The pips squeak


Mark Steel thinks the argument that the 50p tax rate won't bring in any extra money is "mad on lots of levels".

But is it mad to assume that taxes affect behaviour? If so, why do the left keep insisting we should put more tax on alcohol to stop people drinking, more tax on cigarettes to stop people smoking, and more tax on petrol to stop people driving? Maybe they just like taxes.

But tax does affect behaviour, and the 50p tax rate is likely to have a number of consequences.

Some dynamic, innovative and productive people will choose to leave the country rather than have so much of their income confiscated. Companies too are likely to find that they can't attract the best and the brightest to Britain anymore, and will be tempted to relocate. Other people will find that higher tax rates make it worth their while to expend effort on avoiding paying the tax rather than on working and creating wealth.

Higher taxes also lessen incentives to work, and therefore reduce economic growth. That doesn't just apply to people on high incomes either: why take the risk of setting up a business when, if you're successful, your reward will be the government taking half your income?

All those factors point to less revenue, as does the fact that the 50p tax rate will encourage sole traders and unincorporated companies to incorporate, and pay corporate taxes rather than personal ones.

But I don't mind about lost revenue: the government spends far too much, and government spending can damage the economy just as much as tax by crowding out productive, private enterprise. The real point is that if we insist on blunting incentives, driving away the talented and successful, and creating a culture in which success is penalized, any economic recovery is going to be sluggish at best. And whatever Mark Steel thinks, that will hurt the poor every bit as much as the rich.

One last point: does government really have the right to forcibly confiscate so much of someone's income? I don’t think so. If anyone here is being "greedy, avaricious and selfish", it's the state.