[Militant No. 450, 6 April 1979, p. 3]
“A Tory government would cut the monstrous burden of taxation!” This will be the refrain from Thatcher, Joseph, Howe and the rest during the campaign.
For many workers, now paying painful amounts of income tax out of their hard-earned and far-from-adequate wage packet, such a slogan can hardly fail to have a certain appeal.
But the Tories are the Party of big business; we may be sure that Tory tax cuts would mean pennies for the poor and pounds, millions of pounds, for the rich.
The truth is, all the tales of woe about the crippling rates of taxation on the wealthy are so much Tory propaganda. Most of the wealth in this country is held by a tiny handful of people who live off the backs of the majority – and taxation makes little or no difference.
The latest figures, published in the government’s ‘Economic Trends’, show that the top 10% of taxpayers take 26.2% of all income: this is more than the income taken by the bottom 50% who receive only 24%!
“The scale of rates (of income tax) is exceptionally steep,” say the Tories. “The top rates, at 83% on earned income and 98% on investment income, stand out as a beacon of fiscal absurdity.” (‘The Right Approach to the Economy’, ed. Angus Maude, p. 25)
But who actually pays these top rates? The answer is: practically no one!
In a recent feature on ‘Personal Finance’ – full of good advice to the rich on how to increase their wealth – the ‘Economist’ (24 March) said:
“In Britain tax avoidance, by means of perfectly legal and often sensible investment schemes, has become the most profitable of all industries … The victims of punitive income taxes are not the idle rich. The wealthy can convert their income into capital gains, insurance policies, or works of art and avoid tax in many ways.”
Then, of course, there are the illegal ways of avoiding tax … Sir William Pile, chairman of the Board of the Inland Revenue, recently estimated that tax is being evaded on something like £10,000 million a year of earnings (equal to 7½% of gross domestic product).
As most workers on PAYE have little or no chance of evading tax, most of this evasion is clearly by people in the upper-income bracket.
Despite the nominally high tax rates for high-income earners, then, after allowances for things like mortgage interest payments is made, there is little change in this grossly unequal distribution of income.
The top 2% to 10% group takes 20.7% of income before tax. After tax, they still take 19.3%. hardly a penal, egalitarian redistribution of income before tax. After tax they still take 19.3%. Hardly a penal, egalitarian redistribution of income!
| % share of income taken by top | Before tax | After tax |
| 1,00% | 5.5 | 3.8 |
| 5,00% | 16.3 | 13.5 |
| 10,00% | 26.2 | 23.1 |
So the real tax rate is nothing like the official figures so vehemently denounced by the Tories. In 1967-77, the top 1% of taxpayers paid less than half their income (45.4 p in the £) in tax; the richest 10% paid 29.4 p in the £; while the average for all taxpayers was 20 p in the £.
As the Tory Party is full of lawyers and accountants – both Margaret Thatcher and Geoffrey Howe are tax lawyers – we can take it that, despite all their propaganda, they are really well aware of the facts.
Yet the Tory propagandists constantly imply that the Labour government has ruthlessly increased taxation on the rich. Regrettably, this is not so. In reality, the income tax system has become less progressive under this Labour government, as ‘Economic Trends’ shows.
Even if we take the taxes which cause the most Tory howls – capital transfer tax (levied on gifts between rich people) and estate duty (levied on the property of dead rich people) – we find that the burden of taxation has actually been reduced under this Labour government.
In 1972/3 (the last full year of the last Tory government) the total yield of capital transfer tax and estate duty (at 1978 prices) was £1,057 million. In 1978/9 (the last full year of the Labour government) it was only £370 million!
The Wealth Tax, moreover, proposed in Labour’s 1974 Manifesto has been completely dropped!
Finally, company taxation Tories, like Sir Keith Joseph, claim that business “initiative” and “enterprise” is stifled by intolerable tax rates. But once again, he is peddling a Tory myth.
Corporation tax as per cent of trading profits
| 1969 | 27.5 |
| 1970 | 23.6 |
| 1971 | 18.4 |
| 1972 | 13.2 |
| 1973 | 16.5 |
| 1974 | 4.9 |
| 1975 | 1.4 |
| 1976 | 1.9 |
| 1977 | 5.7 |
| 1978 [first 9 months] | 5.6 |
* Source:
For 1969-76 The British Tax System by JA Kay and MA King. For 1977-78, Financial Statistics
In the first nine months of 1978, companies’ tax payments amounted to £637 million – a mere 5.6% of their trading profits. In 1969, by contrast, companies were paying 27.5%.
The reason for this unprecedented low level of taxation is a series of concessions made to big business by the Labour government. Initially, these were supposed to tide companies over the economic crisis of 1974-76. Most big companies now have plenty of cash (profits were up 20% in the first nine months of last year) – but the tax concessions remain.
Consequences of tax cuts
Yet if the Tories get their way, taxes on big business and the wealthy few will be reduced even more. And despite any small cuts in basic income tax, workers will pay dearly for the Tories’ tax hand-outs to the rich.
To balance the lost revenue resulting from tax cuts, the Tories will:
(1) cut public expenditure even more, which will mean things like higher prescription charges, dearer school meals, higher council rents and so on; and
(2) increase indirect taxation, like VAT and tax on petrol, drink, tobacco, which mostly falls on working-class consumers and means higher prices in the shops.
In short, don’t be taken in by the Tories’ tax-cut propaganda!
By Lynn Walsh
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