Is the 50p top income tax rate damaging the economy? A letter to the Daily Telegraph yesterday was sure of it. The tax "puts wealth creators like us in a very awkward position," said more than 500 of the most successful entrepreneurs no one has ever heard of. Maurice Shearman, for example, is the owner of Ace Moulding Services, the go-to place in Coventry if you need, erm, moulding services.
Chris Jenkins, managing director of BWS Security Systems, can fix you up a sweet deal on a burglar alarm if you're in the Bath, Bristol, Gloucester or Swindon areas.
Paul Matthews of Quality Assured Facility Services is also a big hitter. He cleans offices and puts lights in car parks – no one does it better.
Let's assume that Messrs Shearman, Jenkins and Matthews are great guys running terrific firms. It doesn't follow that they are right.
One of the myths that has grown up around business people is that their success in one area (moulding, lighting) gives weight to their views on other matters (tax law, football).
Anyway, let's accept the boast from the 50p warriors that their existence is good for the rest of us. Let's not delve into how much of their revenue is reliant on contracts from government bodies of one sort or another. What tax breaks they got in the past or continue to enjoy. The subsidy they get from the rest of us in the form of a healthy and educated workforce that we paid for (no need to say thanks... actually, it wouldn't hurt).
What's their point?
That by taxing them so highly any incentive to invest in their own business is removed. They can't afford to fund new ventures. And there's the inevitable stop-killing-the-goose-that-lays-the-golden-egg analogy ("wealth creators" find this cliche impossible to resist).
Here's the thing: the 50p is an income tax. It's not a tax on businesses. It is a tax on pay. It might not be bringing more money into the Exchequer overall, but it shouldn't prevent business growth; indeed, anecdotes from the 500 aside, there isn't much evidence that it is.
There are ways for business folk to pay themselves in ways that lower tax – you take a basic salary, then pay yourselves a dividend. That's still taxed as income, but you avoid national insurance. You can lend the company money at a rate of interest you can pretty much set yourself.
And if they are really paying the 50p on money they would otherwise have reinvested in the firms, they don't need a lower tax rate, they need a new accountant.
In the end, their complaints don't amount to much more than the following: it would be better for the rest of you if we were richer.
That might be true. To persuade us, they will have to do better than this.Reuse content