The 50p Tax Rate Explained (refer to Poll Question)

A higher level of income tax of 50% was introduced with effect from January 2010 by the then Labour Government. It was always designed as a temporary measure based on the need to increase tax revenues and the belief that those earning the most should pay a higher share than those with modest or low incomes.

The 50% rate of tax is payable only on any income of more than £150,000 per annum - not on all income of those earning such high salaries.

It is estimated that around 320,000 people will have been liable for tax at this 50% rate.

In recent days there have been increasing calls for the abolition of this tax. Most notably, a letter signed by 20 economists that was published in the Financial Times argued that it sent out negative signals about the ability and willingness of the UK economy to be a good place to do business and develop new ideas.

However, the fears of the letter writers can only be conjecture at present. There is no statistical evidence about either the impact or the level of revenue generated by the new tax rate - it is expected that this will be available in January 2012.

Politicians such as Shadow Chancellor Ed Balls has pointed out the wrong messages that cutting tax for the very rich whilst everyone else is suffering a squeeze on income and standard of living would send out.

Indeed within the coalition Government, the Liberal Democrats are said to be prepared to fight for the 50p tax rate to be retained.

There is also the contrary view to that expressed by the economists who wrote to the Financial Times - a 50% top rate of tax is historically low for the UK (where at one point during the 1960s the most wealthiest of all paid 98% of parts of their income in tax), and actually sends out an important signal that the UK is a place where the wealthiest pay more in tax than those less well off because that it is ethically and morally the right thing to do.

The following links offer different perspectives on this issue.

http://www.guardian.co.uk/politics/2011/sep/08/cut-vat-not-50p-tax-ed-balls

http://www.independent.co.uk/news/uk/politics/george-osborne-loses-nerve-on-plan-to-cut-50p-tax-rate-2351016.html

http://www.ft.com/cms/s/0/f29adfc6-d893-11e0-8f0a-00144feabdc0.html#axzz1XRdB9im1

http://www.timesonline.co.uk/tol/sport/article6395778.ece

Author: Simon Sapper, CWU Assistant Secretary