Conservative myths about raising taxes and “broad coalitions”
9:18 pm - August 29th 2010
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The Spectator’s Peter Hoskin doesn’t like the idea of extending the 50p top rate of tax to earnings over £100,000 (rather than £150,000) though he rather jumps the gun in suggesting that “it’s fairly probable that this will be official Labour policy in the not-too-distant”.
Hoskin suggests that Ed Miliband has joined Ed Balls and Diane Abbott in advocating this policy. In fact, he hasn’t, despite that claim erroneously appearing in one New Statesman editorial which the Coffee House blog links. What Ed Miliband has said is that he would make the 50p rate at £150,000 “permanent“, rather than temporary, but has yet to go further than that.
Hoskins’ substantive argument continues the tradition of right-of-centre media commentators warning centre-left parties not to desert the centre-ground on higher taxes at the top, when they would do so with only the company of a substantial majority of the voters as consolation.
Of course, every right-of-centre commentator believes this (and David Miliband might well agree with Hoskin about the politics). But would it be impertinent to ask for some evidence? Hoskin is sure that the proposal would send aspirational voters running for the hills, so he must expect to find that it sharply divides opinion across classes, regions, parties and between lower and higher earners?
Which it doesn’t.
If a proposal can get 60% support among ABC1 voters, with 21% against, and 63% among C2DE voters, with 13% against, couldn’t you more plausibly argue that it has “broad coalition (centre-right commentators excepted)” written all over it.
Indeed, when a 50p tax rate on earnings of £100k+ can generate 57-27% support among Tory voters and 69-13% backing from LibDems, along with 68-11 support among Labour voters, it begins to look like the very model of a modern coalitionist centrism. Support does fall very slightly in London and the South: in both regions, 58% are in favour (with 19-20% against), compared to 62-66% support across the midlands, Scotland and the north. Still, I seem to recall that 58% came out as a much “broader” section of southern opinion than 20% last time I did the maths on that.
The 50p on £100k question has not been polled very often: there has been no post-election polling on the question.
- YouGov polling for the Fabian Society in December 2008 found that the 45% rate on earnings over £150,000 (which the government had proposed) was backed by 76% (45% supporting it strongly). At that time, polling the idea of a 50% rate on earnings over £150,000 was backed by 52% to 28%, with strong support at 29% and strong opposition at 9%. The class and party breaks can be found in this earlier post.
- An April 2009 poll found 61% supported and 18% disagreed with the statement that “the government should break its 2005 manifesto commitment not to increase any rates of income tax and immediately introduce a new top rate of income tax for those earning above £100,000 a year”. (The break figures above come from this poll). The question – with the manifesto pledge mentioned – would be more likely to reduce than increase support.
- A November 2009 poll found very similar support (62% against 25% opposition) to a 4-point package including a 50p rate at £100k, higher NI on the top 10% and capital gains, in order to bring back the 10p rate.
- Public advocacy of the case for 50p on over £100k could also have an impact. For one thing this “we’re all in it together” Coalition would not relish a public fight with Labour about tax at the top, with the Conservatives having ducked out of arguments over increases to 45p and then 50p on earnings of £150,000 in opposition. (50p on £100k was LibDem policy for a long-time until dropped by Ming Campbell after the 2005 election).
- When Alastair Darling announced the government’s new policy of a 50p rate over £150,000, there was a sharp rise in support for the 50p rate on earnings over £150,000, with 68% support in YouGov’s post-budget poll in the Telegraph.
My strong hunch is that those 2009 polling numbers probably somewhat understate support for the policy now.
At that point, there were important pressures on the public finances – but nothing like the same awareness of the scale of cuts to public services which will be proposed this Autumn.
A cross-class and cross-party pattern of support for higher taxes at the very top is a consistent feature of poll findings on the subject.
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A longer post is over at Next Left
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Sunder Katwala is a regular contributor to Liberal Conspiracy. He is the director of British Future, a think-tank addressing identity and integration, migration and opportunity. He was formerly secretary-general of the Fabian Society.
· Other posts by Sunder Katwala
Story Filed Under: Blog ,Economy ,Media
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Reader comments
Basing tax policy on opinion polls is deeply unsatisfactory. Generally the public are quite happy to tax others even though it might not be the best policy. However, bizarrely enough they are less keen on taxing themselves. If we consider the point of tax is to raise revenue in the least distortionary manner. Moreover, tax should correct negative externalities by forcing the cost onto those who should bear it. By those definitions the British tax system is an utter mess. The huge build up of debt leverage in Britain is a consequence of the British tax system which positively incentivises debt.
