited natural resources to be spread around an escalating world population, and rising pollution. We already have thousands of unemployed who aren't needed.

It is utter, unsustainable madness to expect everybody to work for money in an advanced economy, producing goods and services which inevitably cannot be paid for, while ordinary needs are thereby rendered unaffordable. We can no longer afford to repair roads, run libraries, maintain public parks and gardens, and the rest, because it's too expensive.

If you put all those people to work at going hourly rates instead of paying for their living costs at rock bottom benefit level, then tax levels would soar again and almost everybody would be on 50% tax.