How to tax the rich?
Fraser Nelson 3:27pmAs if to prove he’s still a left-winger, Frank Field today gives a lecture calling for an extra 10% tax on earnings over £150k that could be completely offset by charitable donations. In other words, "if you don't give this to charity, we'll tax you" - Field believes people spend their own money more wisely than bureaucrats.
I agree in principle, but also believe that taxing high income removes the incentives to earn it and the net result is that less money is produced. (Darling’s disastrous tax on non-doms, for example, will result in a net loss to the Exchequer.) So why not adopt Field’s policy for a fifth on income tax already collected? That would help “roll forward society” as David Cameron puts it. One for the Tory policy board?
All this reminds me of Friedman’s “four ways to spend money” and how the least efficient is when someone spends somebody else's money on somebody else. Here’s the great man telling it like it is:
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Marcus Cotswell
February 11th, 2008 3:50pm Report this commentIt's all very well to criticise the tax on non-doms but I suspect most of the people who regularly visit and comment this site were th first to jump up and down and say how wonderful it wqas when Osborne pledged to increase the inheritance tax threshold. And how did he propose to pay for that? Through a tax on non-doms ... So presumably you are also opposed to cutting IHT? Or you have another way to pay for it?
Jerome
February 11th, 2008 4:15pm Report this commentHow about..... cutting spending?
Travis Bickle
February 11th, 2008 4:16pm Report this commentThere are plenty of ways the cut in IHT could be funded. However it would need a government will the true will to cut down on the billions wasted throughout our tax and welfare system. Anyway as Brown and Daring said the IHT/Non Dom tax idea was all theirs and stolen by the nasty Tories (in fact Gordon is on record pre 1997 as saying he would tax non-doms) so nothing for anyone else to aplogise for or defend...
Tiberius
February 11th, 2008 4:45pm Report this commentOsborne's proposals for non-doms did not seek to raise as much tax from the individual as do Labour's. His £6.5b cost of the IHT cut is a raindrop on the ocean of the control total of public expenditure. It is only Labour's hysterical and unjustified cry of "unfunded tax cuts" that make anyone question Osborne's proposals, and which force much-criticized caution on the part of the Tories.
Trumpeter Lanfried
February 11th, 2008 5:14pm Report this commentFrank Field's idea is interesting. But you would have to define charity to exclude political parties and any 'charity' with a semi-political agenda.
T
February 11th, 2008 5:14pm Report this commentCotswell: We've all been brain-washed by 10 years of Labour government to think that every tax cut is somehow taking money out of the economy: "how will the tories pay for this tax cut?" A cut in governemnt spending does not equal a cut in the size of the economy. It's giving money back to people so they can spend it how they want.
Fraser Nelson
February 11th, 2008 5:19pm Report this commentMarcus, I'm proud to say I trashed this calamitous idea when Osborne proposed it. (Tiberius, I failed you). My evidence:- http://www.thebusiness.co.uk/the-magazine/columns/223641/cameronand8217s-calculated-risk-to-tax-the-rich-may-not-add-up.thtml And on CoffeeHouse http://www.thebusiness.co.uk/the-magazine/columns/223641/cameronand8217s-calculated-risk-to-tax-the-rich-may-not-add-up.thtml
bill
February 11th, 2008 5:19pm Report this commentFraser: you probably had only just started school when I and other City whizz-kids were paying 65% tax and thinking ourselves well remunerated. On the one hand I am quite liberal on taxation and would not mind a flat tax. I doubt if we are going to get there. Whilst I reckon IHT is too high, Osborne does not really impress me. On the non-doms thing and taxation in general, having had some professional experience in the area I have to say the rich have done alright under New Labour. It is those in the middle and at the bottom who have been squeezed. I prefer low taxes and think it immoral for the state to take more of your pay than you do. That said I have seen people make huge amounts and pay none or very little tax on their earnings/gains. What we need is a simpler system. As for charities: there are too many and I am not sure that I would be glad for all of them to benefit in the way suggested. Charities hav become too politicised.
Mike
February 11th, 2008 5:34pm Report this commentOur current public spending is c.£750Million pa (not including the Enron style off-balance sheet PFI spending). Since NuLab has been elected they have raised public spending by one trillion pounds. Yes ONE TRILLION POUNDS. That is £50,000 for every family in the UK. Surely somewhere drowning and in this vast and bottomless ocean of big government spending is a germ of an idea for cutting spending and taxes? One that the Conservatives cannot be bullied from with the "Which school n hospital will you close?" or "I will take no lectures form the Tories on spending yada yada". Time for some new thinking! If only raising taxes was as politically toxic here as in the US
Fergus Pickering
February 11th, 2008 5:40pm Report this commentSurely a 50% tax (onw for you and one for me)on earnings above £100,000 (say) wouldn't stop the rich trying to get richer. Though you can quite obviously be too thin, as anybody who has been in India will readily agree, you can't possibly be too rich. Anyway, the richer you are, the easier it is to make lots more. So taking half doesn't seem too bad. The point of Frank Field's idea is that they would have to GIVE IT AWAY. No Yacht. No night clubs, or not with that bit of money. When you have to do that then you might well try to get in with the Lord. Come on Osborne, why not try it?
Dave B
February 11th, 2008 5:49pm Report this commentI'd like to see charitable donations be tax deductible now. Instead of this bureaucratic nonsense of 'gift aid'.
Marcus Cotswell
February 11th, 2008 6:03pm Report this commentI wasn't trying to suggest that there was *no* way a cut in IHT *could* be paid for - although I notice not one of you has come up with any *specific* saving or alternative tax rise. Have you fellas seen the state of the public finances lately - and the projections of what they're going to look like in about 20-30 years' time? It's simply not good enough to blather on about the evils of tax-and-spend as if there were some obviously achievable world in which we all payed much less tax, public services were funded, and the books all balanced.
Fraser Nelson
February 11th, 2008 6:35pm Report this commentDave B, I'm with you - make a limit of about £5k. Fergus, to answer your question look at what happened when Lawson enacted the reverse policy in 1988. Then the richest 1% paid just 14% of income tax. Now, they pay 22% - a figure that hasnt changed in ten years. So Lawson was a far more effective redistributionist than Brown! JFK was the first to prove the paradox: to get the rich to shoulder a greater share, cut their tax rate and incentivse them.
Max Kaye
February 11th, 2008 7:07pm Report this commentCut tax.
Cut spending.
Stop making things - even 'good' things like charity - obligatory. (As we know too well, the road to hell is paved with good intentions).
Tiberius
February 11th, 2008 8:44pm Report this commentNo, Fraser, no failure on your part. I well remember you're thorough examination of Osborne's non-dom policy (and will remember to cite it next time someone accuses you of being in Dave's fan club). But I made a point of reading Bruce Anderson's piece in the ST yesterday, just to put my mind at rest, and he is quite certain that Osborne's policy was not one to frighten away the goose laying the golden egg.(http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/02/10/do1011.xml). Like Fox Mulder, I know you want to believe, Fraser - take fewer lunches with Francis Maude, perhaps.
Tiberius
February 11th, 2008 9:00pm Report this commentHowever I do need to apologize for not checking the numbers. Osborne's IHT cut was worth £3.1b.
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