E are many reasons why the top 50p rate of tax should be axed. It sends a message that the UK doesn’t like successful people; it has made Britain less competitive in the race for talent and capital; and the job losses and reduced economic growth it will cause means that the overall revenue raised by the government will be lower, over time, than had the tax not been introduced.
The 50p tax’s sole purpose is to hurt a few people and fuel class warfare. Even those on low incomes who will never pay the tax will be worse off because of it. It is also a myth to believe that the “rich” do not pay much or enough tax in today’s Britain.
If you don’t believe me, take a look at the facts. There are 29.9m income tax payers (out of a population of 61.8m) who earn at least £7,475. Roughly 727,000 people have an income of at least £100,000 a year. Of these, 369,000 earn £100-150k; 157,000 earn between £150-200k; 158,000 earn £200-500k, 29,000 between £500k-£1m and 14,000 earn a £1m or more.
This implies that 358,000 people earn £150,000 or more; roughly 308,000 of these pay the 50p rate. Some of these will be non-doms, who pay full UK income tax on UK earnings (but also derive earnings from overseas, which are not taxed). These figures do not include capital gains.
A huge share of the tax take and hence of the money used to fund the NHS, schools and welfare is accounted for by a tiny minority on high incomes. The top one per cent of taxpayers (roughly speaking, those on £150k and above) will pay a record 27.7 per cent of the total income tax take in 2011-12, according to HMRC (they earned 12.6 per cent of total income, down from 13.4 per cent five years ago). This has increased from 26.6 per cent the previous year, 21.3 per cent in 1999-2000, 14 per cent in 1986-87 and 11 per cent in 1981-2. History tells us that cuts to the top rate actually increase the share of tax paid for by the rich; there was no need for Gordon Brown’s raid.
Another astonishing statistic is that the 14,000 people on £1m a year or more will pay £14.2bn in income tax this year. They will contribute almost as much to the exchequer as the total paid by the 13.93m people earning up to £20,000 a year, who will fork out £14.9bn. Those on £1m or more now pay 45.5 per cent of their income in income tax, up from 35.7 per cent in 2008-09 (they also pay national insurance).
No wonder many are questioning whether they should stay in the UK, and many global firms are now creating high-paying roles outside of the UK.
The more rich people, the more tax receipts. Paradoxically, of course, that means axing the 50p tax rate. Just as crucially, it must not be replaced by any other tax and certainly not by a wealth tax or mansion tax.
All sections of society already pay far too much tax. A wealth tax would be a moral and economic disaster, double or triple taxing income and making a mockery of property rights. We need growth and jobs, not hate and punitive taxation. It is time to halt the war on wealth.
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