Super-tax Mark I - Super-tax For The Super-rich
The last time Labour were in power between 1974 and 1979, the very rich suffered from exorbitant tax rates. In the first budget when Thatcher came to power, Geoffrey Howe cut top rate tax from 83% to 60% on earned income and from 98% to 75% on unearned income. Those suffering top rate tax could generally arrange their affairs to avoid these punitive rates. For example, Rod Stewart became a tax exile in California in 1975 and called that year's album "Atlantic Crossing". Unsurprisingly, in reducing these exorbitant tax rates the Tories stimulated higher tax revenues. Super-tax was a poor economic idea grounded in the politics of envy.
Super-tax Mark II - Super-tax For The Masses
In their latest incarnation Labour have been keen not to frighten the rich. Access has been widened - these days anybody can suffer supertax. As a result of increased income tax, national insurance and reduced housing benefit and tax credits, those in the £10k to £15k household income range can face 90% plus marginal tax rates (and that was before yesterday). Faced with the clarity of yesterday's post on Gordon's regressive budget, certain Labourites have scampered away to try to prove that extra benefits will mean that low earners are not worse off after all as a consequence of the budget. If they can prove that, I think that will mean there are some poor souls facing 100% marginal tax. Aside from the obvious disincentives to work and the deep poverty trap that Labour are digging, this tinkering forces more and more people to wade through the government's byzantine benefits system to get back in benefits what they've just been taxed. Under New Labour, the client state rules thanks to the return of supertax. This rant is brought to you in association with the most incompetent, sleaziest, meddling, authoritarian government I have ever had the misfortune to cross.