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.