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50p tax rate? Nowhere near enough

The idea that the rest of us suffer because the super rich are subject to a nominal tax rate of 50p – and that’s the claim that 20 leading economists advance in the Financial Times this morning – is special pleading at its worst. What’s more, it is entirely intellectually spurious, too.

For a start, in the real world most of them don’t pay anywhere near what the 50p figure suggests. As one private equity chief admitted a few years back, many of them are able to arrange their fiscal affairs to ensure that they shell out proportionately less to the Inland Revenue than do their cleaning ladies. That loophole may have since closed, but plenty of others remain very much open.

While working stiffs on PAYE hand over their 22%, and better-off employees like Yours Truly are clobbered for 40% every month, those at the top can readily slice and dice things so that they are subject to an effective tax rate in single figures.

Even that is regarded as a bit much by Arcadia boss Sir Philip Green, who famously kept the bill on a £1.2bn dividend payout down to a nice round zero by putting it into the name of the missus, who he then holed up in a luxury villa in Monaco.

Many of the other arguments adduced in today’s round robin are equally shaky. For a start, the contention that ‘other major economies have got back to pre-recession output levels; the UK has not’ is factually incorrect.

Data cited in the FT itself recently reveals that by the second quarter of 2011, none of the six largest high-income economies had yet regained 2008 levels of output. Such a basic error makes for an unimpressive start to the polemic. If it is not an outright fib, it is at best a selective interpretation.

Nor can too much be read into the simple claim that Britain has already slipped from second to fourth as a destination for inward investment, at least without further information. What period are we talking about? Is the decline sustained?

Is there even a shred of evidence that it is in anyway causally related to income tax rates, rather than any other consideration, or even just the result of random fluctuation in these things?

In what way does higher taxation on the top 1% of taxpayers deter mere mortals from setting up shops or window cleaning businesses? Few such small scale entrepreneurs have any realistic hope of pulling down £150,000 a year, ever.

And despite all the overblown claims that such a punitive taxation regime would spark a mass exodus of City Boys, this clearly has not happened yet. Yes, a small handful have upped sticks. The overwhelming majority have elected to stay in the greatest city in the world, which remains a location that facilitates them raking it in hand over fist.

The truth is that many of these people have accumulated fortunes so immense that 50p rather than 40p is so much small change. It will represent just another overhead cost of living in London, much along the lines of the extortionate price of upmarket accomodation.

Besides, for the direct beneficiaries of the bank bail out even to splutter a word of protest at being asked to pay their way offers a new textbook yardstick for captiousness.

Clawing back some of the spectacular giveaways doled out to the wealthy under successive governments since 1979 is entirely justifiable. It is not as if the elite live on another planet. Why should they contribute little or nothing to society, while benefiting disproportionately from the things for which it pays?

Even if they do use private hospitals and independent schools, the public purse foots the bill for the roads their chauffeurs drive them along and the streetlights outside their offices, or the legal system under which they operate, to give just a handful of examples.

Given the way in which three decades of neoliberalism have seen society reconstructed around the needs of capital, there is no good reason that capital’s personifications should not pay their way. Not only should the 50p top rate stay, it should be rigorously enforced.

One Comment

  1. Chris says:

    Even though the idea that economic liberalism is superior to the old post-war way of doing things is now discredited, we still can’t seem to shake the notion that there’s some elite cadre of ultra-talented ‘wealth creators’ (read: private sector bureaucrats) without whom our economy would fall apart.

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