Top-Rate Taxpayers Should Stop Whingeing and Cough Up
Dejevsky, Mary, The Independent (London, England)
IT'S ALMOST two weeks now since the Budget, but still the whingeing goes on. Any commentary that has not been drowned out by MPs' expenses, Gurkhas or swine flu returns to one topic and one topic alone: the 50 per cent tax rate and other penalties for the highest earners.
Immediately after the Chancellor's speech the aggrieved rich were just one voice in the chorus. The others, mostly from the left, complained that there was nothing/very little/not enough for the poor or the pensioners or savers. They were right, there wasn't much - but then, in such parlous times, what did anyone expect?
Less remarked upon was that for the vast majority of earners, the Budget was essentially a non-event. There were no emergency revenue- raising measures that would really have hurt, such as a rise in the basic rate of income tax or new punitive "sin" taxes, only the routine pence on alcohol, tobacco and petrol. The last thing the Chancellor wanted to do was restrict spending.
There was even a pleasant surprise for most of today's higher- rate taxpayers - the 3.5 million or so who earn more than 37,400 but less than 150,000. Contrary to rumours that he would reduce tax relief on pension contributions, the Chancellor left their higher relief in place. This group makes up 10 per cent of income- tax payers. Only 1 per cent of the population earns more than this - 350,000 out of an income-tax paying population of 30.6 million.
In other words, it is only a very, very small number of people who were stung by this Budget and, as a proportion of their income, they were barely pricked. But my goodness are they making the rest of the population know it! To believe them, and their well-paid advocates, the engine of the country's wealth is under assault; there will be a flight of capital to rival Russia's.
Let's look at what these 350,000 really stand to lose. They will pay an extra 10 per cent in tax on the top part of their salary and they will have less incentive to pile money into pensions. Along with those on more than 100,000 - still a tiny fraction of the population - they also face their personal tax-free allowance being phased out. None of this, relative to their rewards, adds up to a huge loss. Remember, we're not talking about 50 per cent of 150,000 but 50 per cent of earnings above that.
Perhaps wisely, the arguments they have conspicuously avoided are those of fairness or morality (though the withdrawal of the personal tax allowance for high-earners poses a real question of fairness). …