Towards a new tax consensus
Embracing progressive taxation
For more than thirty years the politics of the UK and most other western democracies has been dominated by a notable and consistent adherence to a single consensus on tax issues. That agenda, which translated neoliberal thinking into policy prescriptions, had powerful implications for the political economy of tax.
The impact is easy to identify. Over a period of thirty years top rates of income tax have fallen from 60% to 45%, corporation tax rates will have more than halved, the use of tax havens by UK based multinational corporations is now officially sanctioned and even encouraged by tax law whilst VAT is at its highest ever rate. Inequality in the UK has risen. The share of national income paid to labour has fallen; the share to profits has risen. Wage differentials have increased. Investment in our tax system has been reduced, to the benefit of tax avoiders and, inevitably, tax evaders. Those outcomes have all contributed to a now persistent narrative that the government has no choice but cut public services, pensions, benefit payments and investment in our collective futures. None of this is inevitable. It is the result of the adoption of a particular political ideology.
If we want progressive taxation, then we can have it, but, not without creating an alternative political paradigm - the Tax Justice Consensus. As this paper makes clear, there are clear economic and social arguments for progressive taxation. The counter-arguments are weak. However, the gains for society that progressive taxation can deliver are dependent upon creating a new social consensus. Tax could be the means for building that 21st century economic consensus and this paper sets out a research and policy programme that could create that agenda.