Whatever the make up of the next government – one thing is for certain – it will need to find more revenue. All parties are committed to deficit reduction, and as services and benefits have already been cut to the bone, the only way is to increase taxes on those who can afford it most. Raising taxes is always politically tricky – here’s how to pull it off:
1. Focus on the richest – the top 10% in either income or accumulated wealth. Don’t put up taxes for anyone else – you need as many allies as you can get.
2. Clearly explain what the top 10% means – the top 10% of households have at least £967,000 worth of wealth, in pension funds, property and possessions (compared to total wealth in the bottom 10% of households of £13,000. The top 10% of earners make at least £53,040 a year. Just because someone doesn’t ‘feel rich’ doesn’t mean they aren’t.
3. Point out that most people are not rich – only 19% of taxpayers pay higher rate income tax (meaning than they earn more than £41,000. The average UK income is £26,500. If you’re lucky enough to own your own home (36% of us don’t), the average house price is £250,000. The idea that someone earning £60,000 and living in a £600,000 house is ‘ordinary’ in wealth terms is laughable.
3. Don’t be waylaid by sob stories – many people will come forward to say they are not really rich / are on ‘ordinary salaries’ / have worked hard / deserve a break. Stick to the facts – these are people with substantial disposable wealth and when the country needs additional funds it is better to raise them from increasing taxes on this group than by cutting spending on the poor, cutting services for everyone or increasing public borrowing.
4. Don’t be put off by newspapers.The Print media is owned by a tiny group of the super rich who studiously run their papers according to their financial interests. They will do everything they can to protect their own interests by trying to delude as many other people as possible into thinking their taxes are also being increased. If you’ve kept to 1) you should be able to ride this one out.
5. More taxes on wealth, less on income. We should refocus our taxation away from the taxation of economically useful activity and onto the holding of wealth, discouraging the hoarding of valuable cash, land or possessions. This would be much more sensible for the overall economy whilst raising as much revenue or more.
6. Tax land ownership. The greatest source of wealth is the ownership of land and yet it is only lightly taxed in the UK. The simplest way to change this would be to revalue council tax bands (we’re still on 1991 values) and add lots of new bands so people with expensive houses pay much more. Better still would be a land value tax, an annual tax on the underlying value of land owned (rather than the value of buildings that occupy it). This is a policy that has been recommended by economists from across the political spectrum, and could wholly replace current taxes like council tax and stamp duty. Done right, it would mean lower bills or equal bills for the vast majority of the population, and substantially increased taxation on the top 10%.
7. Keep taxing inheritance. There’s a current campaign in the right-wing press (see 4.) to raise the inheritance tax threshold above its current £325,000, and preferably to abolish it all together. This would be a huge mistake – inheritance tax is already only paid by the richest – only around 16% of estates pay any inheritance tax at all. Most people inherit much less than they imagine they will – the average person inherits around £45,000, and that figure is distorted by a small number who inherit astronomical sums.
8. Cut the loopholes. Currently there are a huge number of tax loopholes – the government loses around £101 billion a year from various tax relief schemes – these mostly benefit the super rich. Make tax simple and hard to avoid.
9. Crack down on tax havens. Osbourne has talked the talk on this but has manifestly failed to do anything substantive about it. Britain is hardly a powerless victim of offshore wealth – it is at the centre of a high proportion of the world’s tax havens. Start close to home with the Channel Islands – bring them under UK tax law. They would almost certainly fight it in the courts, but as crown dependencies they would eventually have to submit to the will of Parliament
10. Provide tangible benefits. Many people are suspicious that taxation revenue simply goes into a government black hole and does no good. Prove them wrong by using the increased taxes to improve real services, invest in children and cut poverty, in the most tangible and visible ways possible. If 90% of the population can see the benefits of increased taxation of the wealthiest, the squeals of the top 10% will be ignored and we can start to move towards a more equal and sane society.