Next week is George Osborne's third budget, and the big rumour is that he may drop the top rate of income tax, 50%, which applies to income above £150,000. It was introduced in April 2010, literally weeks before the 2010 election, designed cynically by then Prime Minister Gordon Brown, to corner the Conservatives.
A totemic tax on "the rich", designed to play into the well cultivated class envy. To spread the bigoted discrimination against anyone who has managed to get a job or set up a business or inherit a business that generates that sort of income. Because those how don't have it think the state taking half of every extra pound earned makes up for it. For salary earners, add on the pseudo income tax "National Insurance" (which isn't insurance), it is 52%, add on the employer's contribution to "National Insurance" and it is 58%. Yes, 58% of every pound in income over £150,000 really goes to the state.
Those vindictive little envy mongers in the Labour Party demanding a "banker bonus" tax dishonestly neglect to say that over half of the bonuses go to the state in taxes in any case.
The top tax rate is paid by around 1% of income earners, around 308,000 people, but those people pay 27.7% of all income tax. Fair? Why doesn't the Labour Party tell its low income supporters that almost the entire health budget is paid for by the "rich"? Well it would make people less hateful and envious, and less likely to demand Labour get the power to take more.
£2.8 billion was the estimate for revenue, but other estimates put the real revenue gained as less, because actual revenue from self assessed taxpayers (high income) has dropped half a billion. In other words, they have re-arranged their affairs to reduce their liability.
The debate around the 50% tax rate is full of misnomers. Claims like "bankers are to blame they should pay". Yet most of those on that tax rate are not bankers, and how are they to blame for massive state overspending? They tend not to claim welfare, housing benefit, use the NHS more than anyone else or use state schools. They are more likely to employ people and consume on levels that keep others employed. To blame the successful for the economic situation is dishonest. Even if one claims that some bankers made bad decisions that caused them to fail, this is hardly a fair way to "punish" people who, by and large, lost their jobs in the first place. Besides, who punishes politicians who make bad decisions?
Who holds Gordon Brown to account for selling a significant portion of Britain's gold reserves when it was at a nearly all time low?
The 50% tax rate is not just an envy tax, but is deterring investment and deterring entrepreneurs from basing themselves in the UK. It is a disincentive and earns little revenue, and besides with the rate below that 40%, it's not as if people on higher incomes are not paying substantially to the state.
If George Osborne abolishes the 50% tax rate, he will deserve enormous credit for sending a signal that the UK is not besotted by an attitude of envy, one that doesn't hate success, that doesn't hate entrepreneurs and doesn't see the purpose of high income earners being to fund a state that spends around 50% of GDP.
He ought also to raise the income tax free threshold to £10,000. It is Liberal Democrat policy and will make a positive difference to everyone, as long as the tax band thresholds aren't increased so that people in the higher bands don't lose out. It will be a enormous step to drop the top rate and have a healthy income tax free threshold.
However, more important than that is to confront the envy, confront the acceptable class hatred cultivated by the left, that people on higher incomes not only should pay more tax than those on lower incomes (flat tax does that), but should pay higher proportions of income in tax. The moral question is why should anyone surrender half their income to the state, especially when with most purchases they also pay 20% VAT on many goods and services, and draconian taxes on petrol, air travel, alcohol and tobacco.
That's why abolishing the top tax rate MUST be accompanied by a lowering of the total tax burden, by pulling people at the bottom out of income tax, and being honest about how much tax is paid by those on the highest incomes.