Figures from HM Revenue and Customs suggest that the best-paid one per cent of workers will contribute nearly 30 per cent of all income tax in 2013-14. This represents an increase in tax revenue from the rich since George Osborne cut the top rate of income tax from 50 percent to 45 percent, proving the Laffer Curve theory which contends that tax cuts for the better off typically yield more tax revenue because they stimulate growth and employment. It’s a delicate balancing act. Obviously no one wants a situation where private companies and wealthy individuals stifle the economy by sitting on any increases in their capital facilitated by tax cuts. However, the figures show that the Laffer Curve is not a delusion.
The shadow chancellor, Ed Balls, would be perfectly familiar with this, so it seems odd that he should announce his intention to reinstate the 50 percent top rate if Labour were to win the 2015 election. It gives the impression that he is prepared to sabotage business investment in Britain by indulging in the politics of envy. If his proposal takes no account of the amount of revenue generated, it can only be a purely cynical attempt to appeal to Labour’s core vote. Like the scorpion in Aesop’s fable, it would appear he would drown us all because he cannot overcome his nature.