Ed Balls got his economics quite extraordinarily wrong yesterday, for reasons that I cannot be bothered to explain. But he got the restoration of the 50p tax rate absolutely right.
I have written on this issue extensively. I wrote a report for the TUC in which I wittered on about “the 50p rate” without mentioning the different rate of tax on dividends and how the effective rate is variable according to the rate of corporation tax.
Of course, this left me open to mockery from my parodist, Richard Murphy, who decided to incorrectly correct people on what the rate of tax was on dividends without offering any explanation other than “it’s complicated”. This is presumably because he doesn’t know enough about tax to create a funny reason.
Somehow, he was able to do this before I published the report in March 2012.
This cumulated in a famous post where the lampoonist managed to engage genuine tax experts who did not realise that Richard Murphy’s only purpose was to say the most ridiculously incorrect thing possible.
He even drew me into the fray.
I must confess that I truly believed that he honestly thought he was genuinely correct, and was simply rather incompetent, as opposed to being a lame parody of a true expert.
Finally, the prankster revealed that he had never actually done a proper income tax calculation and abruptly ceased comments on the blog.
So “Richard Murphy” insinuated that I was not even aware that dividends did not carry a tax credit equivalent to the corporation tax paid and that they only carried a notional 10% tax credit and that it was the gross dividend used in the income tax calculation rather than the net dividend and therefore the rate of tax on dividends was always 50% and that I simply assumed other people were wrong rather than bothering to check the facts and figures myself.
Of course, none of this is correct. Because I am fully aware that the effective rate of tax on dividends was always 50%.
But this might still be considered funny to some, especially now that the 50p rate will be reintroduced under a Labour State, and that we can expect Richard Murphy to trot all his old materials that contain these “amusing” errors. But it is not.
It is not funny.
It is just silly.
Shall we get over it now please?