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50p income tax? The rich should count their blessings

Of course the 50p top rate of income is more important for its symbolism than its efficacy. The free market right should stop griping and thank their lucky stars that the last Labour government lacked the political courage required to reintroduce genuinely progressive taxation.

If only they would count their blessings instead of counting their money, they would realise that the current arrangements represents a brilliant public relations coup for the super-rich. For a somewhat modest outlay, it almost looks as if they are pulling something approximating their weight.

Nevertheless, it looks as if the 50p band is on the way out. The Liberal Democrats, we read this morning, have dropped their opposition to seeing it scrapped, leaving the the rest of us wondering how strongly the principle was ever cleaved to anyway.

Such timidity will be warmly welcomed by the noisy lobby that has become increasingly obsessed with this issue in recent months. Yet the case they make against it is notable for its incoherence.

The first main argument advanced is that the 50p rate doesn’t actually raise any money, but rather simply leads to more efficient tax avoidance. In that case, what’s the problem?

In  point of fact, it does appear to raise money. The Treasury estimates that it will pull in £2.7bn in 2012-13, which works out at something like £50 a head for every man, woman and child in Britain.

That is not a fortune, of course. But it is better than nothing, and if the government doesn’t find that sum from the wealthy, it will have to find it from the not so wealthy.

The second typical ground for opposition is the idea that the £150,000 threshold somehow stifles enterprise and wealth creation. That also is nonsense.

Higher taxation on the top 1% of earners does not deter anybody from setting up a local restaurant or window cleaning business. Few such small scale entrepreneurs have any realistic hope of pulling down £150,000 a year, ever.

The handful that do can channel revenue through their companies, leaving it subject to capital gains tax at 20% rather than income tax at any level. Isn’t that right, Ken Livingstone?

Conversely, most people on salaries of £150,000 or more are neither entrepreneurs nor wealth creators. Usually they work in the City, where they speculate using wealth in the main created by the efforts of working people, or have risen up the management ladder in established multinationals.

And despite all the overblown claims that this ostensibly punitive taxation regime would spark a mass exodus of City Boys, this clearly has not happened. Only a small handful have upped sticks. The overwhelming majority have elected to stay in Britain, which remains a country in which a strongly Friedmanite government is dedicated to helping them rake it in hand over fist.

Many of them have accumulated fortunes so immense that 50p rather than 40p is so much small change. It represents just another overhead cost of living in London, much along the lines of the extortionate price of upmarket accommodation.

Clawing back some of the spectacular giveaways doled out to the wealthy under successive governments since 1979 is entirely justifiable.

An effective income tax policy would see them pay rather more than what they are getting away with right now.

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