The OBR and government is saying that the cost of cutting the 50p rate to 45p is just £100 million a year (here, page 50).
So, let's look at the data I used from HMRC for the current tax year to estimate the revenue HMRC raise from the 50p tax rate. This looked like this:
I stress, this is all based on HMRC data on income, taxpayers and what tax they pay.
Let me just concentrate on those earning over £1 million a year for a moment. They have an average of a bit over £2 million of income subject to the 50p tax and as the nad will be the same for the 45p rate (with fewer allowance offsets permitted) the income will be near enough the same for that rate.
So 5% of that sum will be lost for 14,000 people. That just over £1.45 billion lost revenue from this group alone.
Now how come in that case the tax lost is just £100 million according to HMRC, the government and OBR unless someone is telling the most amazing porkies.
Take the rest into account and the oss is liklely to be £3 billion.
Rarely have we had a budget where such a large lie has been told by someone in such high office for the sake of giving so significant a tax cut to so few.
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I am moderately surprised that it is that small but it was really unlikely to be several billion. The net figure of £100 million is the difference between the decreased tax take from incomes that remain the same and stay in the UK and the increased tax take from incomes that increase because some guy thinks it’s worth getting out of bed an hour earlier if the marginal rate is 46% instead of 51% and the tax take from incomes that stay in the UK instead of moving to Switzerland like Kinnock junior and Rothschild junior and the reduction in tax avoidance when the benefit ceases to be much greater than the fees charged. You, of all people, must know that the latter is vast – I can remember the schadenfreude in the City when a lot of “tax specialists” were made redundant in 1979 after Geoffrey Howe cut the top rate to 60% (and significantly increased tax receipts).
And I repeat – show me the maths
And then the facts
And when the final data is published I think you’ll find I’m right
To say “And I repeat — show me the maths” when you have firstly not asked for it before and secondly deliberately failed to notify me of your reply is something that I should choose not to do.
X=D-I-S-A
Howe increased tax revenues from higher earners by reducing the marginal rate.
I have repeatedly said that I favour a 50% higher rate tax, and 60% for those with incomes (I think the word earning only applies to a handful like James Dyson) over £1 million pa, but I *do* care about mathematical rigour.
http://books.google.co.uk/books?id=YcrvrNy0QCEC&pg=PA313&lpg=PA313&dq=Geoffrey+Howe+top+tax+rate+cut&source=bl&ots=WbPufRS102&sig=va5MZo6PUFtFfsbre7WQOpLXV3s&hl=en&sa=X&ei=cT1qT4OEN8Gf0QXIrqiBCQ&ved=0CFgQ6AEwCQ#v=onepage&q=Geoffrey%20Howe%20top%20tax%20rate%20cut&f=false
Although I am surprised that the figure is as little as £100million, which would imply that the overall effect was a massive cost to the economy because the formula ignores the secondary impacts from increases in employment, I must point out that whatever data is published, it cannot *prove* that you are right because you said blah is impossible – it is impossible that the length of one side of a triangle is greater than the sum of the lengths of the other two sides but not that the net tax loss from changing the top rate from A to B is less than X.
What are yopu talking about?
Please try to be coherent
I have just answered each of your questions, in order.
If you don’t have time to read my answer while dealing with many other comments you could try *carefully* answering one comment at a time so that you did not provoke an indignant correction to a thoughtless response which would end up taking more of your time than getting it right in the first place – a primary failing of HMRC in the last decade
Respectfully, it was utterly incoherent
Richard, John
I don’t think John’s reply was that incoherent. I understood it, anyway. But the Treasury appears to be assuming a considerable change in behaviour as a result of a 5p tax cut. In effect they are arguing that increased tax take due to people no longer avoiding tax that they avoided completely at 50p will nearly cancel out the reduced tax take arising from the 5p drop. I think that’s a big assumption, myself.
Well, bully for you!
If you had time to decipher that, well done
I happen to agree your conlusion – but not how you got there
Richard, you are spot on about Osborne telling porkies, clearly he was desperate to manipulate the data however he needed, in order to get the tax cut for the rich he got elected for in the first place. You are also right that this income tax band could not have been avoided for two years on the trot. Now he has given them the green light to avoid it for 2012/13 in exactly the same way. If he was serious about the tax he could easily have introduced counter measures to prevent income shifting.
I await the details of the “tycoon tax” with interest, mainly to see how wide the loopholes in it will be to allow those “tycoons” to squeeze through.
I have never voted Labour in my left and have been generally unimpressed by Ed Miliband but I watched his budget response on tv in full and thought he showed grip for the first time.
Just noted the typo in line 1 of my final para. “left” should have been life. Just like to stress this was not a freudian slip, I’ve never voted left of labour either, unless you count green.