I understand that you plan to cut the top rate of income tax from 50% to a lower figure, and that this is because the total tax collected at the 50% rate is lower than expected and you have been “intellectually persuaded” that a 50% tax rate will put off entrepreneurs and businesses.
Leaving aside the question of whether entrepreneurs and businesses genuinely ‘create wealth’ at all (as opposed to acting as syphons of wealth to make themselves rich or richer), why would the 50% rate make a difference to entrepreneurs and businesses? Your own research shows THEY DON’T PAY IT.
Rich people, with their clever accountants find ways not to pay it. Rich people exploit our flabby tax laws and their many loopholes so as not to pay it. Rich people know that the Government will spend more time and energy chasing benefit fraud than tax evasion and hunting down and recovering overpayments of tax credits than identifying and closing down tax avoidance mechanisms.
Rich people pay as much or as little tax as they want to pay. Because they can.
To justify your outrageous pandering to the super-rich (the net tax giveaway the LibDems say is unconscionable, but will stand by, slack-jawed and watch you implement) you will sell the idea that the country will collect more in tax revenue if it charges rich people at a lower rate.
Rich people, you will tell us, avoid and evade tax because THEY DON’T WANT TO PAY SO MUCH. If only we tell them we are charging them less then THEY WILL PAY MORE.
Yes. And there are fairies at the bottom of my garden.
If this is what passes for “intellectual persuasion” at the Treasury or HMRC then we are doomed.
If rich people currently pay their taxes, including income tax at the top rate, in full because they recognise that is just and fair, they will pay less if you lower the top rate.
If rich people currently don’t pay their tax in full because they:
a) just don’t want to, and
b) can get away with it
…then when we lower the rate of tax, we will collect less tax from them. Because they don’t want to pay tax above a certain level that they have decided feels fair to them. So they will pay what they want to, because they can get away with it.
If you have a lower tax rate for rich people, then rich people will pay less tax.
That is all.