The great tax debate has been thrust back to the top of the political agenda, and about time too. The economic argument against Britain’s 50p top rate of income tax is convincing. As 20 leading economists told the Financial Times earlier this month, there is no evidence that the increased top rate has managed to raise any new revenue for the exchequer.
Crucially, its detrimental effect on the UK’s competitiveness impacts most upon middle and lower-income earners. The FT’s letter made this abundantly clear: ‘the economic damage it causes means it is against the interests even of ordinary workers who don’t pay it’.
The numbers, quite simply, do not add up. Yet as strong as this case may be, there is an even more persuasive justification for abolishing the 50p top rate – one that has largely been ignored so far. Regardless of economics, it is the utterly compelling moral argument that should win the day.
According to KPMG (£), one of the ‘big four’ professional services firms, the average top rate of tax across the European Union is 37.5%, while the richest Americans pay 35% of their income in tax. By contrast, those earning over £150,000 in the UK can expect to pay a marginal tax rate of 52% (50% on their income and an extra 2% in national insurance).
This disparity is grossly unfair. What right does the state have to take over half of an individual’s earned income away from them? None. Is there any evidence that our governments should be trusted to spend a greater proportion of our money? History suggests otherwise.
The case for cutting tax is not just a pragmatic economic argument. It raises other fundamental questions about the morality of how we run our society, and of the role that government should play in the lives of individuals. This year's Tax Freedom Day shows that Britons have to work a staggering 149 days in a year just to pay their taxes. Tim Farron could not have been more wrong at the Liberal Democrat party conference last week. For a western liberal democracy founded on defending the freedom of the individual, this is morally abhorrent.
So far the focus of discussions by politicians and pundits alike has been on economics and whether tax cuts make financial sense. Now it is time for that focus to shift onto the morality of tax; this is the argument that will end the great debate once and for all.
Alexander Wickham is a freelance journalist and Politics finalist at the University of Bath. He writes for the Huffington Post and the student magazine Political Promise.