Thursday, June 08, 2006

Liberal Democrats retreat on progressive taxation

Conventional political wisdom argues that it would be impossible for any party to be electorally successful on a manifesto backing progressive taxation. The Lib Dems have taken notice.

Ming Campbell today announced that - in place of such past favourites as a penny on the basic rate to fund education or a 50p tax band for six-figure earners – the party is now offering a 2p reduction in income tax.

But just what is wrong – or even necessarily unpopular – with the proposition that, yes, billionaires should pay a higher proportion of their income than cleaners and carers?

It is worth remembering that during the period of high Thatcherism from 1979 to 1988, the top rate of income tax was 63%.

At present, many of the super-rich are effectively getting a free ride. For instance, Rupert Murdoch’s News International has paid no net corporation tax in this country for over a decade, despite profits topping £300m. Yet it couldn’t operate without public goods, from roads to rubbish collection.

This is not a call in favour of taxation for taxation’s sakes. But Britain does need to get away from the collective delusion that public investment is by definition squandering money.

If we want the higher levels of healthcare enjoyed by countries like France and Sweden, we need the higher levels of public spending that go with them.

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