October 20, 2018

The Business of 50 percent Tax Rates

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Back in October I wrote about the problems the UK government was having with the 50p tax rate in my post, “A Taxing Question”.

Fifty pence (British coin)

Image via Wikipedia

At the time I said that

“Those for the policy claim that the rate brings in much-needed revenues that help to reduce the size of the budget deficit. Leading Liberal Democrats have come out in favour of the 50p rate, or replacing it with another taxon the very wealthy.

Those against the policy claim that it stifles entrepreneurship and encourages high earners to move overseas. The debate hit headlines again in early September with a group of Economists writing a letter to the Financial Times calling for the removal of the 50p rate, but the government has now stated that it has no immediate plans to remove the top rate of tax until economic conditions improve. This is hardly surprising given the current state of the UK economy. Many would argue that it would be political suicide to reduce taxes on the rich when those on middle and low incomes continue to feel the squeeze of higher taxes and increasing prices. The Liberal Democrats, at their annual party conference, have  said thatthey would only support removing the 50p rate if another way of taxing the rich could be found.”

If you read the BBC News Website this morning you will see that little has changed and a group of business leaders is now calling for the 50 percent rate of tax to be removed. George Osborne is still under pressure from both sides. If he removes the rate in his forthcoming budget he will please business leaders and members of his own party but appear to be giving “tax breaks to the rich” which is unlikely to go down well with his coalition partners or the average voter.

The expression “stuck between a rock and a hard place” springs to mind!