It’s official: the 50p tax rate raises revenue

An HMRC report on the 50p tax is expected to show that the first year of its introduction led to a “surge” in revenues of hundreds of millions of pounds, according to the Telegraph.

The paper reports:

The Daily Telegraph understands that an annual assessment of the tax’s impact on enterprise will be made – and the levy will be scrapped before 2015 only in the “unlikely event” that evidence shows that it is damaging the economy.

When asked about the 50p rate in an interview yesterday, the Prime Minister said:

“When you’re taking the country through difficult times and difficult decisions, you’ve got to take the country with you. That means permanently trying to make the argument that what you’re doing is fair and seen to be fair.”…

The HMRC report, to be delivered after Jan 31, will defy predictions that top earners will avoid paying the 50p rate.

The Telegraph also adds that:

It is now thought that the revenues will only begin falling “over time” as wealthier taxpayers develop ways of circumventing the higher rate, faced by those earning more than £150,000.

“The Treasury will set up an annual analysis of the 50p rate as the thinking now is that the more corrosive effects of the levy will take time to emerge,” said one source.

This line looks likely to become the new avenue of attack for those looking to scrap the tax. It was pre-empted by CEBR’s report in November, which concluded much the same thing: revenues were likely to rise in the short term, but the tax should be scrapped anyway.

At least CEBR accepted that the 50p rate raises revenue. Other Tories defending it didn’t even get that right.

Fraser Nelson argued:

As JFK said, the “paradox” is that higher rates mean less revenue. This is basic economics, true long before Art Laffer tried to explain it by drawing a yield curve on a cocktail napkin. Even the IFS suggests the 50p tax will lose £800 million.

But this study assumed the ultra-rich are no more mobile now than they were in 1988. Obviously, the real impact to Britain will be far higher.

According to him, the Taxpayers’ Alliance put the cost of the 50p tax at £4.5 billion. Which is at least £4.5 billion wrong, according to the HMRC.

Boris Johnson also got it wrong, saying:

As far as I understand it [the 50p rate of tax] is not really raking in huge sums at all, and if that is the case then I think we should think about what the real benefits of this tax is.

The letter to the Telegraph from over 30 top city figures hedged its claims:

We are confident that the cost to the Treasury [of scrapping the tax], if any, in the short term will not be material and that the advantages over the life of this Parliament in terms of generally increased economic activity will more than outweigh any direct costs.

Even so, the claim that hundreds of millions of pounds in revenue is “not material” is hard to reconcile with the behaviour of a government cutting as though every penny counts.

The evidence is as clear as it is unsurprising: Taxing the rich raises revenue. The smart right-wingers will pick new targets, because this is looking like a losing battle.

See also:

• 50p tax: Still a Tory obsession, still not that exceptional – Alex Hern, November 24th 2011

• The 50p tax debate: Are we taxing off our nose to spite our face? – Luke Bozier, September 16th 2011

• Only quarter of voters want to scrap 50p tax – Will Straw, August 1st 2011

• Fraser Nelson is wrong on the 50p tax rate – Duncan Weldon, February 24th 2011

• Fraser Nelson’s attack on 50p tax rate is full of holes – Jana Mills, November 12th 2010

http://twitter.com/homodavien/status/156337370235535360 David Griffiths

It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/oCifNUJV
http://twitter.com/wdjstraw/status/156338273550204928 Will Straw

If Tele is right that 50p tax will raise revenue, will we hear mea culpa from those who predicted it would lose cash? http://t.co/cx7Y90MZ
http://twitter.com/glenfinnan/status/156338337731461121 The Young Chevalier

It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/oCifNUJV
http://www.facebook.com/profile.php?id=100000623749669 Giles Bradshaw

This is interesting in terms of the short and long term effect of the rate.

If ultimate long term effect would be that revenues fall over time from the 50p tax rate. One policy might be to keep it until revenues had fallen to the point where it could be said to be actually losing us money. However at that point if we scrapped it revenues would presumably fall even more because people would not immediately re arrange their affairs to cope with it being a 40p tax rate again.

