What Lib Dem members think about top-rate tax: 53% back 50p (or higher) BUT only if it raises more revenue

Project 365 114 - MoneyLib Dem Voice has polled our members-only forum  to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. More than 830 party members responded – thank you – and we’re publishing the full results.

53% support 50p (or higher) top-rate of tax; 31% say stick at 45p; 13% back 40p (or lower)

Currently the top rate of income tax is 45p in the pound for earnings over £150,000. Which rate do you support this top rate being set at?

    43% – 50p in the pound for earnings over £150,000

    10% – Higher than 50p in the pound for earnings over £150,000

    31% – 45p in the pound for earnings over £150,000

    11% – 40p in the pound for earnings over £150,000

    2% – Lower than 40p in the pound for earnings over £150,000

    4% – Don’t know

Last September, Lib Dem conference voted – by a wafer-thin margin of just 4 votes – to reject a 50p top-rate of tax. However, our survey finds that a narrow-but-clear majority of party members support raising the top-rate (as indeed our survey found last year).

In total, 53% of Lib Dem members want to see the top-rate at 50p or higher for every £ of income earned above £150k. Almost a third (31%) are content to see the top-rate where it is now, at 45p in the £. Just 13% of Lib Dems back Jeremy Browne’s proposal in his book Race Plan that the top-rate should be reduced to 40p or even lower.

Here’s a sample of your comments…

• We need to move away from taxing income and towards taxing wealth. Obsessing about high top rates that raise little or no money flies in the face of that agenda.
• 45p in the pound but starting at £70,000 with abolition of the 40p rate
• The Lib Dem MP’s where a disgrace in allowing the Tories and the super rich off, when millions are struggling
• People should keep the majority of their marginal earnings if they are to have the incentive to work further and increase GDP etc It’s also just.
• We cannot support the level of government spending that will remain after all the current projected cuts unless we raise more taxes. We should also increase taxes on property through additional council tax bands. Council tax on expensive properties in London is ridiculously low.
• Further BANDS for still higher earners.
• As long as the £150,000 is adjusted for inflation, otherwise everyone will finish up paying it, as increasing numbers pay 40% now. Fiscal drag.
• It’s a drop in the ocean. Capital gains tax and Corporation tax are more significant but receive no coverage
• In the long term I’m happy with 20-ish and 40-ish, provided we do far, far more on avoidance and evasion. For now, a 50% rate would be right.
• Why the simplistic obsession with tax rates at round figures? I think it would make sense to have a top rate of income at around 48 p – it would still be competitive internationally, it would not drive anyone out of the UK, but it would generate more revenue than the current 45 per cent top income tax rate.
• Higher for those earning ove £1M
• All income taxes should be a bit lower, with a new tax on wealth to raise more from the rich. Failing that, the 50 per cent top rate tax should be reinstated if it would raise more money.
• income tax must include all sources of wealth equally
• The revenue raised is less important than the disincentive effect for highly mobile entrepreneurs to invest in the UK
• Should amalgamate income tax and NI: currently total is 47% for above 150 K as against 32% from 10 K up.
• It would make people on very low incomes feel that we are in it together – all categories have benefitted from the raised tax thresholds
• See what high income tax is doing to the French economy. Keep it reasonable for all earners. Higher tax for top earners does not bring in the income for the state that people think it does.
• Everyone talks about whether 45% is the right rate but nobody seems to talk about whether £150,000 is the right level for it to apply.

BUT 60% would oppose 50p rate IF it could be shown it raised no extra money

Imagine it was the case that a top tax rate of 50p did not bring in any extra money. Which of the following would best reflect your view?

