Increasing income inequality in the UK, together with policies to protect low-income families and the lowering of tax rates on high earners to encourage less tax avoidance, have resulted in the top 50% of tax payers now contributing over 90% of total income tax collected. Indeed the top 1% (those earning over £160,000 per year) pay around 30% of total income tax and the top 10% almost 60%. These high earners are, therefore, funding by far the largest proportion of Britain?s public services.
Yet the opposition Labour party has threatened to return the top rate of income tax back to 50% (from the current 45%) should it be returned to power at the next General Election in May 2015. At the other end of the scale, the governing Coalition of the Conservative & Liberal Democrat parties is also progressively increasing the tax-free allowance to some £10,000 or more before 2015.
However, with the economy now finally developing a solid pattern of growth, in good time for the Conservative party to benefit at the 2015 election, where is the associated policy to demonstrate sharing the financial benefit of growth with a broader part of the electorate e.g. the ?squeezed middle? income earners? Raising the higher (40%) tax rate income threshold is one answer, if the projected overall increase in tax returns from growth will allow, although there is still the need to pay for the costs associated with any ?green? taxes diverted from the energy bills of hard-pressed British consumers.