Want to soak the rich, Ed? Try taxing property
Raising the top rate of income tax isn't fair - and it doesn't work anyway. If Ed Miliband really wants to bash the rich, he'd be better off taxing property.
With all the fuss over whether the 50% tax rate for those earning over £150,000 should stay or go in the next Parliament (Ed Miliband thinks it should stay as a "socialist article of faith" almost no one else agrees with him) it is easy to forget just how much the well off pay already.
The richest 10% of the population pay around 50% of all the income tax paid in the UK. The top 1% alone pay 20% of it. They also pay more of every other tax than the poorest. They travel more, so they pay more airport duties, for example. They buy more stuff (and more expensive stuff) so they pay more VAT. They buy and sell houses and shares more often, so they pay more stamp duty. They pay more capital gains tax. And if they die without making provision for avoidance (which, contrary to popular belief, they sometimes do) they pay more inheritance tax. That seems entirely reasonable.
However, we should also note that there is one easy way to make sure that the rich pay less tax. And that is to put up the top marginal tax rates. Back in 1978/9 when the top tax rate was 83%, the top 10% only paid 35% of the UK's total income tax take. Even in 1986/7, when it had been cut to 60%, they only paid 39%. Higher rates really do mean a lower income tax take: so much so that The TaxPayers' Alliance has put the cost of the 50% rate to the Exchequer to be around £4.5bn.
Miliband has admitted that the high rate doesn't work as a revenue raiser, but he still thinks we should keep it on the basis that it is "fair". Fair is a word that has come in for a lot of warping recently, but in this context it really is being horribly misused. The TaxPayers' Alliance may be over-egging the pudding, but even if the policy costs only, say, £2bn you'd think it would be more fair to drop it, get more money in and spend the extra on education or some such. High tax rates might somehow feel fair, but their outcomes are not. As I have said before, if the rich don't pay tax (because they leave the UK or they avoid it) the rest of us will somehow have to make up the difference.
But if Mr Miliband does accept this and presumably he will see sense at some point in his policy review where should he turn for his next anti-rich policy? There is an obvious way to go. The top 10-20% of the population owns 80-90% of the privately owned property in the UK.
I don't think I approve of wealth taxes and I am not advocating one today. But if I were a Labour politician and I was trying to think of something "fair" to put to a banker-and-rich-people-hating population, I suspect I'd spend my time pointing out that they don't pay much tax on their ownership of this assuming they don't buy and sell it too often (which, in the main, they do not). Which, you might think, makes it pretty lucky for them that they only pay 50% of the UK's income tax.
So I'd be talking about land taxes, second home taxes and the like. I'd be asking if it is fair that a mere 36,000 people (0.6% of the population) own 50% of the UK's rural land; that Country Life identifies a core 1,200 people who own most of that; or even that the National Trust owns an extraordinary 630,000 acres of our country.
That might at least stimulate a more interesting debate than the current one.