    60% – If a 50p top tax rate would not bring in any extra money then it should not be introduced

    32% – A 50p top tax rate should be introduced even if would not bring in any extra money – it is only right that the rich should pay higher taxes

    7% – Neither

    2% – Don’t know

This question triggered an interesting response. By a clear margin, 60% to 32%, most Lib Dem members would oppose a 50p top-rate of tax that didn’t bring in extra revenue – BUT the comments submitted show more passionate and nuanced views than that headline would suggest, with many arguing for a shift to wealth taxation combined with much tougher crackdowns on high-earners reducing their tax liabilities. Here’s a sample of your comments…

• This IS the case and it’s wrong to support overtaxing people without any benefit to the public purse in order to make a point of punishing high earners
• PLUS a Mansion Tax!
• I do no accept the premis eof the question. If these people are dodging tax, then fix that then put the tax rate up.
• …and please ensure they do pay! Too much effort is put into benefit frauds and not enough to tax cheats
• It depends from where you start. I would not have reduced the 50p rate to 45p because the amounts raised are piffling but now that it is here I would not increase it for the same reason.
• Squeeze the bastards until the pips squeak.
• Where would this evidence come from and how would it be independently verified and tested?
• If a 50p tax rate that existed for more than a year proved not to bring in any extra money in the long term, then it should be amended.
• It’s the principle of the thing, stupid!
• A 50p tax rate should not be introduced , we should not tax at source of earnings but on purchases, capital gains, propertys and assets increased in value due to the success of our economy.
• And tighten tax avoidable, evasion. Employ more tax inspectors.
• The tax regime should be simplified so that income, salaries and other benefits are all taxed at the same rate. If it could be shown that people receiving salary, bonus, sundry benefits, share options etc. were paying paying about 30% on the whole package, the system would appear to be fairer.
• The rate at which tax is levied is only a part of the problem. Dealing with avoidance,
• evasion is the main issue. Legislation must be past to address this national ‘disease’!
• Loopholes might be a higher priority along wth restrictions on non dom status.
• I think the question should also be asked the other way round. If 50p did raise significant revenue, should it be introduced?
• However the question ignores that there could be other policies such as increasing CGT that might make this policy work better.
• Of course it would, don’t propose such right-wing nonsense
• Something has to be done to reduce inequality in the UK, tax is one way alternatives would be a higher minimum wage or restrictions on high salaries and bonuses that create antisocial behaviour.
• I don’t accept the question. 50p would bring in more money if tax loopholes were closed
• Imagine any politician actually knew the answer to this question, then ask me again.

  • 1,500 Lib Dem paid-up party members are registered with LibDemVoice.org. 745 responded in full – and a further 87 in part – to the latest survey, which was conducted between 16th and 22nd April.
  • Please note: we make no claims that the survey is fully representative of the Lib Dem membership as a whole. However, LibDemVoice.org’s surveys are the largest independent samples of the views of Lib Dem members across the country, and have in the past offered accurate guides to what party members think.
  • For further information on the reliability/credibility of our surveys, please refer to FAQs: Are the Liberal Democrat Voice surveys of party members accurate? and polling expert Anthony Wells’ verdict, On that poll of Lib Dem members.
  • The full archive of our members’ surveys can be viewed at www.libdemvoice.org/category/ldv-members-poll
  • * Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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    • Jenny Barnes 2nd May '14 - 8:56am

      I think we should focus on money acquired by inheritance/ gift. It’s still income, and should still be taxed. Possibly for inheritance, spread the tax liability over 10 years.

    • Simon McGrath 2nd May '14 - 9:15am

      The 32% who think taxes should be higher even if it raises no extra revenue are in the wrong party.

    • Simon McGrath 2nd May '14 - 9:16am

      @Jenny “I think we should focus on money acquired by inheritance/ gift. ” What do you think inheritance tax is ?

    • I believe that I was one of the 32%. I supported a 50% top rate in the survey because “we are all in this together” and in these economically challenging times I am sure our hard pressed public servants have far better things to do than trying to forecast the effects of hypothetical tax changes. Oh….. and this “mean-spirited” colleague actually feels that he is in the right party!

    • Paul Pettinger 2nd May '14 - 11:24am

      Idleness is being tackled at the poorer end of the scale, with greater labour flexibility (such as shown through the growth of zero hour contracts during this Parliament) and making work pay (such as through welfare reform and increasing the income tax threshold). Because of this Lib Dems can speak from an even stronger position of strength in seeking to tackle the much larger and more malignant dead weight in society – the idle rich. Inspired Georgist forebears, we should go into the next Election making a further decentralisation of wealth a key priority, in part by just continuing the tax revolution that we have already started, but by having a much greater tax burden fall on the unearned income of the most wealthy – we would have by far the most socially just and economically literate tax policy of any Party. ‘Why should we work hard and let the landlords take the best? Make them pay their taxes on the land just like the rest’. It will be a disaster to fight the next Election with being ‘a moderating force’ as one of our key messages.

