It
makes your blood boil! The only good
news to come out of the UK budget announced by New Labour Chancellor Alastair
Darling last week was the slight increase in tax rate that would now be levied
on those earning more than £100,000 a year.
The rate was being raised from 40% to 50% to help raise a little more
money from those who have benefited most from the credit binge that has now
gone bust around the world.
But
what a barrage of criticism and rage has erupted from the great and good and
from the news media on Darling’s action.
Tycoons and celebrities have lined up in droves to condemn the
measure. Tim Linacre, chief executive at
stockbrokers Panmure Gordon tells us that the tax hike “will kill the City of
London at a time when it is on its knees.”
Former Labour supporter and Scottish lingerie tycoon Michelle Mone, who
owns a bra firm called Ultimo, said the tax hike was a “disgrace” that will
damage the economy irreparably. Sir
Michael Caine, the film actor, screams that “he will not pay the government
more. No way, ever. They’ve reached their limit with me. That’s the lot”.
These
people were joined by Sir Richard Branson of Virgin, Luke Johnson, head of
Channel 4 News (and part-time hedge fund manager), Sir John Madejski, founder
of Auto trade and owner of Reading Town Football Club, Stanley Fink, former
head of the UK’s biggest hedge fund, MAN and Lord Jones, former Labour minister
and head of the CBI, the employers’ federation.
Peter Hargreaves, who runs a huge financial asset management company,
says he is “seriously considering leaving the UK in protest at the tax”.
Well
good riddance! These types have lived
off the fat of the land for decades under both Conservative and New Labour
governments. Their income tax rates have
been held to low levels; while taxes on their stock market and property
windfalls have been reduced as capital gains taxes and inheritance taxes have
been slashed. Now the UK and other
countries (that they claimed were best operated under a capitalist market
economy where they could make profits with impunity) have seen their economies collapse,
but these people still don’t want to pay the price.
Raising
the top rate of tax to 50% will only affect just 1% of UK income tax
payers. Given that the average mean annual
wage for full-time workers in the UK is only £26,000 a year, the tax will
affect people who are earning around four times more than the average – and a
lot more for many others earnings less.
It’s not much to ask.
Even
this paltry measure has produced backbiting by the Blairite faction in New
Labour. Back in 1998, (Lord) Peter
Mandelson said that he was “intensely relaxed about people getting filthy rich
as long as they pay their tax”. Well, it
seems that they don’t want to. Tony
Blair, now earning more than a million a year from sitting on the boards of
hedge funds, with his wife racking up something similar from lawyering and
speech-making, commented that the 50% rate was “a terrible mistake”. The hypocrisy makes you sick.
The
main argument of the rich against the 50% tax rate on incomes is that the top
1% of income earners already pay 23% of all income tax revenues, way higher
than in the 1980s. But the reason for
that is obvious: the income and wealth of top 1% has risen so much more than
the average income earner that their share of tax revenues, even at the current
low rates, has risen. They have got so
much more money that they have contributed more revenue.
But
that is only direct taxes. When you add
in indirect taxes like VAT, petrol and customs duties, the proportion paid by
the top 1% on all taxes affecting the 25m households in the UK falls to just
18%. That’s because indirect taxes are
regressive and put a heavier burden on the poor and a lighter one on the
richest.
There
are 2.5m households that receive over £100,000 a year, of which nearly
one-third comes from non-wage income like investments and profits. They are now being asked to pay perhaps
another £7bn a year in tax, or about £3,000 a year more. It’s not much to ask. And yet even this produces a howl of anger
and open calls to evade paying.
If
you read the newspapers, you would get the impression that everybody is against
this tax hike. Yet every opinion poll
taken on the subject shows a clear majority in favour – the tax hike is seen as
‘only fair’. One TV reporter visited the
City and interviewed a series of banking executives about the tax hike. They were unanimous in their condemnation. As he left one City building, he stopped and
asked the security guard what he thought.
The guard exclaimed that the tax hike was right – and as for the people
‘upstairs’, “what do you expect from those bastards?”
