The truth behind the Mail’s warning that 50p tax will cost £350bn

The Daily Mail this morning published the surprising news that “Labour’s 50p tax rate ‘could cost the country £350bn’, Osborne warned“. The number, if it were true, would be eye watering. Readers can decide for themselves whether it’s worth more than the fag packet on which it was calculated.

The source of the story is the Adam Smith Institute who have put together a short report titled ‘The Revenue and Growth Effects of Britain’s High Personal Taxes‘. The report concludes:

“At a minimum, the policy risks flat growth for a decade, and a possible recession at the end of the period. The net effect upon government finances, adverse from the outset, gets worse from year to year and ends up with net losses of some £350bn after ten years. In the worst-‐case scenario, approximately £640bn of revenue would be forgone.”

The Mail made no mention of the fact that the £350bn would be spread over 10 years but, even so, £35bn is a huge number. The Adam Smith Institute get this number and their claim about “flat growth” from projections over how many individuals will leave Britain as a result of the tax regime. As the table below shows, the survey of “tax advisers” found that at a minimum, 25% of personal taxpayers and 15% of corporate taxpayers are considering leaving the UK.

From their survey of “several dozen” tax advisers (I’m told by author, Miles Saltiel) and assumptions about migration and recruitment, which are not disclosed in the report, the authors extrapolate that at least 17% and up to 31% of higher rate taxpayers working in London’s financial services sector will leave the country. In other words up to a third of all those working in the City and earning above £150,00 will have left the UK by 2016.

Saltiel told me that his calculations were “a lot better than a wet finger in the air” and that although he was “pretty comfortable” with the conclusions, there were not enough survey respondants “to do a statistical thing”. Statistical things aside, readers will no doubt remember similar claims by Paul Daniels and Frank Bruno after the 1997 election.

The
increase
in
the
top
tax
rate
may
prove
disastrous
for
revenue
raising.
At
a
minimum,
the
policy
risks
flat
growth
for
a
decade,
and
a
possible
recession
at
the
end
of
the
period.
The
net
effect
upon
government
finances,
adverse
from
the
outset,
gets
worse
from
year
to
year
and
ends
up
with
net
losses
of
some
£350bn
after
ten
years.
In
the
worst-‐case
scenario,
approximately
£640bn
of
revenue
would
be
forgone.
The
UK
simply
cannot
afford
such
an
ill-‐judged
policy.

http://twitter.com/bitfuzzy/status/45915274267992065 Deb

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/uniteyou/status/45919304243359744 UniteYou

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/falseecon/status/45920129351041024 False Economy

RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/davidnash1/status/45920288134795264 David Nash

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/othertpa/status/45920446679494656 Other TaxPayers Alli

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/brumprotestor/status/45920841208303616 Brummie Protestor

RT @FalseEcon: RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/spsot/status/45921834088140800 Spir.Sotiropoulou

RT @leftfootfwd: The truth behind http://www.leftfootforward.org/2011/03/the-truth-behind-the-mails-warning-that-50p-tax-will-cost-350bn/
http://twitter.com/jodatu/status/45922407898300416 John Turner

RT @OtherTPA: RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/jodatu/status/45922427313733632 John Turner

RT @FalseEcon: RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/gplondon/status/45923197413097473 Geoffrey Pearson

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/jamiesw/status/45923598464069632 JamieSW

RT @OtherTPA: RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/kerryabel/status/45923858615779328 Kerry Abel

RT @FalseEcon: RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://www.demsoc.org Anthony Zacharzewski

Also worth checking out Chris Dillow’s piece on it at: http://stumblingandmumbling.typepad.com/

Summary: they ignore all research that doesn’t agree with their predetermined position.
http://twitter.com/oldmankelv/status/45926971535921152 Kelvin John Edge

RT @FalseEcon: RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/paul0evans1/status/45930418347835392 Paul Evans

One for @timharford I think? http://bit.ly/hCtZku
http://twitter.com/davidtaylor85/status/45938822663507970 David Taylor

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/cllrkrichards/status/45939568314290177 Kevin Richards

Another fictitious story from the Mail @ leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/gWvVGU
http://twitter.com/steve_trow/status/45940070108237824 Steve Trow

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/louisefk/status/45945347649974272 Louise King

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/staffsunison/status/45954950475415552 Staffordshire UNISON

RT @FalseEcon: RT @leftfootfwd The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
http://twitter.com/heroicsteve/status/45968754684870656 Steven Dobbs

RT @OtherTPA: RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
Mr. Sensible

Sounds familiar…

Anyway, the government’s austerity program isn’t exactly encouraging the economy to grow like an express train is it…
http://www.hlc-heathrow.org Jon Purdom

The loss to Britain of corporations and high earners who don’t want to pay their fair share to the treasury (or often nothing at all) is something that I can live with.

Our tax rates are not excessive among the G20 nations. If these entrepreneurs that believe they contribute so much to our nation want to go and try their luck in the developing world at lower tax rates, good luck to them. But almost all of them are bluffing so that the government will let them get away with keeping more of their profits.

I’ll see your bluff and raise you 5p to a 55% tax for over £250,000 p.a.. Any takers?
http://twitter.com/myinfamy/status/46086714715934720 Daniel Pitt

RT @leftfootfwd: The truth behind the Mail's warning that 50p tax will cost £350bn http://bit.ly/ebOV2L by @wdjstraw
Henry

There was a hilarious article in last week’s Economist about some of the people who had fled to Geneva to escape the wicked British tax system. Many of them were homesick & wanted to return, finding Geneva boring, full of petty rules & vastly expensive.
Mr. Sensible

Valid point, Henry.

People talk about the so called excessive regulation that comes from Europe, but Switzerland I think finds itself abiding by the same rules even though it is not part of the EU.
Dave Citizen

There’s a simple remedy if you don’t like paying 50% on what you earn over £150,000 – earn less. It seems to me there’s plenty of evidence that it would be better for Britain if we didn’t have people on mega bucks, so why not cap earnings to say £250,000 similar to Mail and Tory suggestions about C.Execs of Councils. Let’s face it, if Birmingham City Council Chief gets £185,000 (£233,000 with all benefits) then it’s hard to imagine many people in the country carrying more responsibility or doing a more difficult /important job: I guess some soldiers leading troops in battle or the boss of a critical care unit but those folks don’t get mega bucks. If the rest aren’t motivated to work for their country on £250,000 a year then, for the good of the country, lets help them leave (not sure it’s fair to dump such selfish types on other countries though)