    • Stephen Howse 2nd May '14 - 11:29am

      I agree with Simon McGrath.

      I have a serious moral objection to the idea that the state should have an equal (or greater) claim to the fruits of an individual’s labours as the individual themselves. 45p is too high, never mind 50p.

      The real issue is that different kinds of income are treated differently. Don’t set stupidly high tax rates – much better to take action and make sure everyone is paying the tax they’re supposed to be, without any cute accounting tricks.

    • Stephen House – Why not take this further? An individual should be entitled to at least 50% of the value of their work. I doubt many employers could realistically claim to reward their employees accordingly…

    • The question I find myself asking is: do people seriously think that increasing the taxes on the rich will some how improve the lot of the less well off? particularly as the evidence from the coalition is stark: we have more higher and additional rate tax payers than ever before, yet the reports indicate the less well off and those depending on welfare have not gained.

      Which leads on to the second question: what is the liberal way of getting higher earners to disproportionally financially invest in society? I use invest in it’s widest sense, namely directly: employ people, finance (commercial) businesses, contribute to social enterprise and charity etc. As someone who has started up businesses, I prefer a few investors with names and faces rather than a government grant giving agency: the investor is wanting to see a return and hence will positively contribute, the grant agency is looking to see that the money was spent on the purpose it was given and so effectively plays the role of an auditor.

      Which leads me to set my challenge: we’ve talked about sticks now lets talk about carrots!!

    • David Allen 2nd May '14 - 4:26pm

      It’s really smart. First, rich people get loopholes written into the tax system – by lobbying, by sponsoring political parties who do what they ask, by hiring clever lawyers to find and create loopholes, etc. Then, they point out that because of all the loopholes they have put in place, efforts to tax them more heavily are doomed to failure. Finally, they slag off all those who try to tax them more heavily, and point out that their ideas are impractical and can be called stupid, thanks to the fact that the rich have rigged the tax system to suit themselves.

      The rich are especially delighted to fund people like the Orange Book brigade. By capturing a previously left-of-centre party, Orange Bookers have played a crucial role in helping to suppress those who might otherwise have been able to challenge the stranglehold of the rich.

    • Simon McGrath 2nd May '14 - 5:20pm

      @Geoffrey Payne
      “Surely the questions are somewhat unfair. Of course the tax rate should only be increased if it raises more money, but perhaps it can be made to raise more money by equalising it with capital gains tax so that rich businessmen do not substitute their salary with shares?”
      If you are paid in shares they are subject to income tax.

    • jedibeeftrix 2nd May '14 - 5:27pm

      @ GP – “no one pays half of their income in income tax. No one. Because if it were a 50p tax rate then it would only be that tax rate on income above the threshold”

      I take no issue with that statement, and yet I hold to the notion that no personal tax rate should exceed 50%.

    • What I find disagreeable is that some people say there shouldn’t be a tax rate of 50% because it is a disincentive but support those on benefit receiving only 3 pence in every extra pound they earn. Universal Benefit will be withdrawn at the rate of 65% on every pound earned but also 20% Income Tax will deducted alone with 12% National Insurance. If a marginal rate of 97% deduction from income is fine for those receiving benefit earning above £10,000, why would a 50% marginal rate be wrong in principle for those earning over £150,000?

      If someone believes that the top rate of tax should be 45% and no higher rate is ever justified then they should support a Universal Benefit withdrawal rate of 13% for those earning over £10,000 so their marginal rate is 45% too.

    • “alone” should have been “along”

    • Trevor B comments:
      ! I am sure our hard pressed public servants have far better things to do than trying to forecast the effects of hypothetical tax changes.”

      I’m sorry, estimating the impact of tax changes is exactly what Treasury civil servants should be doing.

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