Wednesday, 7 September 2011

If I were a rich man...

If I earned £150k I'd be possibly just outside the top 1% of earners in the UK. If the 50% tax rate was abolished...I would receive no different income than I was on before it was abolished.

If I earned £300k I'd likely be within the top 0.2% of earners in the UK. If the 50% tax rate was abolished I would be able to take home an extra £15k. This equates to around £175k instead of the higher £190k, a loss of about 8% of disposable income.

If I earned £500k, I'd be nearer to the top of the 0.1% of earners in the UK. If the 50% tax rate was abolished I would take home an extra £35k.

If I earned £1m, aside from being one of the highest paid people in the world, the 50% tax rate being abolished would let me take home an extra £85k.

I might be a bit of a freak here, economically speaking...but I can't quite get my head around why, even on something as "paltry" as £300k, the idea of *only* having over £150k of disposable income (after pensions, perhaps) instead of £165k is "punishment". Sure, if I had those earnings I might be able to keep more money if I lived somewhere else...but in the UK I would still have enough money alone that would sustain 8 whole *average* families, even if without the 50% tax I might be able to sustain 9 whole families a year instead.

Maybe those that are in the top 1% of earners in the UK don't think in such selfless terms. However even if this were the case, and they all felt so punished, how does removing the 50% tax rate help our growth situation?

I can't help but think that if our growth is truly down to this small, extremely small, section of society that we have much deeper problems than our income tax system. If growth is down to these few hundred thousand individuals then they hold far too much power, and the fall of the 50% tax rate may be inevitable. There is also the threat that even with the removal of the 50% tax rate that we could be undercut even more by an emerging market, and that we could be forced to reduce our own revenues even further to compete.

This is not a healthy position to stand from, and with widening income gaps between the rich and the poor a position that gets more perverse each year. The idea that our entire economy rests on the shoulders of such a dwindling proportion of people should scare the pants off of us.