A Labour MP has predicted the new top rate of tax for the rich may actually cost the Treasury money – but welcomed it anyway because it “sends out a message” about the need for a fairer society.
Speaking in the House of Commons, Rob Marris (Lab Wolverhampton South West) backed plans for a new 50p rate of income tax to be charged on incomes of more than £150,000, announced in the Budget earlier this month.
But he also said the tax may fail to raise any money.
It followed warnings, including from think-tank the Institute for Fiscal Studies, that the new levy would encourage high earners to look for ways to avoid paying income tax, or to leave the country.
Labour has denied the claim but Mr Marris, who has a reputation for independence, said the tax was worth having even if it was true.
He referred to the Laffer curve, a graph named after economist Arthur Laffer, which shows tax revenues rise to a limited extent when tax rates increase, but actually start falling if tax rates become too high.
Mr Marris told MPs: “I hear the figures bandied about – about how the 50 per cent tax rate will drive people out the country, about the Laffer curve and about how the tax take will go down. Of course, one has to be aware of that issue but there is also a basic issue of equality. Professional footballers in this country earn in two weeks more than the Prime Minister does in a year.”