Johnson defies Cameron on 50p tax

Boris Johnson today called the Government’s policy to introduce a 50p tax rate on those earning over £150,000 a “double disaster”. In doing so, he will be lauded by the party’s grassroots but will put pressure on David Cameron and George Osborne to reiterate their position.

Boris-Johnson-David-Cameron Writing for the Telegraph, Johnson says:

“And yet the 50p tax rate that is beginning to drive these people away is a disaster for this country, and it is a double disaster that no one seems willing to talk about it …

“The 50p tax is not far, in its political motive, from Stalin’s assault on the kulaks.”

His intervention will put pressure on the Conservative party leadership to reiterate their position. At their party conference, David Cameron said:

“The progressive thing to do, the responsible thing to do is to get a grip on the debt but in a way that brings the country together instead of driving it apart … [that] is why for now the 50p tax rate will have to stay.”

While George Osborne said:

“I am no fan of high tax rates. We know that in the long run they destroy enterprise. That is why we should not accept Labour’s new 50 per cent tax rate on the highest earners as a permanent feature of the tax system. But we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs.”

The policy has been unpopular with right-wing campaigners. Matthew Sinclair of the TaxPayers’ Alliance believes that the 50p rate will “mean fewer entrepreneurs and fewer jobs” – a position picked apart by the Other TaxPayers’ Alliance. A YouGov poll in April for the Fabian Society showed that 52 per cent of voters support the tax. Mr Johnson did not set out how the Government should make up the lost revenue.

UPDATE 11:03

Andrew Sparrow has a good analysis of what this means for Boris Johnson’s longer term plans to be Tory leader.

http://twitter.com/wdjstraw/status/5762334565 Will Straw

Johnson defies Cameron on 50p tax http://bit.ly/1HXzL4
Bill Kristol-Balls

IMHO the Tories should scrap the 50p rate and pay for it by abandoning their IHT pledge.

Reward work and not luck.

Palin 2012!!
willstraw

That still leaves a gap vis-a-vis Labour’s plans. How would you fill that? Faster public spending squeeze or higher taxes elsewhere?
http://twitter.com/shamikdas/status/5762521080 Shamik Das

RT @wdjstraw @leftfootfwd: Johnson defies Cameron on 50p tax http://bit.ly/1HXzL4 <— Bullingdon boys at war! Fight, fight, fight!
http://twitter.com/jonathan_todd/status/5762532415 Jonathan Todd

RT @wdjstraw Johnson defies Cameron on 50p tax http://bit.ly/1HXzL4 < Johnson does keep pushing the envelope http://tinyurl.com/yjper8e
Bill Kristol-Balls

That really does depend on whether or not the projected tax take from the 50p rate actually comes in.

My preference is for St. Vince’s ‘mansion tax’. Very hard to avoid, very popular with the masses (despite the kicking given to it by the well propertied newspaper editors and commentators) and targets unearned wealth rather than income from work.

Labour should swallow their pride and work with the Lib Dems on a joint manifesto commitment to it.
Anon E Mouse

Will – there is already a huge gap, one that won’t be filled with either scrapping IHT or any other silly crowd pleasing sound-bite. My problem is they tax you your whole life when you’re alive and then when you’re dead?

It’s immoral and when Alistar Darling doubled the threshold for it last year to let more people keep more of their loved one’s money, I for one supported him.

Look at America with Reaganomics – as bad as the finances are, we are where we are and if this government can resist overtaxing us we’ll just grow our way out of the problem.

Couple that with Labour cuts of 9.3% or the Tory cuts of 10% – either way, assuming the Lib Dems don’t get in we will be OK.

I’m no economist but I wish people would just calm down. Why not start by getting rid of 100 MP’s?
http://.promiseofavalon.wordpress.com Arthur

“make up the lost revenue’?

That is the whole point. The higher tax rate will, in the end, lose more revenue than it raises. This is called the dynamic effect of taxation. Low rates are an incentive, high rates are a penalty.

The introduction of the 50p rate is nothing more than a Labour trick set to trap the Tories. Gordon Brown is not stupid, he knows that the higher rate will raise precious little in revenue, but he does not care. That is not his purpose. If he can lay a trap for the conservatives, then he is like pig in muck.
willstraw

Arthur,

The dynamic effect of taxation and its chief proponent Arthur Laffer are both discredited because they have never been proved empirically.

Johann Hari did an excellent explanation a couple of years ago: http://www.newstatesman.com/books/2007/11/supply-side-economic-tax-rich

And even theoretically, you never know whether you are on the up or down side of the Laffer curve (ie the margin at which higher taxes start resulting in lower revenues could be 70%).

Will
http://jonathantodd.wordpress.com/2009/11/17/cracks-in-tory-discipline/ Cracks in Tory discipline « The Home of Toddism

[...] The Spectator — jonathantodd @ 2:43 pm As I was writing my last blog, Boris Johnson was writing his latest act of defiance to David Cameron. With commentary like this from the Spectator’s [...]
http://jonathantodd.wordpress.com/ Jonathan Todd

The Johnson/Cameron battles now seem a key dynamic within the Tory Party. More thoughts:

http://jonathantodd.wordpress.com/2009/11/17/cracks-in-tory-discipline/

And:

http://jonathantodd.wordpress.com/2009/11/15/dave-v-boris/
Richard Blogger

Anon E Mouse:

My problem is they tax you your whole life when you’re alive and then when you’re dead?

No they don’t. They tax the estate. You are dead, it is irrelevant to you. As Bill says, the people who inherit the estate have not earned it.

Why not start by getting rid of 100 MP’s?

You want less representation? That’s odd. I actually want more, and more accountable representatives.

What will cutting 100 MPs achieve?

1) @£65k each that will be £6.5m per year. Not much really. (OK, so pension benefits will boost that amount, but we are still not talking much when compared to the £200bn debt).
2) It will mean that boundaries will have to be redrawn. This is not a trivial task. There is a lot of consultation involved when there are boundary changes and cutting 100 MPs will mean that boundaries of *all* constituencies will have to be redrawn to even out the effect. My guess is that it could not be done within one parliament. I would also be interested in estimates of the cost of this. I bet it would eat up all the “savings” from #1.
3) It will make MPs more aloof and disconnected from their constituency (cf MEPs for an example of what I mean). The expenses scandal has shown that the public want their MPs to be more accountable to the public. Making them more aloof is going in the wrong direction.
4) It is blatant gerrymandering from Cameron. ‘Nuff said.
http://www.leftfootforward.org/2010/01/bojo-out-on-a-limb-over-bankers-bonus/ BoJo out on a limb over bankers’ bonus | Left Foot Forward

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