Ahead of this week’s budget announcement from Chancellor George Osborne, one of the key topics of discussion has been the current 50p tax rate on earnings over £150,000 per year. Under the previous government, the tax rate on earnings above £150,000 was increased from 40p up to 50p in every pound. Since then, the possibility of returning the tax rate to its previous level has been a constant source of debate.
The key questions stemming from this debate are:
1. Will the 50p rate result in more or less income generation for the UK overall?
2. If the 50p tax rate does produce less revenue, is the symbolism of the tax more important than the revenue it creates?
This has led to the government asking HM Revenue and Customs to conduct a review of the tax rate, allowing the Chancellor to fully assess how worthwhile it has been.
Those in favour of removing the tax argued that it would bring in more tax revenue overall, and encourage more entrepreneurs and high earning business people to remain in the UK. While those wishing to keep the tax felt that it would be wrong to cut tax for the wealthiest at a time of economic difficulty.
Are you for or against the removal of the 50p tax rate? Enter the debate by using Disqus below
Politics lab participants demonstrated a wide range of differing opinions on this issue, here’s what some of them had to say...
1. The 50p tax rate should be abolished
“Yes it would stop high income earners deciding to go overseas. So therefore these people may decide to set up business in the UK so creating jobs that we need so as to get this country back on its feet” Philosann, Suffolk
“Top earners bring much needed business into UK. I would rather see a dismantling of the excessive bonus system” BH, Orpington
“It will keep business leaders and high earners in the United Kingdom where THEY PAY TAX OF SOME SORT rather than driving them out of the country where they pay NO tax towards the United Kingdom” Anon
“It will encourage top employees to stay in the UK, be retained by UK businesses and allow small businesses to compete for these individuals” Emma W, Portsmouth
“Encourage entrepreneurs and managers/ business owners to stay in this country and pay UK taxes“ Robin K, East Sussex
“I am not affected but feel it is a disincentive to those who are. If I were earning that much I would leave the country, and I know people who have” Anon
“Whilst on the face of it the 50p tax may seem fair - it simply does not work. It does not bring more money into Government coffers because people find ingenious and legal ways to avoid it. Anyone with any sense will pay the minimum tax necessary” Anon
“The very individuals who pay the 50p rate are in the top 1% of tax payers who currently contribute 24% of tax. There are those who can massage their tax, those who avoid tax and those who would pay if the rate was lower. Drop the tax, focus on those skipping the full payment and see the increased revenue. History holds quality references” Anon
“This would persuade more high earners to come clean and keep spending in the UK. It may also encourage non-evasion of income tax” Joel A. London
“Over taxing the rich in my opinion is not the way to go, they can afford to find the loopholes so does not really bring in any extra cash” Anon
“Most high earners will be making sure they pay the least tax they can, I expect a lot of money has been lost to the tax man because the rich know the dodges” Bertram R, Cornwall
“It has been proven that rates of tax above the 40% to 45% rate are self-defeating and tax revenue falls. It is the high income population who are more ready, and able, to pay accountants to reduce their tax burden - below 45% there appears to be less incentive to try and avoid tax” Anon
“Why should they be penalised because they earn more, they work hard to get only half their wage yet someone earning 75,000 keeps most of their earnings” Anon
“The more they earn the more they pay anyway, why should success be penalised? I think there should be a tax-free allowance for EVERYONE and then a straight percentage on the rest. No allowances and complex avoidance make it simple and transparent. It would reduce bureaucracy and therefore cost of collection and fair to all” Anon
“For those who work so hard as to earn over £150,000, they should be entitled to the majority of their money” Danni C, Lincoln.
“No-one should pay more to the tax man than they themselves earn - add in national insurance and it is over 50%. Just doesn't seem right to me that someone benefits more than you do for your labour and efforts” Anon
“Giving such a large percentage of earnings to the government seems unfair for someone who would earn £150,000, since such a high tax rate makes a real and significant impact on a person’s spending ability and therefore standard of living” Anon
“It’s an unfair tax, punishing success. 40% should be the maximum” Anon, London
2. The 50p tax rate should remain as it is
“Those with the ability to pay more tax, should, when needed, do so” Danny Sweeney, Shropshire
“Those earning in the top bracket have more disposable income than those in other bands and have the ability to contribute a little more than others. That levelling-out of the burden helps to create a more equal society than we have at present and a society which values people equally brings additional social benefits and lowers the costs to the state” Anon
“The poorest in society are taking almost all of the hits from the recession. It seems very unfair for those with more money than they need to be getting even more money!” Anon
“The country doesn't have two pennies to rub together - we all have to pay to dig us out. Those who earn more, pay more. Simple” Chris, Yorkshire
“Progressive taxation is fair. They have not suddenly started making £150kpa without using state provided resources” Anon
“In hard times, the 1% who earn the most need to pay more tax to support those who are really struggling” Paul D, Worcester
“While people’s standard of living has been hit hard by austerity measures it would send out the wrong signals if the highest paid got bigger tax breaks. Before people who earn big salaries get any tax breaks the lower tax bands should be reviewed with no tax paid on the first £12000 earned” Anon
“The top earners are in a better financial position to pay more tax. It would be wrong at this time to lower their tax rates but not help the lower paid” Anon
“The government should not be cutting ANY taxes during the on-going recession” Anon
“Social cohesion. Fairness. Reduction of inequality. Tax revenue. How can it be fair that VAT is increased, benefits cut, public sector pay frozen for another two years etc. at the same time that tax rates on the very richest people in society are reduced” Anon
“It's unacceptable to improve the material circumstances of the better off when many people are on wage freezes etc” Rob, Edinburgh
“Those at the higher end of the income scale have likely to contributed to the economic mess that we are in and its only right that they should bear a bigger share of the tax burden” Anon
“The general public are paying for the high fliers who have taken us into the recession, by being effected more by inflation, government cut backs, increased University fees and job loss. 50p income tax rate for the amount over £150000 is the least the very rich can contribute” B Shanks, Poynton
“The economic crisis has largely been caused by the financial services industry. The majority of those paying 50% tax either work in that industry or derive pensions from it. A 50% tax rate is a way of making these people aware of the costs their industry has loaded on other taxpayers” Pete M, Fortis Green
“Why should the poor have to pay for the mistakes of the rich?” Edna, Halifax
“Because the financial recession has been caused mostly by people who are on these vast salaries and therefore should be held accountable. Too many poor people are having to bear the brunt of cuts whilst these people get away scot free” Anon