Boris Johnson has exerted much energy recently defending “the 1%” and their contribution to society in the form of tax. He said in his Margaret Thatcher lecture on Wednesday night:
Last week I tried to calm people down, by pointing out that the rich paid a much greater share of income tax than they used to.
When Margaret Thatcher came to power in 1979 they faced a top marginal tax rate of 98 per cent, and the top one per cent of earners contributed 11 per cent of the government’s total revenues from income tax. Today, when taxes have been cut substantially, the top one per cent contributes almost 30 per cent of income tax; and indeed the top 0.1 per cent – just 29,000 people – contribute fully 14 per cent of all taxation.
That is an awful lot of schools and roads and hospitals that are being paid for by the super-rich. So why, I asked innocently, are they so despicable in the eyes of all decent British people? Surely they should be hailed like the Stakhanovites of Stalin’s Russia, who half-killed themselves, in the name of the people, by mining record tonnages of coal?
Boris’s ideological stridency is often contrasted favourably by conservatives with David Cameron’s timidity, so it’s striking to see the PM make the same argument in a Q&A with i readers today. In response to a question on why the government cut the top rate of tax while simultaneously reducing benefits for the poorest through measures such as the bedroom tax, he said:
You mention the cut in the top rate of tax. The fact is that if you carry on with a relatively high top-rate, that makes this country a less attractive place for wealth creators and entrepreneurs to be. If they decide to go elsewhere, that means fewer jobs created, less money for the Treasury, and less money to spend on schools, hospitals and growing our economy. These are all the things we took into account when cutting the top rate. Beyond that particular case, the fact is this: the top 1 per cent of income-taxpayers contribute nearly 30 per cent of all income tax – and those with the highest incomes will contribute more to income tax this year than under any year of the previous government.
Cameron isn’t wrong; the top 1% do pay 30% of all income tax and currently pay a higher marginal rate than in any year of New Labour (the 50p rate wasn’t introduced until April 2010). But what he doesn’t mention is that the 30% stat tells us less about what has happened to the tax system than it does about what has happened to the income system. Over the period in question, the earnings of the rich have risen to previously unimaginable levels. As a recent OECD study showed, the share of income taken by the top 1% of UK earners increased from 7.1% in 1970 to 14.3% in 2005, while the top 0.1% took 5%. Quite simply, the rich are paying more because they’re earning more. Is this really cause for us to thank them? If 11 million low and middle earners receive the pay rise they have been denied since 2003, they’ll pay more tax too.
Like Boris, Cameron also doesn’t mention the inconvenient truth that the poorest continue to pay more tax than the richest. As the ONS recently found, owing to VAT and other regressive levies, the least well-off households pay 36.6% of their income in tax, while the wealthiest pay 35.5%.
But even were this not the case, Cameron’s argument is still an odd one for him to make. Had it not been for the Lib Dems, the top rate of income tax would almost certainly have been cut to 40% (Boris, meanwhile, has suggested that George Osborne should “brood” on cutting it to 30%), so it’s more than a little opportunistic for Cameron to boast that the rich are paying more tax than under Labour. Rhetoric aside, his commitment to a progressive system is wafer thin.