High Taxes for the Rich cost Jobs for the Poor

Yesterday a group of distinguished businessmen wrote to the press calling for action to stimulate growth, and asking inter alia for the rapid abandonment of the 50% income tax rate (let me declare my interest: I do not earn enough to pay this rate, so my concern is solely for the economy, not for my bank balance).

Cameron’s reported response deserves a prize for the over-worked cliché, but a raspberry for economic analysis.  He said that “The broadest backs should bear the greatest load”.  OK, Dave, fine.  But the broadest backs will continue to bear the greatest load even after we ditch the 50% rate.  Reduce the higher rate to 40%, and the rich will still pay more than the poor, both absolutely and pro-rata.  And the man on £1 million a year will still pay (roughly) double the man on £500,000.

Let’s be honest about the 50% rate.  It’s there for purely presentational reasons.  It’s there because we’re running scared of what Ed Balls might say about it.  We ought to have the courage to do the right thing, and then explain why we did it — not do the wrong thing because we’re frightened of criticism.

The Treasury is doing a study of the extra tax collected by the higher rate, but most serious economists expect the answer to be zero, or negative, for all the familiar reasons.  And if this cosmetic gesture of a tax raises no extra revenue, then all the talk of “broad backs bearing the greatest load” is so much nonsense.  If, as seems to be the case, higher taxes depress economic growth, then the 50% tax is downright irresponsible.  Worse still, by reducing economic growth, by disincentivising high earners and entrepreneurs from investing, or even remaining, in the UK, we are actually damaging the lower- and middle-income people that we pretend to be helping.  We are standing in the way of job creation.

There is overwhelming evidence from dozens of countries over decades that low taxes (and flat taxes) stimulate growth and jobs, and benefit the whole economy, not just high earners.  High taxes for the rich cost jobs for the poor.  We are cutting off our noses to spite our faces — or to appease the Labour Party.  Come on Dave (and George).  Time to show some backbone, and do the right thing.

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2 Responses to High Taxes for the Rich cost Jobs for the Poor

  1. maureen gannon says:

    When asking for Dave to have some backbone you are talking to the dummy the puppet master would not allow that surely Clegg runs this govt because Dave is ****scared of losing the facade of power he has . he is bLiar incarnate the world stage is for him not the well being of the economy of his own country. and if bowing to Clegg is the answer then so be it.

  2. I agree with your analysis. Entrepreneurs need a lot of encouragement. There were two of them on last night with Peter “Dragons’ Den” Jones.
    People like that need all the support they can get – they have given their lives for their businesses for whatever reason. Family, holidays, relaxation all come second to the relentless drive that pushes them on.

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