There has been more commotion in the past 12 months over taxing the rich than in the 12 years prior. The occupy movements followed by all the confusion over the 50p tax reduction and most recently all the legal loopholes allowing those with clever accountants to avoid paying anywhere near the amount of tax the government says they should be paying.
With all of Europe going through what we had hoped would be the austerity years, and is rapidly looking more like the austerity decade, everyone is looking around for a sector which can be squeezed for a little more money. The middle classes all claim to be tapped out, the “lower class” if such a thing really exists now, can’t afford to pay any more than they already are so everyone looks to “the rich” to bridge the gap with their mansions full of gold and money machines.
However proportionately the high earners are already paying an enormous amount of money towards the budget and claiming “they can afford to pay more” will eventually damage the country to a point where being profitable in this economy becomes nearly impossible. Last year the top 1% of earners paid 27% of all income tax. Comparatively they pay staggering amounts of tax but if we’re looking for ways to heal the country it’s the lower tax brackets that contribute more in terms of tax than the rich, purely due to the fact that there are so many more of them. Last year there were a recorded 275,000 people paying the 50% income tax and on average they each paid £151,000 a year in income tax. 26.3 million people pay the basic 20% and although they only pay £2,590 each on average, it adds up to a considerably larger pile of cash than that from the rich.
It’s always very tempting to look at the millionaires and tell them to pay more in taxes but there are just 13,000 people on that sort of income in the UK and the government would need to increase it to nearly 100% for it to make any real impact on the tax input from their bracket.
Today George Osborne has revealed how shocked he was by discovering that some of Britain’s wealthiest people pay “virtually no” income tax. How this is news to anyone is still surprising but the reason it has been swept under the rug for so long is that there is no real workable solution to it. If you try to impose enormous taxes on those earning ridiculous amounts of money they are going to be far more willing to pay clever accountants a considerably smaller chunk of change than they would pay on tax to avoid paying it altogether.
This has gone on since the birth of the tax system and there is nothing illegal about it. Immoral perhaps but well within the law. These loopholes exist and every time the government try to close one up, they open three more which are promptly found and exploited in turn. In order to stop tax avoidance happening the Chancellor would have to change the tax laws to such an extent it would accidently cripple hundreds of small businesses trying to make a healthy profit. Businesses which would in turn fuel our economy.
The only real workable option out of the financial state in which we find ourselves is growth. If we continue to tax those making money the option to go abroad with your businesses and profits becomes more and more appealing. Now that our “double dip recession” has been announced we need the growth more than ever and piling on even higher tax on those earning the money is a sure way for us to drive the country into a tax funded hole we may never manage to dig our way out of.