The independent Institute of Fiscal Studies uses a more dynamic model which rightly assumes some high earners won't (for example, they might leave the country, stop working or pay themselves anything above £150,000 in tax-free pension contributions). It recently concluded that the proposed 45% would not bring in ANY extra revenue and indeed might actually generate less. We will wait with interest to see what it makes of the new 50% rate.
Threats that high earners will leave the country are often dismissed as propaganda and no doubt they often are. But a 50% top rate of income tax means Britain will have the third highest top rate in the industrialised world -- only Sweden (55%), Denmark (59%) and Netherlands (52%) will be higher while America (35%), Canada (29%), Hong Kong (16%) and Dubai (0%) could start to look even more tempting to Britain's high fliers, especially now the streets of the City are no longer paved with gold and there are mumbles among them that the Budget of 2009 represents the end of New Labour.
Good riddance to bad rubbish, you might say, and if we see the back of some of the bankers who've brought us to our knees you might be right. But the top 5% of income tax payers account for half of all income tax receipts. You don't want to lose too many of them when you're already planning to borrow £800 billion.
Wednesday, 22 April 2009
Andrew Neil on the 50% income tax rate for higher earners
Andrew Neil on the 50% income tax rate for higher earners - 'Worse than we feared?'