So the government is considering scrapping the 50p top rate of tax. We need to promote growth in the economy. It’s the people who pay the most tax who are the entrepreneurs and high achievers who will achieve this growth. So why punish them with punitive taxes? why not cut them to incentivise them to work harder, create more jobs and stimulate growth. Good idea surely?
Having been out of action for 6 months or so (apologies for that) I am amazed that something so trivial has got me back onto the blogosphere. Anyway. In answer to the question – NO!
There are apparently 320,000 people who pay this top rate of tax. Without knowing the specifics of each individual (and why let details spoil a good generalisation) my guess is that the vast majority are not “entrepreneurs” or “drivers of growth”. I would expect a fair proportion of them are employees of private companies and of course bureaucrats in the still bloated public sector. I have no problem with talented employees being rewarded accordingly (although obviously I do have a problem with public sector pay levels!) but lets not pretend the majority of these employees are going to work less hard because they are having to pay at extra 10p tax on their earnings over £150k. Most of them will either not notice (it has been in place for over a year anyway) or would have been given a pay hike anyway to negate the effect of the tax rise on their net pay.
The real entrepreneurs and growth drivers are likely to be the owners of companies and small businesses who will pay themselves a nominal salary and take dividends from their companies (if they’re making a profit at all). Most of the money will be ploughed back into their businesses.
If the government really wants to promote growth then they should make it easier for these people to operate by cutting the red tape and bureaucracy that overburdens small businesses and disincentivises them to actually employ anyone.
Or you could bring back tapered relief on capital gains to encourage long term investment rather than putting it into the same bracket as short term “punting” (much of it done by the same traders who are the employees described above).
Anyway whatever it decides to do please let’s not pander to the pressures of overpaid employees who want to cream a little extra cash for themselves and pretend these are the people that are going to turn around the economy. There are plenty more sensible and effective ways to encourage the real entrepreneurs who will be the ones we need to do that.