Instead of raising taxes on labour we need to be moving to eliminate them completely. Labour taxes have a well known deadweight loss and if our ideal is to have full employment we need to lower or eliminate labour taxes and tax something else. However, if the point of taxes is to punish those who earn more than the median then there is no case against having taxes at 99% on higher incomes. What on earth is progressive about taxing someones labour?
None of this means I am one of those ‘ taxation is theft ‘ nutters. However, we are on the wrong track taxing the wrong things. Land value taxes, consumption taxes and Pigovian taxes where the polluters pay is where the government should be raising revenue. There is no reason why we could not make some disadvantaged groups exempt from paying consumption taxes. In British Columbia, First Nation people do not pay the HST and when they purchase goods they just hand over a swipe card and get the goods tax-free.
Why progressives can’t see the benefits from a LVT, yet bang on about destructive labour taxes is a mystery to me. You will always struggle to reduce inequality without a LVT. The more government taxes high-income labour and redistributes to those at the bottom the higher rents will be. Rent being economic rent not just the price to rent a house i.e. The George Theorem. http://en.wikipedia.org/wiki/Henry_George_Theorem
This is not about right-wing ideas about reducing taxes and also reducing the services of the many. However, it is about doing things in a more sensible manner. Income tax commenced to pay for the Napoleonic wars. Get over it the was is finished.
My argument is not that one should base tax policy on the opinion polls, nor necessarily that the 50p on £100k ought to be adopted. I was challenging the claim that the policy would be a major electoral liability because it would smash up to a broad coalition, including aspirational middle class voters.
“And that’s before we get onto what it would mean for Labour’s appeal among the aspirational middle classes. David Miliband’s “broad coalition” this is not”.
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There are numerous commentarian claims that policies with 66%+ public support “abandon the centre-ground” – such as when the current 50p rate on £150k was introduced.
There are two separate points here:
1) Richard is right that income tax is a silly way to raise tax – taxing land, which can’t be offshored or given up, would be far more sensible, both at the lower end (ensuring that low-paid workers aren’t disincentivised) and at the higher end.
2) However, that isn’t the case that Tory commentators are making against raising higher rate taxes. They’re saying ‘it’s divisive, far left, ignoring the centre ground’, etc. This is obviously bullshit, given that 57% of Tories and 60% of ABC1s support the proposal.
Sunder, your argument assumes that the figures for popular support are representative of public opinion, which is quite odd. The UK electoral system is grossly unrepresentative and so support for any one issue can be completely unrelated to the outcome of an election. I also feel you’re suggesting that policy should be based upon popular support, which is demagoguery. Personally, I don’t feel that a 50p tax rate is appropriate for a £100K income. I do, however, Richard’s arguments for Land Value Tax as an alternative or, at least, that any income over ~£10 million should be taxed at 80% or higher. Remember that when Thatcher was elected the top rate of tax was 83%.
Reactions: Twitter, blogs
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Liberal Conspiracy
Conservative myths about raising taxes and "broad coalitions" http://bit.ly/9wygkL
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sunny hundal
@xtophercook http://bit.ly/9wygkL
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sunny hundal
Excellent pieceby @nextleft on right-wing myth-making that 50p tax-rate isn't "aspirational" http://bit.ly/9wygkL
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Andy Sutherland
RT @sunny_hundal: Excellent pieceby @nextleft on right-wing myth-making that 50p tax-rate isn't "aspirational" http://bit.ly/9wygkL
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matthew bond
RT @sunny_hundal: Excellent pieceby @nextleft on right-wing myth-making that 50p tax-rate isn't "aspirational" http://bit.ly/9wygkL
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Steve Gardiner
RT @libcon Tory myths about raising taxes & "broad coalitions" http://bit.ly/9wygkL <- the public, as usual, far to the left of politicians
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Business Fun
Conservative myths about raising taxes and “broad coalitions …: The Spectator's Peter Hoskin doesn't like the id… http://bit.ly/9ANL4a
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K C FONG
Conservative myths about raising taxes and “broad coalitions …: The Spectator's Peter Hoskin doesn't like the id… http://bit.ly/9SlzuY
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kc616
Conservative myths about raising taxes and “broad coalitions …: The Spectator's Peter Hoskin doesn't like the id… http://bit.ly/9SlzuY
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sunny hundal
@xtophercook dunno why you keep facepalming me. Ask @nextleft if you want – there is appetite for more tax rises http://bit.ly/9wygkL
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