The advantage of having been around when dinosaurs roamed the Earth is that a 50% rate band isn't that exciting. I am old enough to have assessed people using six different rate bands at once - the then basic rate plus 40%, 45%, 50%, 55% and 60%. And in those days, only fifteen or so years ago, I would calculate your tax bill on the basis of the information you gave me - none of this self assessment nonsense. Indeed, there were still amendments being issued where tax was chargeable at the now unthinkable rate of 83%, and my more experienced colleagues had assessed the investment income surcharge of 15% on top of that.
So, let's not get too carried away by the supposed outrageousness of a 50% tax rate.
However, we do need to be a bit smarter about taxation in an increasingly international economy. People do have a choice as to where they live, and the tax rate is a factor. Don't get me wrong, that is not to say that one should kowtow to the wealthy minority. Instead, we need to think about tax fairness.
For example, is it fair that, for every £1 that a 50% taxpayer pays into their pension fund, the Government matches it, whereas for every £1 a basic rate taxpayer pays into their pension fund, the Government chips in just 25p? Is it right that the Government offers incentives to wealthy people to invest in things that will hopefully be profitable anyway? Indeed, UK tax policy over recent years has been part social engineering and part trickle down economics.
Perhaps it would be better to withdraw the 50% rate band whilst reducing the relief available to those investing in new enterprises. After all, corporation tax rates are already being reduced, meaning that successful companies can pay out more in dividends than was the case previously. And if the impact of the 50% rate is as small as George would have us believe, reducing the benefits to higher rate taxpayers would allow us to increase personal allowances, thus taking more people out of tax, and reducing the amount to be paid back in tax credits. In turn, this would reduce the number of people administering the tax credit system, reducing the cost to the state further.
Everyone's a winner. Well, not exactly, but it's a good first step towards a fairer, more transparent, tax system. Now, where was that draft for a flat rate tax system?...