David Cameron has accused Labour of putting "political convenience" above good economics by pledging to restore the 50p top tax rate on earnings over £150,000.
The Prime Minister defended his own decision to cut the top rate to 45p, insisting that while it may not have been popular, it was economically the right thing to do. But he dodged questions about whether he agreed with Conservative mayor of London Boris Johnson that the rate should be reduced further to 40p.
Shadow chancellor Ed Balls has announced that he would restore the 50p rate as part of an economic plan to balance the books, run a budget surplus and cut the national debt if Labour is returned to power in 2015.
His plans sparked a ferocious response from business leaders, with 24 warning in a letter to the Daily Telegraph that a 50p rate would "put the economic recovery at risk" and cost jobs.
Mr Balls insisted Labour is not "anti-business" and said he was "proud" of the party's record on public spending during its time in power. And opinion polls suggested that his proposal was popular with voters.
But Mr Cameron told a conference of the Federation of Small Businesses in London that the Labour proposals may be "politically convenient" but would be "very, very bad for our economy".
" We've cut the top rate of tax from 50p to 45p. I think it was the right step to take. I always knew it wouldn't be particularly popular but I thought it was the right thing to do because I want to take steps in this country that are going to encourage investment, going to encourage jobs, going to encourage growth, going to encourage business to invest more," said the PM.
"From all the reaction I've seen over the last 48 hours since Ed Balls and Labour made their announcement, it only confirms me in that view.
"We've now got former Labour minister after former Labour minister alongside a huge number of people in business to say that putting up the top rate of tax would cost jobs, cost investment, it is an anti-business, anti-enterprise, anti-growth measure.
"I would argue that, just as I think what George Osborne and I did was right for the economy but politically difficult, Labour are now doing something that's politically convenient but is very, very bad for our economy".