We shouldn’t cut taxes for the rich – we should raise them

September 7, 2011 4:16 pm

Author:

Share this Article

TaxesBy Owen Jones / @owenjones84

Today, we learned that right-wing economists don’t like progressive taxation. Not a bombshell, you would think: but a letter signed by 20 economists calling for the 50p tax band to be scrapped was deemed important enough to be the BBC’s main news story. If you’re wondering who’s behind this initiative, it’s being funded by big business using the PR firm Westbourne. This is a blatant attempt by the rich and powerful to soften up public opinion into supporting their selfish economic interests. It’s an old trick of the wealthy to conflate their interests with those of society as a whole.

If you want to read the arguments of these mouthpieces of Britain’s economic elite being shredded, I recommend reading the ever-excellent Richard Murphy’s piece. The 50p tax band was one of the most popular policies of the last Labour government. At a threshold of £150,000, it applies to the richest 1% of the population (about 328,000 individuals, to be specific). We live in an era where a crisis of neo-liberalism perversely led to more aggressive doses of neo-liberalism than ever before: here was the one striking exception.

But I don’t think we should be forced into a defensive position on this. Let’s not simply defend the 50p tax band. Instead, let’s push for it either to be increased to 60p, or to take the threshold down from the current £150,000 to £100,000. In a country where if you earn £21,000, you are bang in the middle, decreasing the threshold would still only affect the very wealthiest – the top 2%, to be precise.

Either move would be popular with a public that wants to see the rich paying more. A poll last year revealed that 54% (against 29% who disagreed) wanted the top rate of tax increased to 60p in the pound.

It is said that higher taxes will just encourage tax evasion by the wealthy. It’s worth noting that – to flip the argument around – the low level of benefits is never offered as an excuse for so-called ‘benefit cheats’. But a more progressive taxation system should be combined with an all-out war on tax evasion and avoidance by the wealthy (worth around £70 billion a year) – from loopholes to tax havens.

It’s not as though there’s a lack of money sloshing around at the top. In the current economic crisis, working-class people are being made to suffer the most. The average Briton is experiencing the biggest squeeze on living standards since the 1920s. But, between 2010 and 2011, the richest 1,000 Britons saw their wealth go up by nearly a fifth. At the end of 2010, it was reported that boardroom pay leapt by 55%. As the bank balances of the richest continue to soar, why not increase the top rate of tax to increase revenues as an alternative to devastating cuts?

Tory opponents of more progressive taxation argue it will damage the economy. Given they back an austerity drive that objectively is damaging the economy, there is an element of chutzpah in this. But it is worth looking at countries with high tax rates whose standard of living is higher than our own: like Sweden (56.6%), Norway (54.3%), Finland (53%) the Netherlands (52%), Denmark (51.5%) and Belgium (50%). But it is questionable whether impoverished Albania has been given much of a boost by its tiny top rate tax (10%); the same goes for Macedonia (10%), the Ukraine (15%) and Romania (16%).

Britain did once have far higher taxes on the rich, peaking at 98% in the 1970s. But our economic growth between the 1940s and the 1970s was greater, more stable and more equitably distributed than it was after Margaret Thatcher trashed the post-war consensus. Indeed, the three catastrophic economic crises of post-war Britain have all taken place in the neo-liberal era: in the early 1980s, the early 1990s and – of course – today. In his book Keynes: Return of the Master (2009), Lord Skidelsky found that average British unemployment in the Keynesian era of high taxes on the rich was 1.6%. In the neo-liberal period initiated by Thatcher’s governments – with ever-lower taxes on the top – it was 7.4%. So much for high taxes being a block on job creation.

The 20 right-wing economists may be part of an orchestrated campaign by wealthy businesspeople, but let’s take their letter as an opportunity and go on the offensive. At a time when working Britons, the unemployed and the poor face being hammered by cuts and – in the case of VAT, higher taxes – the case for the rich to pay more is unanswerable. It is popular and it makes economic sense. And – just as importantly – it would allow us to do what only the right are currently doing: dictating the terms of political debate in Britain.

Comments are closed

Latest

  • Comment The Next Portillo Moment

    The Next Portillo Moment

    Undoubtedly the highlight of election night ‘97 was seeing Labour record the unlikeliest of victories where I live in Enfield Southgate. We did it through hard work, at the time all three Enfield seats were blue and though the Labour swing meant that Edmonton and Enfield North were going red regardless it took a special campaign lead by an extraordinarily good candidate in Stephen Twigg to record what was an iconic victory in the Party’s history. We held the seat […]

    Read more →
  • Comment The business backlash against Tory EU exit plans 

    The business backlash against Tory EU exit plans 

    It’s not just José Manuel Barroso who has warned David Cameron that his party is taking the wrong approach when it comes to talk of an EU exit. There is a clear sense of concern and anger from the UK and international business community in respect of the Tory plans for an in/out referendum on the UK’s membership of the EU in 2017. This has led to a serious business backlash against the Tories. Standard & Poor’s, the international rating […]

    Read more →
  • Featured Miliband sets out 5 point immigration reform plan (but won’t join “Operation Pander”)

    Miliband sets out 5 point immigration reform plan (but won’t join “Operation Pander”)

    Ed Miliband is in Rochester today, where he’s campaigning for the party’s by-election candidate Naushabah Khan against what he called the “two Tory opponents” of UKIP and the Tories in the Rochester and Strood by-election. But the main purpose of Miliband’s speech was to set out what Labour’s approach to immigration will be – specifically an Immigration Reform Bill in the first Queen’s Speech of the new Parliament. Miliband announced it’d be based around five key principles (most of which […]

    Read more →
  • News Sadiq Khan asks Mansion Tax critics – how would you fund the NHS?

    Sadiq Khan asks Mansion Tax critics – how would you fund the NHS?

    Since Labour conference, the majority of Labour’s potential London mayoral candidates have been critical of the party’s Mansion Tax proposals. However one presumptive candidate has been consistently positive about the plans – Sadiq Khan. That’s understandable and expected, as he’s a Shadow Cabinet member and a Miliband loyalist. But Khan has now launched a public defence of the tax (calling it “absolutely fair”) and a broadside against critics, asking them “why they are opposed to hiring thousands more nurses and doctors […]

    Read more →
  • News Seema Malhotra asks Farage to condemn EU ally’s “deplorable attitude towards women and girls”

    Seema Malhotra asks Farage to condemn EU ally’s “deplorable attitude towards women and girls”

    As we reported earlier this week, Ukip have allowed Polish MEP Robert Iwaszkiewicz to join their European Parliamentary group – Europe for Free and Direct Democracy group (EFDD) following the resignation of a Latvian MEP from the group. Iwaszkiewicz however has spoken out in favour of men beating their wives and praised Hitler for keeping taxes low. These comments – and consequently Ukip’s acceptance of Iwaszkiewicz into their EU Parliamentary fold – have rightly been met with outrage. In response, Seema Malhotra, Labour’s Shadow […]

    Read more →