mikems wrote:Surely the argument that higher rates of income tax harm the economy is put to bed by looking at the GDP figures post war.
If you make it easier to avoid higher rate taxes by allowing tax havens and free movement of capital, then society will be undermined.
The ease with which the rich dodge their taxes now is not an argument against stopping them doing it.
Firstly you can't really look at post war GDP figures to form a strategy for today. The world, and the UK's place in it are completely different today. We used to export stuff to the empire, now we import it from China.
To me once the state starts taking more than 50% of a pay rise a line has probably been crossed. It is true in the past we had very high rates of tax, but I am not sure there is any appetite amongst the population to go back to those days. I knew the 92 election was lost by John Smiths budget when I was canvassing relatively poor people objecting to tax rises (they never had any chance of being hit, but aspiration is a tricky thing). Let's not replay 92, not least because their are better options.
Currently we have an odd situation where taxation falls increasingly on a narrow section of society, and that does not include the rich. You cannot resolve this by income tax, you need new tax strategies to make the wealthy pay their share. When you talk about inequality, it isn't the top 5% or probably even the top 3% that have the money, it is the top 2% the majority held by the top 1%. This inequality is an issue because this group of people aren't doing anything productive with it.
So in this environment the priority is to increase the tax take and reduce the state subsidy required by low wages. Raising income tax will do nothing for the latter and is likely (after a point) to return disappointing results for the former. Hollande has achieved very little with his super tax, freedom of movement is an issue.
The challenge is to raise taxes against oligarchs, the aristocracy and the citizens of the world(TM). The answer being in part the mansion tax, but also taxes on unoccupied property and the closing down of corporate and private tax loopholes. The contractor case being an example, you still need contractors and they still need to be able to offset costs against tax, but income must be booked as income and the money placed in "The business" limited. Some of Osbornes pension tax scams need shutting down as well. Limiting tax relief to say 30% of income or 50K (higher figure) would also be an idea; massively tightening up on capital gains tax another must.
Having done that then some thought can be applied to income tax, but my gut feeling is you won't need to. VAT is only partially regressive, and the EU stops is abolishing it anyway. If Labour ever gets far enough to consider tax cuts they could look at reducing VAT rates on non elective items (like car repairs).
Release the Guardvarks.
