Raising the top rate income tax to 45% is the right move
Alistair Darling has announced a new top rate of tax for the highest earners, with those on more than £150k to be charged at 45p in the £1. This is right and just, those earning that much should contribute a little more.
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It is about time those earning the most contributed the most.
The tax system in Britain has often been criticised for its social discriminatory properties. The less well off always seem to be hit very hard by tax whereas the welathy find loopholes. Perhaps raising top band income tax will help reduce the social inequality that still exists in the country.
The very welathy will stil find loopholes. Those earning 150k will perhaps have the economic savvy (or the money to afford accountants who have) that they need to avoid much of the tax, whereas minumum wage earners perhaps cannot.
In most cases, media stories of the wealthy finding loop holes is anecdotal. On average, the wealthy pays their fair share of the taxes. In Canada, studies have shown that the richest 1 per cent of income earners pay 33 per cent of the tax. In fact, the richest 5 per cent pay well over 50 per cent. This is the same in the United States. (http://www.irs.gov/taxstats/indtaxstats/article/0,,id=129270,00.html)
Although it seems a lot there is no 'unearned income' surcharge
There is no extra tax on investments, and those above the 150k threshold are likely to have pretty hefty investments. The income tax is therefore not quite as much of a blow to these people as it could have been.
The investments of earners in this bracket are likely to have been in property. As the property market plummets so do the value of their investments so they are being affected.
So called 'Robin Hood economics' will help those that need it most
This tax rate is for those that earn the most. When combined with the announcement that the £120 increase in the personal income tax allowance is now permanent (and will be increased to £145 from next April) we will see real help for those earning least and struggling most.
The move will be greatly popular with Joe Bloggs
The general public blame the city fat cats for the current economic situation. It will please the public if they are seen to pay for the consequences through raised tax on their ill-gotten (or at least ill-advised) gains.
Bad idea politically - it gives the Tories more reason to criticise.
It appears that the Tories have actually emerged from their decade of irrelevance and stand to gain should this crisis be mishandled. Despite the lack of any real causal relationship, Tory leadership can always blame lackluster economic performance on the taxing of the UK's most productive citizens.
This argument rests on the assumption that the measure will fail. If this is what's needed to kickstart the economy then not only will the Tories not be able to criticise, they may be more hesitant to criticise similar policies in the future.
Increasing income taxes during a downturn is always a risky idea.
Practically speaking, increasing income taxes during a downturn is always a risky idea. It assumes that this population wont waste resources on trying to avoid the higher rates (maxing out tax-sheltered accounts, loopholes, etc.), especially when they have taking a huge hit on securities losses. Further, the wealthy often have huge discretionary income accounts--they are the best target for spurring consumption; I highly doubt the rich will spend more if their income is taxed more (especially if the increase offsets the decrease in VAT).
Almost everything there is irrelevant - raising income tax to 45% will Always increase the amount taken, you will not find that taxes are reaping less if the rates are higher.
What do you think?