Monday, November 24, 2008

Post-dated new top tax rate: like I said

The least important thing about today’s tax news is that I told you so:

In a pre-election Budget, Alistair Darling declares that now the economy is recovering, it’s possible (and desirable) to cut back on borrowing. So he announces a new income tax band for very high earners.
… The tax change could be set to come in the following year. So voters will still have their chance to accept or reject it as they like.

But I’m a shallow, vain little man, so I’m mentioning it anyway.

I was wrong about the timing of the announcement. And, on reflection, it makes more sense to say it now rather than later. For one thing, the markets want to see that the Government is serious about reducing the deficit in years to come. For another, the Tories would bang away on the ‘taxes will need to rise’ drum for month after month, and announcing this tax rate now sets the terms of that debate.

They’ll soon find that they too are trapped, along with Labour, by ‘taxes will need to rise’. So if they oppose the new top rate, they’ll have to explain why they favour the burden of tax rises falling more on people who aren’t very rich.

And kudos to Ewan Aitken, who plugged the political, social and economic wisdom of a higher income tax rate in light of the recession a good five days before me (although, as he notes, such a rate is not exactly a new idea).

(I’m assuming that the media reports are accurate. If not, then I’ve just made myself look pretty stupid.)

2 comments:

Chris said...

At the risk of boosting your ego further, apparently more generous and less conditional unemployment benefit is a very cost-effective way of stimulating the economy.

snowflake5 said...

Yes. In their manifesto the Tories will have to say what they will do. They will probably oppose raising the top rate of tax, want to introduce the rise in inheritance tax threshold to £2 million (benefits the shadow cabinet y'know) and announce a rise in tax for the poor. I think it's quite liklely they'll want to make swinging cuts in public services which will sit badly with Cameron's claims that he loves the NHS.