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On the eve of what is sure to be Alistair Darling's most important political statement there is speculation and counter speculation about how he will address the situation of the UK economy next...
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Tuesday 5th August 2008
This is an age old debate and one which seems to appear on the front pages from time to time, but is it actually fair to expect the richer people of society to pay a higher rate of tax? Does it actually incentivise people to better themselves or does it contribute to the brain drain?
While there is no right or wrong answer to the above question, opinions are generally divided down the middle. So consider the following :-
Does It Encourage Entrepreneurism?
Not only does this disincentivise many to take the step forward in their place of work but it has been shown in the past to contribute to the brain drain. While some in the UK have riches because of their family backgrounds, others have started at the bottom and worked their way to the top. A standard rate of tax for all will see the rich pay more actual taxes even though the percentage of their income remains the same.
Does It Incentivise The Less Well Off?
If the less well off in society, people who are able to work but often choose not to, know that the more wealthy end of the population will be supporting them, where is their incentive to work. Higher taxes mean higher benefit payments which means the starting level where it is economical to start work moves higher and higher.
Tax is a very powerful weapon but it can actually disincentivise people on both sides of the equation. |
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