All of the usual bollocks about the effects of higher tax rates were trundled out last night in response to the budget raising the top rate of income tax to 50%.  Brain drain time, how unfair look how we’re being hit, disincentivising and robbing us of entrepreneurial spirit and, as we are constantly told, it’s also ineffective because the rich are highly skilled at arranging their affairs to avoid taxation.

Tax systems redistribute income.  The choice we always have to make is a simple one – do we want to take money away from poorer people and give it to richer people, or do we want to take money away from richer people and give it to poorer people.  At heart it’s that simple.

One of the biggest lies about Thatcher’s governments through the 80s was that they were a tax-cutting crew.  This was just untrue – they cut taxes hugely, enormously for the wealthy, slashing top rates and creating enormous schemes to benefit those with lots of money and let them keep it, but Thatcher’s governments paid for this by increasing the tax burden on the less well off – if you were a standard rate tax payer you paid more in tax under Thatcher than you had done before – a tax rising government for the vast majority of people.  She did this by relying on the mendacious press and the fucking stupidity of the rest of us who would look at a cut in the headline rate of income tax and think that this meant we were paying less tax – and never underestimate the fucking stupidity of the rest of us, we fell for it, ignoring changes to allowances, national insurance, VAT and duty which all fell more heavily on the less well off.

What happens when you take money from the poorer sections of the population and give it to the richer?  They create stupid housing booms and huge boosts in conspicuous consumption.  The idea is the one promoted by Reagan and Thatcher through the late 70s and early 80s, of the supply side – essentially if you give the cows more hay to eat then eventually there’ll be more shit for the birds.  But it doesn’t work and it never has.

Should we feel sorry for the wealthy hit with this excessively high tax rate?  Firstly you need to remember that we have a graduated tax system – you don’t pay 50% on all of your income, you only pay 50% on the money you earn over and above £150,000.  Secondly, it’s worth remembering just how much money £150,000 is – over six times the average income in the UK, but that average income is skewed by the stupid levels of income of the highest earners,  and it’s a much bigger multiple of the modal income – the amount that most people earn.  £150k  pa is a lot more than the average earnings of GPs or Hospital Consultants (ie senior doctors), of Crown Court Judges (and not much less than High Court Judges), a lot more than the most senior head teacher of the biggest school – it’s an awful lot of money – a handful of very wealthy people.

As for the idea that ‘well, they will just find ways to avoid paying anyway’ which gets said over and over again on the news, why don’t journalists step in and say ‘well, then we should stop them!’.  There are clear and detailed rules in place in the Benefits system to stop people disposing of assets in order to acquire benefits.  It would be comparatively straightfoward to copy and adapt those rules across to the tax system and to treat people as having notional income and capital that they would have to pay tax on even if they’d squirrelled it away somewhere.

Essentially, I think what I’m saying here that people should shut the fuck up with their complaining about tax rates.

Motorhead – Eat The Rich mp3