An American Lion

I don’t pretend to have an insider’s knowledge of how taxes affect the British economy. Given that the services provided to the citizens of that country vary greatly from what we have here in this country, no one should foolishly go about comparing the two. Britain is very socialized, in terms of paying out support to the unemployed, housing the poor, and providing health care insurance. While the government has a better handle on costs, in some cases, it really doesn’t have a handle on a thing called incentives. The upside to a socialized system is that everyone seems to be able to get enough health care to survive. The downside is that it is never enough, it is never of high enough equality, and everyone sort of resigns themselves to a kind of enforced mediocrity. Why try harder if there’s no incentive to do better?

Given that reality, you can see why the government of Prime Minister Gordon Brown is getting ready to try to increase tax rates:

[…] it is utterly tragic, at the end of the first decade of this century, that we are back in the hands of a government whose mindset seems frozen in the wastes of the 1970s. If Gordon Brown remains in power – and perhaps even if he does not – Britain’s top rate of tax will soar far above that of our most important global competitors. China, Germany and Australia are on 45 per cent maximum; Italy is on 43 per cent; Ireland on 41 per cent; France on 40 per cent; and America is on 35 per cent.

I would not mind so much if I thought this expedient was temporary, or that it would work. If the 50p tax was going to plug the hole in the nation’s finances, then it might be a good thing, and it would be right that the rich should pay a larger share. But even on the Government’s figures it is only due to raise £2.5 billion of the £700 billion required – and those estimates may be wildly optimistic. This tax is predicted to drive away at least 25,000 people; it may simply encourage more avoidance; it may actually cost money, not bring it in.

After all, when Mrs Thatcher cut the top rate in 1988, the Treasury saw yields go up. People stopped avoiding taxation; people thought it worth their while to get up at 5am and work that extra bit harder – and the share paid by higher-rate taxpayers actually increased as a result of the tax cut. What Gordon Brown wants to do is therefore economically illiterate.

I don’t know if I buy that argument—people stopped avoiding taxation. Really? When did that ever happen in a society? Am I supposed to believe that the 2004 ban on fox hunting put an end to fox hunting as well?