50p Tax Rate: Is Byers right?
Stephen Byers has attacked the Government for introducing the 50p tax band for those earning over £150,000 as a “cynical, political” move that serves no wider economic or fiscal purpose.
Another way of looking at it is that the new rate will, according to the Budget, raise £2.94 billion to 2012 which is just about the right amount to cover the costs of the funds being poured into extra help for the unemployed through Jobcentre Plus and into the scheme to provide work for 200,000 unemployed people under 25. Together these measures will cost £2.87 billion. It could be argued, this makes the tax a very good progressive measure designed to ensure that mass worklessness amongst the young does not do untold, long term damage to our economy and the public finances.
There’s a side debate about whether the new tax will raise any extra funds (which Byers latches on to) but that is an argument for tough anti-avoidance measures not against the tax per se.
Of course, Byers has form on this having argued for the abolition of inheritance tax (one of the most progressive taxes we have) despite the fact it only affects about 6% of the wealthiest people in the country.
It’s probably time we ditched the view that what is good for the rich is necessarily good for the economy as whole. Yes, we need entrepreneurs but that group is not identical with the very wealthy nor those motivated entirely by wealth. In fact, there’s a good economic case to be made that we should stop trying to attract the money-hungry beasts of the City culture of the last twenty years and instead concentrate on the innovators, thinkers and doers who are motivated by much more than just the next bonus. That would probably set us up for the post-recessionary economy far better.