Er…told you so. Twenty leading UK economists have today written to the Financial Times to say that the 50p tax rate, introduced by Gordon Brown’s outgoing Labour government last year and maintained at the insistence of the Liberal Democrat partners in the current coalition, is counterproductive. It will not raise much money, but will do ‘lasting damage’ if it persists, they say.
Quite. Back in March, in the snappily-titled The Revenue and Growth Effects of Britain’s High Personal Taxes, our experts said pretty much the same. Indeed, we calculated that the tax would actually lose the Treasury some £350bn over the next decade, as businesses and high-fliers left the UK for lower-taxed countries. Of which there are many: a KPMG survey of 86 countries last year showed that 82 of them had lower taxes than the UK.
That’s partly because the 50p tax rate is actually a 60% tax rate, by the time you have factored in National Insurance increases and phasing out of allowances. But evidence from past experience in the UK, from the US, Canada, France, india, Hong Kong and Russia is consistent. High top-rate taxes fail to produce revenue and harm economies.
The 50p tax was supposed to help cut the deficit, but it will do the opposite. It should go, now.