Top Taxes & Growth

Chris Dillow:

Top taxes & growth: Rich people don’t like paying taxes. This is pretty much the only thing we’ve learned from some of the hysterical reaction in the papers to Labour’s plan to raise taxes on the rich.

Let’s remember the historical facts here. Low tax rates aren’t associated with faster growth – if anything the opposite. …

For me, the non-hysterical arguments against Labour’s tax plans lie elsewhere. You could argue that – with tax morale low partly as a result of the rise of individualism – they’ll decrease social solidarity. People will regard them not as the price for living in a civilized society but as a burden which subsidizes “scroungers”. Or you could argue that the revenue raised by taxes will fuel wasteful public spending. Or you might argue that redistributive taxation isn’t enough: we need to reduce inequalities of power as well as income. Or you might argue that the tax base should be shifted from incomes to land and inheritances…

What you shouldn’t do, though, is argue that higher top taxes will wreck the economy. Other things might do that, but it’s unlikely that top taxes will.