This week shadow chancellor Ed Balls announced plans that if Labour win the next general election, the 50p tax rate will return. This is a terrible idea that resembles the old days of the ‘loony left’ in the 1970s and 1980s. The 50p tax rate was something introduced on earnings over £150,000 per year by the last Labour government in 2010, but subsequently was repealed in favour of a 45p rate by the Coalition government. In a time of austerity with spending cuts and high unemployment it is a shameless attempt at pleasing voters who have suffered in this recession. As a concept, it may seem logical; those who have money pay more than those who don’t. The problem, however, lies in the direction society is turning because of this. We seem to love punishing people’s success in a bitter attempt to make the rich few suffer, in order to make the working class feel better about themselves; and this is entirely wrong.
The beauty of free trade and a liberal economy is that anyone can be successful. Raising taxes to a ridiculous 50 per cent of earnings for the highest earners is simply teaching us to not bother trying to be successful, because those who are not successful will simply drag you down. It is worrying to see how more and more handouts are given to those at the bottom, while anyone who is lucky enough to reach their potential is punished.
I am by no means saying that higher earners should pay less than low earners; that is of course how it should be. However the unacceptable amount that high earners are being threatened with paying is well over the top. As a nation we should be encouraging people to work hard and reach their potential, and as much as money is not everything in life, it certainly is a good way of encouraging people to work hard. If we were to increase the taxes up to a 50p rate, then it should at least be on the huge earners, such as bankers earning over £500,000 per year. This way at least the people who are paying exorbitant taxes are the super rich who should be doing so.
Another reason why the 50p tax rate should be avoided like the plague is that despite Ed Balls’ ridiculous claims otherwise, it is very much an anti-business proposal. Why would the high earners paying already high levels of tax and helping our state budget want to stay in this country, when they could go elsewhere with lower tax rates? Would we not rather take 45p in every pound over £150,000 rather than take nothing because the attempt of taking 50p drove the high earners to move abroad?
Not to mention how this tax on success will discourage potential investors in the UK; why set up a business in what is already one of the highest taxed nations in the world, when taxes will rise? Any wise investor would simply invest in different nations where a successful business would reap greater rewards. It is for these reasons, that a success tax disguised as a Robin Hood tax increase should be avoided at all costs. After all, I thought we were a country of opportunity, not a communist wasteland.