Raising top tax rate to 50p will bring in little or no revenue

Paul Johnson and David Phillips of the Institute of Fiscal Studies question Ed Balls's tax pledge

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(Image credit: 2013 AFP)

ED BALLS, the shadow chancellor, has announced that if elected a Labour government would return the rate of income tax payable on incomes above £150,000 to 50 per cent. What would the effect of this be?

Labour's contention is that it would raise a meaningful sum of money to help reduce the budget deficit and make for a fairer tax system. The contention of their opponents is that it could result in an exodus of talent from the UK, a reduction in entrepreneurial drive, and an increase in tax avoidance and evasion, and may actually reduce the amount of tax paid.

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