Craig Barrett 11.12am
“95 per cent of statistics which appear on the internet are made up.” ~ Albert Einstein, echoing an earlier statement by Jean-Jacques Rousseau.
As someone who does his mathematics in true Douglas-Home style (with matchsicks), I find statistics, analysis, pie charts and graphs often to be somewhat baffling.
However, one piece of analysis that has emerged - namely that a 50 per cent tax bracket raises no additional revenue - was something that was always patently obvious to me. When this country had a top rate of tax on earned income of 83 per cent, 11 per cent of tax revenue was paid by those who fell into that bracket; when the top rate fell to 40 per cent, the proportion rose to 25 per cent. In the years prior to the introduction of the 50p band, the richest 1 per cent paid 23 per cent of income tax, whilst the top 5 per cent gave an astonishing 42 per cent of tax revenue.
Any fool must be able to see that in order to cover the lost revenue from each individual of those 5 per cent who departs, those who remain must pay more, or more jobs must be created. In a stagnant economy, neither of these options are possible.
I wrote a few weeks ago about how a Tobin Tax is essentially just a ‘soundbite tax’. The ability of companies to shift headquarters for tax reasons is remarkable and one of the reasons why the British tax system must remain competitive. The same is true for the 50 per cent income tax bracket.
The way that some people are talking - with a righteous excess of vitriol - you would be forgiven for thinking that 50p taxpayers pay no tax at all. As it happens, those taxpayers are not the super-rich (who have advantages such as non-dom status, portable capital, expensive advisers etc). Most of the people paying the 50p rate are hard-working middle-class professionals - in other words, net contributors that this country cannot afford to lose.
You do not need to be able to understand a Laffer curve to know that cutting taxes can actually increase the total tax take. What should also be obvious are the subsequent benefits: a simpler tax system is cheaper to administer and police (for both businesses and HMRC) as well as providing for increased spending power.
So what is the point? Well, the 50p rate is just another soundbite tax. A mind that was warped enough to build a tax system that over-taxes everyone, then pontificates about whether to give each individual some of their own money back again is warped (and cynical) enough to create a tax purely for political reasons.
Sir John Major sagely said: “The Tories are elected to govern, Labour governs to be elected.”
Thirteen years of economic and constitutional destruction demonstrate the contempt that the Labour party has for this country and its people, the culmination involving the introduction of a tax designed simply to make life difficult for an incoming alternative government.
The 50p tax brings in no revenue yet it is used by the Left to whip the population into a frenzy by discreetly associating it with the “evil” of the bankers. As such, its retention is supported by a public whose only knowledge of it is what Ed Balls, the shadow chancellor, tells them.
Even worse is the support for the 50p rate in certain quarters of Whitehall. Chris Huhne, a man of the Left at heart, rules out its abolition, which comes as no surprise seeing as Mr Huhne has always seemed slightly more interested in what benefits Chris Huhne than his own country. Danny Alexander, on the other hand, has always seemed so much more sensible.
The Liberal Democrats who support its retention are at best economically naive and at worst, politically cynical.
Julian Glover had an excellent article on the Guardian website yesterday, telling Nick Clegg to remind his party that they are in power.
“To govern is to choose”, said Nigel Lawson, the Chancellor whose reduction of the top rate of income tax created a massive increase in tax revenue. I am afraid that the Lib-Dems need now to choose to do something that is good for the country, however unpopular.
Follow Craig on Twitter @MrSteedUK