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A budget reason for me to thank George Osborne

by Paul Goodman

I've three times urged George Osborne to find a way to examine whether cutting taxes raises revenues, especially in relation to the 50p rate - here and here.  Earlier this week, I returned to the theme by drafting a mock section of the budget speech to this end.

I suggested that the Office for Budget Responsibility do the relevant statistical and intellectual heavy lifting.  The Chancellor yesterday announced that HMRC will look at whether the 50p rate raises more revenue than it loses.  He said -

"In an age when businesses and capital and people can increasingly move anywhere, high tax rates can do real damage.

That’s true for high corporate taxes.

It’s true for high personal tax rates too.

They crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them.

I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent.

That is why I regard it as a temporary measure.

Just as my Labour predecessor, the RHM for Edinburgh South West, did when he introduced it.

I’ve said before that now wouldn’t be the right time to remove it, when we’re asking others in our society on much lower incomes to make sacrifices.

For we’re all in this together.

But I think it’s sensible to see how much revenue it actually raises.

I’ve asked HMRC to find out the truth when the self-assessment forms start coming in."

Osborne presumably plumped for HMRC rather than the OBR because the former is closer to the data.  Last year, he looked at the effect on revenue of the capital gains tax rate before setting it at 28%.  This year, the 50p rate gets the same treatment.

In other words, he's gradually making examinations of the effect of tax rates part of the Treasury's ordinary business.  With the possible merger of tax and national insurance - which would headline how much tax we pay - Osborne is building a political constituency for lower taxes in the long run.

Credit where credit's due: well done, George Osborne.


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