Memo to both Left and Right: Income Tax isn’t the only tax that matters

by Stephen Tall on February 13, 2014

There was some leftie love showered on this ConservativeHome article by Peter Franklin this week: Right-wingers should stop boasting about how much income tax the rich pay. His point was absolutely right, as he laid into the supposedly slam-dunk argument glibly tossed around by unthinking capitalist Tories like Boris:

The richest one per cent of Britons contribute 30 per cent of all the Income Tax collected in this country. This, supposedly, is a ‘killer fact’ – deployed with devastating complacency by the free-market right: Rising inequality? No need to worry about that! The rich are kindly paying your taxes for you – so just you run along.

But as Peter observed:

Income Tax is only one tax among many. Indeed, it isn’t even the only tax on income; once National Insurance is factored in, the system isn’t nearly so progressive. Add in all the taxes and duties and things become yet flatter.

Yep – ‘Income Tax is only one tax among many’. But it’s amazing how quickly the left forget that when it suits them.

Many, for example, still attack the Lib Dems for being part of a Coalition government that cut the top-rate of tax from 50p to 45p for those earning more than £150k. Yet they ignore the fact that, in the same 2012 budget, wealth taxes were increased: stamp duty was increased to 7% for multi-million pound homes, and there was a new 15% tax on companies buying property over £2m.

The net result of the Coalition’s tax and benefit changes has seen the income of the richest 10% fall most sharply since 2010, as this IFS graph shows:

ifs_distribution graph

And rightly so. As Nick Clegg has said, “those with the broadest shoulders must bear the greatest burden”.

So if the left is now accepting that Income Tax is just one tax among many, can they also stop obsessing that the only tax which matters if you want to be progressive is the top-rate of Income Tax?

* Stephen Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.