Sunday, 8 November 2009

Higher Rate Tax in this Green and Pleasant Land

Is it fair that because you earn more money than other people that you should be expected to pay a higher rate of tax? Or is this just the age old way that governments squeeze the pips out of middle England to pay for the mistakes that they have made while in office?

Whilst I believe that Britain should have a solid social infrastructure of Police/Fire/Ambulance services, a free at point of use NHS and a good state school system etc. it always seems inequitable in who has to actually pay for it the most. The analogy that springs to mind is of two families having identical meals in a restaurant, but one family is asked to pay more for their meals because their annual income is higher than the other family’s. Surely the fact is that if you earn more than someone else, you are already paying more tax into the system even at the same rate of tax.

Although governments are always ready and waiting to tax you to the hilt once you become financially successful, where are they when you are struggling on a low salary whilst studying for professional qualifications or attempting to start-up your own business? Where is the support then, when you really need it?

The taxation system as it stands, is completely unfair to the creation and maintenance of innovation, entrepreneurship and job creation, because you’re unfairly penalised for success when, in reality, you are already contributing so much to the economy. And this more flexible and entrepreneurial sector of the business community is vital to economic growth - after all, recent research showed that 51% of UK GDP came from Small and Medium Sized Enterprises (SMEs).

The recent credit crunch was the first recession that made a large number of professional people, managers and white collar workers redundant. After the shock of being in full employment for so many years, and then being unexpectedly made redundant, an even greater shock was waiting for them on their first visit to the Job Centre Plus. Aside from the lack of jobs and any meaningful help, they had to cope with the realisation that the only short term assistance that they would get would be the Job Seekers Allowance of a little over £60 per week, the same amount that other people who had lost their jobs and who had paid much less tax (and probably tax in a lower band) into the system were receiving. This does not seem fair or equitable.

And how did our government deal with this crisis? By announcing a new, even higher, tax banding (50%) for all those earning more than £150,000 per annum (from April 2010). This band is far too low - these aren’t the super rich. A Premiership footballer, film star or television personality could earn this sum in a little over a week. It will, however, hit many business people who are working hard to help Britain escape out of recession and attempt to build a sustainable recovery for our economy. It is no coincidence that we must have a General Election in 2010 – hitting the perceived high earners is always going to be a vote winner for the masses, particularly the long term benefits claimants who perhaps don’t want to work…….after all, continued taxation (particularly at a higher rate) of those who contribute most to the economy is how they derive their income!!!

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