Churchill, as ever, said it best: “For a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Still we all find ourselves sometimes persisting too long in fruitless tasks. Self-sabotaging appeals to soak the rich – seen again in this week’s bid to scrap non-dom tax status – may yet win Labour the General Election.
But a narrow focus on vote-winning at the expense of pragmatism is a poor basis for successful administration.
In the late 1970s, the top rate of income tax in the UK was over 80 per cent and the top one per cent of income tax payers paid just 11 per cent of the total. Rates are dramatically lower today, and the one per cent paid 27.7 per cent of the 2011/12 total. The idea you get more money out of the rich by putting the screws on runs counter to the facts.
To see what happens, look at the UK’s attempt to tax the global earnings of sportsmen and women who compete here: either top matches and stars stay away, since the tax bill can outweigh a trip’s earning potential many times over, or they get granted arbitrary loopholes for special events.
That misguided talent tax sadly shows Ed Miliband is merely upping the pace on an existing trend. In the face of a dwindling working age population, and the historic shift to self-employment, which is making tax collection trickier, tax authorities need the world’s top earners more than ever. But as an instructive new book by Ian Angell and David Lesperance, Flight of the Golden Geese, makes clear, the richest have more options than our politicians. We should step back from the politics of envy and consider whose goose we are really cooking.