By Phil Doherty (11 January 2009)

Published in the Sunday Sun here

RECENT research has found the public’s attitude to the “undeserving” rich is hardening and that more people than ever think they should pay more tax. But does it make sense in the middle of the huge economic downturn facing Britain? PHIL DOHERTY reports . . .

“TAX them until the pips squeak . . . ” goes the old adage on making the rich pay more to the public purse.

But, in the last decade, neither Labour nor the Tories have advocated raising the higher threshold of tax for the rich.

And neither party saw a vote winner in closing tax loopholes that allow the rich to evade their present tax responsibilities with the help of their creative accountants.

In recent years there has been no political clamour to make examples of tax-evading rich people . . . yet some sections of the media at times seem obsessed with outing poorer benefit cheats.

But research by the left-wing think tank the Fabian Society and pollsters YouGov — on behalf of the Joseph Rowntree Foundation — shows that the public’s attitude to the well-off has changed . . . thanks to the credit crunch.

And when, in his pre-Budget report last November, Chancellor of the Exchequer Alastair Darling announced his intention to introduce a new higher top rate of tax of 45 per cent for those earning £150,000 a year, protests were muted. In fact, many want it to be higher.

Louise Bamfield of the Fabian Society said: “Our work suggests there is a growing public mood for rich people to contribute more.

“Three quarters of respondents to our poll supported the Government’s proposed new higher top rate tax of 45 per cent for people earning over £150,000. Meanwhile, almost seven in 10 respondents expressed support for a new top rate of 50 per cent for people earning over £250,000.

“Poll data also gives some clues as to why people think the rich should contribute more, with 70 per cent of respondents agreeing that ‘Those at the top are failing to pay their fair share towards investment in public services’.

“There was also incredibly low support for the business case for low taxation, with only 19 per cent of respondents agreeing that taxes on high earners should be kept low so that ‘British companies can attract the talent they need to succeed’.

“As the threat of unemployment spreads more widely than at any point over the last decade, there is sympathy and support for people affected by the downturn and, temporarily at least, greater empathy and understanding towards people who have been laid off.”

But the right-wing Adam Smith Institute believes it would be madness to tax the rich more at a time of economic meltdown as it would destroy the entrepreneurial spirit at a time Britain needs wealth creators.

They believe the best way to help the poorer sections of society is to lift the very poor out of the tax system altogether by raising the point where an individual starts paying tax up to £12,000, instead of the present £6035.

Spokesman Tom Clougherty said: “Higher taxes for the rich might make for good envy politics, but higher tax rates do not necessarily mean that more tax is paid, or that more revenue is collected. Often, the opposite is true.

“Higher tax rates discourage work, discourage investment and discourage production. Less wealth is created as a result, and both the economy and the exchequer suffer. That’s the last thing we need in a recession.

“Higher taxes also give people an incentive to avoid tax, either by hiring accountants to find loopholes or by moving somewhere else. Given that the top one per cent of wage earners in the UK pays 23 per cent of its income tax, that’s a real problem.

“A better way to make the tax system fairer is to take the poor out of income tax altogether, by raising the personal allowance to at least £12,000.

“Raising taxes on the UK’s wealth creators is just counter-productive.”

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