So the short termist argument would allways be to keep it. However the long term effect might end up being negative overall.
http://twitter.com/pulpark/status/156338830927069184 Pulp Ark

It’s official: the 50p tax rate raises revenue http://t.co/UlWxpk3N #Sustainable_Economy #50p_tax #Boris_Johnson #muslim #tcot #sioa
http://twitter.com/drkmj/status/156338888800075780 Dr Kalvis M. Jansons

RT @leftfootfwd: It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/ORLIsP7J #NewsClub
http://twitter.com/duncankeeling/status/156339109084921856 Duncan Keeling

RT @DrKMJ: RT @leftfootfwd: It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/CqOZp6Ox #NewsClub
http://twitter.com/garethsiddorn/status/156339521603112961 Gareth Siddorn

If Tele is right that 50p tax will raise revenue, will we hear mea culpa from those who predicted it would lose cash? http://t.co/cx7Y90MZ
http://twitter.com/danjrobinson/status/156341959244525569 Dan Robinson

It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/oCifNUJV
http://twitter.com/othertpa/status/156344376954597376 Other TaxPayers Alli

RT @leftfootfwd: It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/GS7W2KtC
http://twitter.com/lukewaterfield/status/156345349882126336 lukewaterfield

RT @leftfootfwd: It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/GS7W2KtC
George McLean

Let’s take the opportunity, while we are talking about income tax, to talk as well about land value tax that is much more difficult to avoid, that cannot be considered a “deadweight” tax, and will help to get underdeveloped land back into practical use rather than it being an investment opportunity for property speculators.
http://twitter.com/Newsbot9 Newsbot9

George;

1. How will you handle the issue of council tax benefit, given the tax WILL be passed on to tenants?
2. How will you stop living above a shop from becoming prohibitively expensive (as it is in every proposal I’ve seen so far)
3. How will you handle the problem of poorer people being immediately priced out of London and city centres?

There are dozens of questions like this which I’ve yet to see properly addressed for a LVT.
http://twitter.com/Newsbot9 Newsbot9

George;

1. How will you handle the issue of council tax benefit, given the tax WILL be passed on to tenants?
2. How will you stop living above a shop from becoming prohibitively expensive (as it is in every proposal I’ve seen so far)
3. How will you handle the problem of poorer people being immediately priced out of London and city centres?

There are dozens of questions like this which I’ve yet to see properly addressed for a LVT.
http://twitter.com/cheetss18/status/156420448626810880 David Cheetham

If Tele is right that 50p tax will raise revenue, will we hear mea culpa from those who predicted it would lose cash? http://t.co/cx7Y90MZ
http://twitter.com/maxlawsontin/status/156441365599879169 maxlawsontin

http://t.co/MdAJTGer It’s official: the 50p tax rate raises revenue. Well blow me down with a feather. @robinhood @falseecon @occ…
http://twitter.com/staffsunison/status/156441808761655296 Staffordshire UNISON

RT @leftfootfwd: It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/GS7W2KtC
http://twitter.com/robinhood/status/156444093017370626 Robin Hood

http://t.co/MdAJTGer It’s official: the 50p tax rate raises revenue. Well blow me down with a feather. @robinhood @falseecon @occ…
http://twitter.com/neilrfoster/status/156444718933344256 neilrfoster

http://t.co/MdAJTGer It’s official: the 50p tax rate raises revenue. Well blow me down with a feather. @robinhood @falseecon @occ…
http://twitter.com/atbenphillips/status/156444986878074880 Ben Phillips

http://t.co/MdAJTGer It’s official: the 50p tax rate raises revenue. Well blow me down with a feather. @robinhood @falseecon @occ…
http://twitter.com/labourtim/status/156445181837713409 Tim

RT @leftfootfwd: It's official: the 50p tax rate raises revenue http://t.co/qjU8UvtZ
http://twitter.com/janeayres/status/156445627725787136 Jane Ayres

It's official: the 50p tax rate raises revenue, writes @alexhern: http://t.co/oCifNUJV
http://twitter.com/altojude/status/156447256705376256 Judith Robertson

http://t.co/MdAJTGer It’s official: the 50p tax rate raises revenue. Well blow me down with a feather. @robinhood @falseecon @occ…
http://twitter.com/occupytaxes/status/156452449912229888 OccupyTaxes

RT @robinhood RT @maxlawsontin: http://t.co/0l7A1VsB It’s official: the 50p tax rate raises revenue. Well blow m… http://t.co/t1BHWMjy
http://www.leftfootforward.org/2012/01/look-left-13-01-12/ Look Left – Wonga’s student ‘scam’ comes unstuck | Left Foot Forward

[...] see Tony Dolphin’s latest Economic Update; Alex Hern on the evidence the 50p top rate of tax is raising revenue; Dr Graham Cookson on the false economy of the legal aid cuts; and Daniel Elton on how [...]