Killing their Financial Industry & Economy

Gordon Brown's Labor government in the UK just announced a plan for a 50% tax on banker bonuses and a plan to raise income taxes broadly next year. Given that the financial industry is something like 27% of their economy, a special tax targeting that industry doesn't seem like a very good idea:

The British Bankers’ Association Chief Executive Angela Knight said foreign banks that reward staff with contractually agreed bonuses will be “hardest hit” and may look at London as “a significantly less attractive place.” Richard Lambert, director general of the Confederation of British Industry, said Darling’s “jobs tax” was a “serious mistake.”

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Darling also confirmed he’d return value-added tax to 17.5 percent at the end of this year from 15 percent. He also extended tax relief on empty properties, cut duties on bingo gaming and raised the basic state pension 2.5 percent from April. He also will increase disability benefits by 1.5 percent.

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The fee on bankers applies to discretionary payments of more than 25,000 pounds and will be paid by the bank, not the employee. The employees also will have to pay tax on the bonus at their marginal rate, which already is due to rise to 50 percent from 40 percent on wages over 150,000 pounds from April.

Wealthier taxpayers were also hit with a clarification of pension rules announced in April. People earning 130,000 pounds or more will pay tax on the sums their employer contributes, effectively cancelling out relief usually paid out on pension payments made by employees. The measure takes effect in 2011 and raises 500 million pounds by 2013.

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From 2011, Darling said he’d raise National Insurance contributions, which are paid by all wage earners to cover health and pensions.