The current 50p income tax rate for high earners is “damaging the economy” and delaying the UK’s recovery from recession, according to a letter signed by more than 500 business leaders.
The letter, which was printed today by the Daily Telegraph, accused Chancellor George Osborne of putting “populist politics before sound economics” and called on him to ditch the levy in his forthcoming budget.
“The tax, which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position….penalising high earners through an unfair, politically motivated tax puts populist politics before sound economics”, the 537 owners of small and medium-businesses claimed.
They attested that the top 1% of earners already generated almost 28% of the UK’s total tax revenues and the levy meant that they had less incentive to invest their own cash in their firms or to make them successful.
One of the signatories, Tony Stein, director at care home operator, Canterbury Care, complained that the 50p tax rate was acting as a disincentive to job creation.
“To put it bluntly, as a result of the increase in tax, we can no longer help to finance [a] new venture. I believe that this is the wrong outcome for the economy,” he said.
But Andrew Denny, managing director of label printing specialists, Fix-a-Form, added: “With the Government taking half of what I earn, I ask myself ‘who am I working for? Why do I bother? Why don’t I just close the business and become something else instead? If you earn your money, you’re resented.”
As a result, the letter attested, the continued existence of the 50p tax rate was “set to reduce government income, and damage the economy, the public services and charitable giving”.
Repealing it, however, “would be a good demonstration of the Chancellor’s wish to celebrate British entrepreneurialism, stimulate British industry and contribute to the Government’s growth agenda”, the businessmen claimed.
The Chancellor and Prime Minister David Cameron have repeatedly said that they are opposed to the tax and believe it should only be “temporary”. But ministers are understood to have privately ruled out abolishing it until at least 2015 over fears that they will be accused of prioritising tax cuts for the wealthy.
The Treasury is currently awaiting the results of a study conducted by Her Majesty’s Revenue & Customs into the impact of the levy in its first year of implementation. The analysis is expected to show that it has raised much less than a hoped-for £3 billion.