Adele has hit the news because she’s come out against the 50p tax rate, astonishingly saying she would rather not pay 50% of tax (neglecting to mention it’s only on earnings that put her in the top 0.1% of earners in the country but that’s by the by).
What I do wonder about in the debate about the 50p tax rate is how much people like Adele would save anyway. She’s complaining essentially about 10p on the pound.
So if – as she intimates – she earned £8 million and paid £4 million in tax, how much would she have paid with a 40p tax rate? £3.2 million.
So for all she is complaining, if we got rid of the 50p tax rate tomorrow she’d only save £800,000 in tax. I say ‘only’ because she already has £4 million in the bank.
I think what is interesting about this is how the importance of the 50 tax rate to her is more symbolic than real. She rails against the amount of tax she pays but in reality the 50p rate only concerns a small part of it (10% in fact) over what she’d have paid at any point in the last 10-20 years or whatever.
Now if she left the country because of it, citing the 50p tax rate, it would be a gift for the ‘right’ in arguing that a 50p tax rate deters people from living in this country.
Yet what it would show is how irrational human behaviour is, as if Adele paid 40% tax she’d have still forked out millions to the taxman.
This is not to say we shouldn’t get rid of the 50p tax rate, just that it’s an interesting point and rarely discussed in the debate about the proper threshold for the higher rate of tax.
My own personal opinion is that a 50p tax rate is indeed too high in a purely symbolic sense. It means that at some point, the state would take half of what you earn – even if what you earn is more than 99.9% of the population. I think this undermines the tax and welfare system in the longer term as it turns people against the concept of paying taxing and receiving public services in return (we’ll leave aside Adele’s erroneous opinions on the trains and our state schools).
However, I think it is acceptable to believe that the richest in society should pay a higher rate than those on £40-50k. Perhaps a 45% tax rate on earning over £100,000 would widen the pool but make it shallower to calm those, like Adele, who see the symbolism of being taxed 50% over the reality of the alternatives that wouldn’t save them all that much in the first place. I’d like to see the figures on the projected tax take of the Treasury if we got rid of the 50p rate on earnings over £150,000 and replaced it with a 45% figure, either on the same amount of earnings or on earning over £100,000.
UPDATE: Did I ever mention what a wonderful girl that Adele was? Can’t say enough positive things about her. Nothing at all related to the fact she’s a ‘Labour girl through and through‘, mind.