50p Tax: Boosting Growth Or Tax Break For Wealthy? (Vote)
Politicians, economists, unions and charities have reacted to a letter calling for the abolition of the 50p tax, signed by some of the UK's leading academics. Provoking strong reactions on either side, Huffington Post UK highlights some of the key issues that surround the taxation policy and invites you to give your own opinion.
Ruth Lea, economic adviser and director of Arbuthnot Banking Group told the Huffington Post UK:
"I agree that the 50p tax rate should be abolished. It's unlikely to be a big revenue earner. And the marginal rate of 'tax' for high earners is in fact higher because of the extra NICs.
"The government has to decide whether it wants the City to remain internationally competitive. And the Z/Yen Group reports show quite clearly that London's competitiveness is under threat - by a combination of high taxes (where the top 50 per cent rate is internationally uncompetitive for highly mobile talent) and the extra regulation (including the extra capital requirements on banks and EU Directives including the Alternative Investment Fund Managers Directive, which affects hedge funds).
"The government is now worrying about slow growth. It needs to nurture the whole economy - not least of all the City. Leaving the tax at 50 per cent inevitably undermines the City's international competitiveness and its ability to grow and contribute to the economy."
Angela Eagle, Shadow Chief Secretary to the Treasury, is calling for an independent report on whether scrapping the 50p tax would actually have an effect on incentives. She says:
"They are making an assertion for which there is no evidence yet, and I think that if we want to have a proper debate about this, we should be getting the Office of Budget Responsibility to do a genuinely independent report about the effect on incentives, and the amount of money that the top rate of tax actually brings in.
Rather than get the revenue and customs to do this report, as George Osborne has said, I think we should have a genuinely independent report by the Office for Budget Responsibility.
It's a funny priority from a Chancellor that claimed when he first came into office that we are all in this together, that he should be only concerned about those at the very very top of the earnings ladder."
Ed Balls, Labour’s Shadow Chancellor, (and one of the most popular Labour ministers according to a poll) has proposed reversing the VAT rise instead, saying:
"Millions of struggling families and pensioners on middle and low incomes will wonder why the only tax rise or spending cut George Osborne is willing to reconsider is the top rate of tax for the very richest.
The right priority to boost the stalled economy now should be temporarily reversing the VAT rise, which is costing families with children around £450 a year. "
Trades Union Congress (TUC) General Secretary Brendan Barber also joined the debate in support of those on lower incomes, saying:
"At a time when cuts are biting hard and ordinary people are suffering the biggest squeeze on their living standards in years, the last thing we need is a handout to the wealthiest in our society. “What is most depressing is that in the US, France and Germany there are vocal lobbies of wealthy people making the case that they should pay more to help clear up the mess that caused by the crash. “In the UK they simply want to get back to what they see as the good old days, with a Chancellor quietly egging them on.”
The letter aimed to reset the debate to "sound economics not party politics", a distinction that Professor Keith Pilburn, Director of Business Economics, at City University London, was keen to point out:
"Certainly many people are disgracefully overpaid, but that is a separate issue and it is important to separate the arguments: this is a tax issue, and it is bad economics. If those individuals leave the country because they are adversely affected by the 50 per cent tax rate, that will create further tax losses for the government, which will have to be picked up by the ordinary citizen. ”
An HM Treasury spokesperson said:
"The Chancellor said at Budget that the 50p rate is a temporary measure and he has asked HMRC to conduct an analysis of the revenue raised by the rate. The Government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden.”