Plans for a higher rate of income tax

Personal allowances will also be tapered away for those earning over £100,000. And from 2011, people earning more than £150,000 will also see their pension tax relief reduced, until it disappears altogether at £180,000. Between them, officials estimate the measures will cost high earners in the £150,000 to £250,000-a-year income bracket about £80 a week. But does it represent an unfair tax burden on the rich?

The businessman

Mulberry Hall boss Adam Sinclair says he doesn’t earn £150,000 a year. Times are hard, he says. “Our business is not profitable enough to pay me a lot of money.”

Nevertheless, he is angry about the Chancellor’s tax plans.

When you take National Insurance into account, high earners will be giving the government more than 60p out of every pound they earn over £150,000, he says. “It is unfair to punish people who work hard.

“If we are going down a road where everybody who works hard or is trying to get on, trying to boost the economy and employ people, is going to get punished, that’s not very clever.

“We already have economic problems and employment problems enough. What we need in this country is people who are going to work hard, and who want to employ people.

“And yet these are the people who are getting absolutely clobbered.”

Such tax proposals were a huge disincentive to anyone who was considering investing in or setting up a business in the UK, Mr Sinclair said. “Say you were an overseas manufacturer or investor: would you decide to invest £10 million in the UK and employ 50 people? The answer is no.”

It wasn’t only the very rich who would be hit by the proposals, Mr Sinclair added. Anybody earning over £100,000 – and that includes some public service workers in the York area – would be affected.

The proposals were also a huge disincentive for those who earned less than £100,000 but aspired to do better, he said.

His own company, Mulberry Hall, employs about 60 people.

Taking responsibility for that many staff is a real burden, he said. “Employing people is quite an onerous thing these days. People are not going to do that if the reward is that 60p in every pound is taken away.”

The union man

It is about time the rich shouldered their share of the tax burden, says Ben Drake, of York City Unison.

“The simple fact is that all of us want to have a health service that’s free for everybody, a school system that’s free for everybody. All of us recognise the need to pay for these public services.

What’s the fairest way to do that? For everybody to pay in proportion to what they can afford to pay. Higher rates of tax for higher earners is right, because they can afford to pay more.”

It isn’t true that high earners will be giving back half of all they earn to the taxman, Mr Drake said.

“They will only be paying 50 per cent of what they earn over £150,000 a year.”

It is in everybody’s interests for us to live in a fairer society, he added. “There is properly-evidenced research which looks at the fact that more equal societies tend to be happier societies.

Everybody is happier, not just poor people but richer people as well. There is less crime, less resentment, you have a stabler, happier society.”

A 50p higher rate of income tax is all very well – but it doesn’t tackle the problem of tax loopholes exploited by the very rich, Mr Drake said. The Government loses millions of pounds through such loopholes, he said. “I would be even happier if the government had tackled those. Ordinary working people have no option but to pay tax. If they don’t they get caught and clobbered. Everybody should have to pay their share.”

It is nonsense to argue that by increasing the tax burden on the rich, you drive wealth creators overseas, Mr Drake said. “We are in a global recession. Every government in the world is going to be looking at closing tax loopholes.”

Alistair Darling’s tax measures come as a “triple whammy” for the better off, says Charles Helfferich, a director of York-based Grosvenor Financial Consultants. But the most painful element for the wealthy will not be the new 50 per cent tax rate, but the reduction in pension tax relief.

At the moment, higher earners enjoy 40 per cent tax relief on pension contributions. From 2011, this will reduce to 20 per cent – and will be phased out altogether for those earning over £180,000. “That will be more significant than the headline 50 per cent tax rate.”

While it will be up to two years before all the new tax rules come in, Mr Helfferich and Marcella Shone, a director in the wealth management department of law firm Dickinson Dees, agree that there will be measures in place to stop high earners exploiting the delay. “There are anti-avoidance measures which will apply between now and April 2011,” Ms Shone said.