Andy Gilder wrote:
Congratulations George on producing the most fundamentally flawed analysis of the impact of the 50p tax rate.
Apparently it didn't raise as much as was expected, because a lot of people took additional income in the preceding year to avoid it. So rather than waiting until we see what it produces this year (the first year that won't be available as an option to additional rate taxpayers) we're going to get rid of it.
Hit the nail on the head there. Not only was the 50p tax rate announced a year before it came in thus allowing the rich to bring forward income and avoid the tax, ever since the coalition (and even under Labour I think) the rate was mentioned as being temporary which means people may have decided to defer income to avoid paying tax now in the hope Osborne would look after them - which he has done.
Channel 4 News reported that A4e's Emma Harrison and others brought forward their 2010/11 income to 2009/10 to avoid the extra 10p in tax that came in from April 2010.
Except we're not going to actually get rid of it, we're going to reduce it so it's only 5p different to the higher rate of income tax. I'm sure that will bring all those departed oligarchs and business leaders that fled the country rushing back.
Well the argument goes that because this was a "temporary" tax rate then these people may well have decided to do as I say above or if they could not then simply put up with the 50p rate because moving out of the UK is a high cost exercise in itself and would likely lose them money in the short term.
My opinion is few if any left with this as the main reason for going.
What is certainly true however is one years tax returns with the new rate in force are no basis to conclude how effective it is. It would need to run for several years so the effects of bringing forward or deferring income worked their way out of the system and so would have the loss of any revenue due to people leaving the country as the ones minded to leave would have have left.
The fact these so called behavioural responses to the 50p have not worked their way out of the system will not stop Osborne saying relatively low tax revenue for the 2010-2011 tax year is proof it does not work.
It also ignores the rather pertinent fact we had a recession and many high earners in the financial sector will have had a lower income because of that - so less tax to be taken.
They have only had the 2010-2011 figures for 7 weeks and have simply not had the time to do the sums properly and include estimations for what the likes of Harrison did, the recession and so on.
Any such figures will simply be an excuse to lower the rate for the rich and it will be an outright lie to say it has failed.
Its the wrong solution to lower than estimated revenues anyway.
If such behavioural responses will lower the tax taken then
punish that behaviour, not reduce the tax.
Perhaps the money raised (five times the current income, apparently) can all be used to set up and run this new means testing system for child benefit?
The amount of money raised by the measures that will supposedly make up for lowering the 50p tax rate such as the stamp duty increase on properties sold over £2m is being debated on various sites commenting on the budget and by the looks of it, it won't come close to even covering the loss in revenue from the lowering the 50p tax rate despite the factors that will make the amount collected from this in 2010-11 lower than expected.
The original estimate for the 50p rate was it would raise £2.7bn. The estimates for the stamp duty measure amount to a mere £300m.
