The President 's Argument And The Labor Party 's Proposal By Extension

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Introduction Debate surrounding the controversial 50 pence additional rate of income tax for high income earners hit the limelight again at the beginning of this year following Shadow Chancellor ED Beals’ announcement that the Labor Party intended to restore the same if it was elected to power in the 2015 general elections. Addressing journalists in January, the Shadow Chancellor argued that such a move would see the economy raise approximately £10 billion over a period of three years, which would essentially imply that i) the level of national debt would be reduced, and ii) disparities in income and wealth would be minimized through a fully-progressive tax system structured to ensure that “those with the broadest shoulders bear a fairer…show more content…
What is the 5p Additional Rate of Income Tax? The UK taxation system subjects individuals’ incomes, including interest on savings, pensions, and salaries to income tax on the basis of ‘bands’ – the first £ 9,440 (which recently rose to £ 10,000) is exempt from taxation, with any income between this limit and £32,010 attracting a basic rate of 20%, that between £32,011 and £ 150,000 attracting a tax rate 40%, and anything in excess of £150,000 attracting a rate of 45% (BBC, 2014). Prior to April 2013, earnings exceeding £150,000 were taxed at a rate of 50% - the 5p rate of income tax - such that a person earning £200,000 would be taxed at 40% for the first £150,000 and an additional £25,000 for the extra £50,000, as opposed to the £22,500 they would pay under the current 45% rate. The government’s decision to reduce the high-band rate from 50% to 45% in April last year was aimed at stimulating economic growth and facilitating the process of recovery. The Labor Party’s plan is geared towards facilitating income redistribution by raising the high-band rate of income taxation from the current 45% to the original 50%. Evolution of the ‘Additional’ Rate of Taxation in the UK Ault and Arnold (2010) point out that politics and history have both had an influence on the UK tax system over the years. The
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