Charlotte Church says she would happily pay tax at 60% or 70% if it would protect public services. Three cheers for the Welsh singer who defends herself against sneers about champagne socialism by describing herself as “more of a prosecco girl myself”. In the wake of an election dominated by the need to cut public spending and won by a government that intends tax increases to contribute a mere 2% in the battle to balance the books, it is time to defend the virtue of the better-off paying more tax.
One of the conceits of government is that income tax is a temporary imposition, even though it is 200 years since the defeat of Napoleon at Waterloo last resulted in income tax actually being abolished. It was reinstated in 1842, and has been renewed every year since, yet the impression remains that it is a temporary imposition on the citizen, required only to spread the burden of some pressing national project, acceded to reluctantly as part of the obligation of the rich. As the great Liberal leader William Gladstone, no enthusiast, described it in one of his epic budget speeches as the Crimean war broke out in 1854, income tax was an “engine of gigantic power for great national purposes”.
The masterstroke of the Attlee government was to keep the tax rates needed for war and convert them from spending on the defence of the nation into spending on the defence of the citizen through the welfare state. For a while, many people accepted that there was an equivalence. But slowly tax became an irrevocably partisan matter, divorced from the sense of contribution to the common good and reconstructed as the handmaiden of socialism.
And since the high-water mark of taxation as a redistributive tool in the egalitarian 1970s, when marginal rates of tax on earned income reached 83%, the debate has become almost emptied of moral content. After Margaret Thatcher, who made cutting tax the issue that defined her style of politics and lay at the heart of her assault on the state, it was a brave politician who dared to try to revive the idea of paying tax as a moral obligation. When Paddy Ashdown, as leader of the Lib Dems, described taxes as the “subscription charge we pay to live in a civilised society”, plenty of people cheered but no one imagined it a serious proposition for government.
Now, though, a new current in economics is providing some heavyweight support for Charlotte Church’s perspective. The world’s leading analytical experts on inequality – Emmanuel Saez, Thomas Piketty and Anthony Atkinson – have all advocated far higher marginal top tax rates, not merely as a mechanical means of redistributing money, but also as a means of improving the way that bosses spend their time. Professor Atkinson’s new book, in particular, demolishes George Osborne’s claim that a 50p tax rate fails to increase revenue because it discourages effort. He points out that if chief executives were more heavily taxed they might measure their success less by the weight of their pay packet and instead concentrate more (and more fruitfully) on other metrics, such as the size and market share of their firm. They might even feel better for it.
