Restoring the 50% tax rate is essential if we’re to beat inequality

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Ed Balls got his economics quite extraordinarily wrong today, for reasons that I have already explained (see previous post). But he got the restoration of the 50p tax rate absolutely right.

I have written on this issue extensively (links here) explaining that I think this tax rate would have raised an additional £6 billion in tax a year but for tax avoidance on its introduction and demise.

We need that £6 billion now, most especially to redistribute income to create greater equality in society. The impact is also significant on economic activity - the multiplier effect of this reallocation is significant.

And the risk of significant cost to the economy is minuscule. Entrepreneurial activity takes place in companies that do not pay income tax. Capital gains are not impacted. And only those living off rents - who contributed nothing to real growth - leave the UK and still enjoy their income.

I do not in general support tax rates of much over 50% (and yes, I am aware of NIC) but think that right now clear signal of a willingness to use tax to beat inequality is vital.

This policy does not redeem a mistaken economic policy, but it's welcome nonetheless.