Punitive middle class tax rises will backfire
Back in the 1960s and 1970s, income taxes rose to such stratospheric levels that they led to an exodus of the super-rich. The marginal top rate at one point was 98 per cent applied to incomes over £20,000,equivalent to about £222,000 today.
Most well-off people paid 60p in the pound until Nigel Lawson reduced the top rate to 40p in 1988, where it remained until Labour raised it to 50p. George Osborne lowered the top rate to 45p and a failed attempt by Kwasi Kwarteng just a few months ago to cut it back to 40p helped bring down Liz Truss. The tax burden is now higher than at any time since the 1960s and some middle-class families, by no means wealthy, will soon be hit with a marginal rate of 96 per cent on part of their income because of the withdrawal of child benefits over a certain threshold.
Labour is now saying that it will not tax the middle classes more to pay for the NHS. Wes Streeting, the shadow health secretary, criticised the Conservatives for using ever higher personal taxes as “the first and last resort to raise money” for the service. While we remain sceptical about this conversion, Mr Streeting is at least acknowledging something that used to be a Tory article of faith: that ever-higher taxes act as a deterrent to generating the very income needed to fund those services.
Yet he is still promising to raise more money through efficiency savings and by ending the non-dom status of wealthy people. This would provide a drop in the vast ocean of cash absorbed by the NHS. The health service is funded almost entirely through taxes. Until that changes, they will always bear the burden of higher spending.
telegraph.co.uk, 29 December 2022