Britain’s Anti-Entrepreneur Tax Hike

Just to show that bad economic policy is in no way limited to the United States right now, Great Britain’s Prime Minister Gordon Brown has announced that the nation’s highest marginal income tax rate will be hiked to 50 percent.

That’s a 25 percent increase from the current top rate of 40 percent. The 50 percent rate would kick in at $220,000 in annual income.

A Washington Post story on the issue reported two interesting points:

• “[T]hose who will pay the higher tax argue that it is a significant deterrent for an entire generation of entrepreneurs who have grown up paying no more than 40 percent of their income in taxes. Britain had a top rate of 83 percent in the late 1970s and a top rate of 60 percent until 1988, when the rates were slashed and simplified.”

• “Composer Andrew Lloyd Webber called it ‘the final nail in the coffin’ for the British economy. Actor Michael Caine threatened to move to the United States because of it, and one of Britain's top soccer coaches said it could undermine the national sport… Critics say the measure, which targets those who earn more than about $220,000 a year, will create a brain drain and a new era of class warfare, undermining entrepreneurial spirit when it is most needed, while doing little to rescue the nation's wheezing economy.”

This tax increase has nothing to do with sound economics, and everything to do with class warfare. And class warfare comes with very heavy economic costs.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council