Progressive approaches to raising tax

A supertax on bankers and a mansion tax should be among the tax raising policies considered in closing the deficit.

Tax policy is back in the news with the National Institute of Economic and Social Research suggesting, according to the Guardian, that “income tax should rise by 7p in the pound or alternatively the state pension age should be increased to 70” to help close the fiscal deficit. But two more progressive options should be considered.

In Saturday’s Guardian, Polly Toynbee proposed an “emergency super-tax” on the banks. But according to a Financial Times report yesterday, Treasury officials have ruled out the move, despite the prospect of City bonuses rising to £6 billion. Gavin Hayes, General Secretary of Compass, speaking exclusively to Left Foot Forward, said:

“As millions of Britons struggle to make ends meet, as record numbers lose their jobs and as families see their homes repossessed, bankers and their top executives are struggling with a very different dilemma – what to do with all their record bonuses.

I find it quite incredible that in 1983 Mrs Thatcher – the mummy of modern financialised capitalism – had absolutely no problem in intervening in state owned British Leyland, British Steel or British Coal, yet a Labour Government seems to find it difficult to intervene in recently nationalized British banks who very nearly brought down our entire economy, I would further add that she had absolutely no problem either in imposing a windfall tax on High Street Banks during that same period.

The government should therefore think again this idea of a windfall on bankers’ bonuses as a way of ensuring bank’s are socially useful.”

Meanwhile Martin Wolf, writing in yesterday’s FT, has praised the Liberal Democrats “mansion tax” policy:

“Taxation of property should be heavier, not lighter. But it should also be less regressive. That is why the mansion tax is the germ of an excellent idea.

“Taxes on property have other benefits: they automatically rise with prosperity; they are hard to evade; and they are automatically imposed on otherwise untaxed foreign owners. The latter benefit from the amenities of the UK without paying for them. A higher property tax is a simple – and inescapable – way of making them contribute to what they enjoy.”

But unlike a banks supertax, the Government has not yet ruled out a mansion tax. Speaking at a Progress event last night, Liam Byrne told Left Foot Forward:

“On the mansion tax, I’m araid I cannot give you an answer as I haven’t studied it enough.”

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