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Published on September 7th, 2011 | by Madlen Davies
Image © [caption id="attachment_3428" align="alignleft" width="235" caption="twenty leading economists urged the government to drop the 50p tax"][/caption] Last night George Osborne announced that for the fourth time this autumn his forecasts for growth will have to be reduced. Britain thus faces either a few years trudging along at snail-pace growth, or a cold, double dip into the parsimonious waters of recession. Great. Yesterday in a letter to the Financial Times, twenty leading economists urged the government to drop the 50p tax- paid by the 1%of the population that earn over £150,000 a year. They worry it punishes wealth creators and dampens entrepreneurial incentives, claiming that the UK has "one of the highest personal tax regimes in the industrialised world, making it less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers". The tax then should be dropped as part of a package deal to stimulate growth. Boris Johnson agrees, and believes that the tax should be abolished to signal that “London is open for business”. However, there are concerns that abolishing the 50p tax during the current climate of economic harship would send out the wrong message to those struggling, and increase tensions stemming from income inequalities. The “squeezed middle classes” may feel especially resentful. Should then, the 50p tax rate then be kept for political symbolism? The New Statesman’s George Eaton points out that those earning over £150,000 a year would be likely to save any windfall received rather than spend it, and exact figures of how much the tax actually brings in are not known. He suggests instead, cutting National Insurance- the 'tax on jobs'. Vince Cable has proposed a mansion tax to replace the 50p tax which may solve the problem of the wealthy moving abroad. Ed Balls has previously suggested a temporary reduction in VAT which seems like a good idea as it would relieve pressure on those struggling at the lower end of the pay-scale, reduce inflation and, to quote Boris Johnson’s once more, “get people shopping again” to revive the economy. A spokesman from the Treasury responded to the FT letter with the following: "The government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden." So, for the near-distant future at least, it looks as though the 50p tax is here to stay.

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The Fate of the 50p Tax

twenty leading economists urged the government to drop the 50p tax

Last night George Osborne announced that for the fourth time this autumn his forecasts for growth will have to be reduced. Britain thus faces either a few years trudging along at snail-pace growth, or a cold, double dip into the parsimonious waters of recession. Great.

Yesterday in a letter to the Financial Times, twenty leading economists urged the government to drop the 50p tax- paid by the 1%of the population that earn over £150,000 a year. They worry it punishes wealth creators and dampens entrepreneurial incentives, claiming that the UK has “one of the highest personal tax regimes in the industrialised world, making it less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers”. The tax then should be dropped as part of a package deal to stimulate growth. Boris Johnson agrees, and believes that the tax should be abolished to signal that “London is open for business”.

However, there are concerns that abolishing the 50p tax during the current climate of economic harship would send out the wrong message to those struggling, and increase tensions stemming from income inequalities. The “squeezed middle classes” may feel especially resentful. Should then, the 50p tax rate then be kept for political symbolism? The New Statesman’s George Eaton points out that those earning over £150,000 a year would be likely to save any windfall received rather than spend it, and exact figures of how much the tax actually brings in are not known. He suggests instead, cutting National Insurance- the ‘tax on jobs’. Vince Cable has proposed a mansion tax to replace the 50p tax which may solve the problem of the wealthy moving abroad.

Ed Balls has previously suggested a temporary reduction in VAT which seems like a good idea as it would relieve pressure on those struggling at the lower end of the pay-scale, reduce inflation and, to quote Boris Johnson’s once more, “get people shopping again” to revive the economy. A spokesman from the Treasury responded to the FT letter with the following: “The government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden.”

So, for the near-distant future at least, it looks as though the 50p tax is here to stay.

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