Sunday, August 17, 2008

Ivan Lewis: Tax the rich not the middle classes

I'm liking Ivan Lewis, he seemed very angry about the Tories "Vermin" press release a few weeks ago. He called it gutter politics and I'd say that was a 100% accurate view on things. In the Times today, he says "Tax the Rich not the Middle Classes", another sentiment I totally agree with.

Often, the suggestion of taxing the rich has long been greeted with the suggestion that such a move is a return to 70's style socialism. The truth is that a minor hike in the top income tax band is nothing of the sort. We already have a progressive taxation system, the principle is sound, what's wrong with making it a little more progressive?

The other major argument against this kind of move is that the rich are good for the economy, they are the wealth creators, the geese laying golden eggs. I disagree with this in that I believe that only a limited subset of the rich are actually these fabled "wealth creators", most contribute no more to society than any ordinary person. Additionally, the tax regime can be structured so that entrepreneurs still see the benefits, entrepreneurs derive much of their income from dividends and capital gains and these are taxed differently to income tax.

Further to the argument that the rich aren't all that good for the economy, I would suggest that some of the consequences are actually destructive. High private sector salaries have had a knock on effect on the top public sector jobs, leading to additional expense for the taxpayer. Wealthy individuals also tend to invest far more of their money, meaning that the price of assets such as houses and shares become inflated, often leading to a squeeze on incomes for everyone.

In conclusion then, I think Ivan Lewis was right to say what he said and the Labour party should be looking to implement policy along these lines.

Crossposted on LabourHome

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