The company said: “It scarcely matters how much revenue is raised by the 50% top rate of income tax. In political terms it’s a necessary marker that the pain of getting the economy back on its feet is being shared by high-, middle- and low-income groups alike. Whether that pain takes the form of cuts or taxes, the government reminds us that we’re all in this together. Perversely of course, the less tax raised by the 50% rate, the weaker the case for abolishing it now.
Baker Tilly says the coalition’s fingers were firmly crossed that – by the time of the next election – the cuts would have done their job, the income tax threshold could be raised to £10,000 and the 50% rate quietly scrapped.
However, it says that this week’s calls to scrap the 50% rate immediately have been rejected, but two measures are developing their own momentum:
- the Liberal Democrat Treasury chief secretary Danny Alexander is urging that nobody in a full-time job and earning the minimum wage should pay any income tax. This implies a tax threshold of more than £12,000, which will have to be funded through higher taxes elsewhere
- a form of property tax aimed at the wealthy is beginning to look distinctly more likely, nothwithstanding that all the proposals so far have been flawed to a greater or lesser extent.
According to Baker Tilly if the Coalition wishes to maximise the electoral impact of the higher income tax threshold, while drawing the sting of a “mansion tax”, then detailed, serious work on implementation is certain to start soon. The Chancellor’s Autumn Statement on Tuesday 29th November 2011 will indeed be an occasion to watch.