Should the rich pay?

BBCNews: Economists say ‘Top 50p tax rate damages UK economy’.

They’re reporting today that 20 top economists have written to the Financial Times claiming that the 50p rate tax paid by the UKs highest earners is damaging the country.

DeAnne Juluis, one of 20, interviewed on BBC TV news said that, though they haven’t done so yet, some of the people paying this top tax rate might be considering leaving the country because there’s something psychologically significant about the thought that half of your income is going to the government. Is it just me, or is there is a bit of a hint-of-blackmail about this kind of argument?

The interviewer asked whether she thought that people who can afford to pay should be shouldering their fair share and she responded that already the 1% of people in the country who are the top income earners pay a little more than 20% of all income taxes. Actually I think that the interviewer missed the point that a ‘fair’ tax system is not necessarily one that shares the tax burden equally among all people – but rather one that takes into account an individual’s ability to pay. Perhaps a fairer comparison would be see what percentage of the country’s disposable income those same top income earners have at their disposal…

At the top of the interview the point was made that this extra tax might be stifling entrepreneurial investment in the UK… So I wondered whether the government have thought about establishing a new incentive – along the lines of the current GiftAid scheme – that specifically focusses on the money raised by the 50p tax rate (so that it doesn’t remove the existing incentives to give under existing schemes) – a sort of InvestAid that encourages these tax payers to invest in new businesses and activities that might address some of the areas that David Cameron hopes might be captured as part of his ‘big society’ dream…?