[Britain and the United States once competed for that honor. Times
have changed.]
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WHICH NATION HAS TAXED THE RICH THE MOST?  
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Sam Pizzigati
September 3, 2023
Inequality.org
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_ Britain and the United States once competed for that honor. Times
have changed. _

The superyacht Lady Lau in the port of Bonifacio, Southern Corsica,
France. , Myrabella / Wikimedia Commons

 

Eight decades ago, at a pivotal turning point in American history, our
nation’s richest faced a 94 percent federal tax rate on their income
over $200,000, the equivalent of about $3.5 million today. At that
point, near the end of World War II, only one other nation — the UK
— taxed its rich at a steeper rate. The wealthiest Brits ended the
war facing a 97.5 percent tax on their top-bracket income.

These stiff top tax rates — all nearly unimaginable today — would
help usher in a generation of unparalleled economic progress for
average Americans and Brits. And those rates ebbed only slightly in
the postwar years. In the 1950s, America’s richest faced a 91
percent top tax rate. The GOP president then sitting in the White
House, Dwight Eisenhower, made no move whatsoever to hack that top
rate down.

Overall, notes
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economist Thomas Piketty, America’s wealthiest faced an average 81
percent top tax rate between the years 1932 and 1980, one key reason
why our richest 0.1 percenters — over the course of the 20th
century’s middle decades — saw
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the nation’s wealth sink from 25 to just 7 percent.

The rich — on both sides of the Atlantic — would spend plenty of
time stewing about that shocking sink throughout those middle decades.
But these deep pockets would eventually regain their political mojo,
first in the UK with Margaret Thatcher’s 1979 political ascent and
then a year later with Ronald Reagan’s election. By 1988, the UK’s
top rate had sunk by over half, and America’s richest faced
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just a 28 percent top-bracket bite.

But none of this tax cutting — back then and ever since — has
brought us the nirvana that the Thatcherites and Reaganites promised.
We’ve experienced no uplifting trickle-down. We have, instead,
witnessed an incredibly intense concentration of wealth that has
recreated the same sort of top-heavy economic imbalances that ushered
in the Great Depression almost a century ago.

The Democratic Party in the United States and the Labour Party in the
UK have had, since the late 1980s, some modest success undoing the
most generous of the tax breaks that have gone rich people’s way.
The mainstream leadership of both parties has over recent years
signaled, at least rhetorically, support for undoing even more.

In 2021, for instance, the Labour Party insider set to become the
UK’s top finance official should Labour regain a majority in the
upcoming 2024 elections, reaffirmed
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her support for hiking the tax burden on her nation’s grandest
fortunes.

“People who get their income through wealth,” opined Rachel Reeves
at that time, “should have to pay more.”

The Labour Party’s prime-minister-in-waiting Keir Starmer last
September pledged to undo the ruling Conservative Party’s axing of
Britain’s 45 percent top-bracket tax.

“I would reverse it — be absolutely clear about that,” Starmer
told
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the BBC.

The UK Conservative Party’s tax giveaways to the rich, Starmer would
add
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at the Labour Party’s annual conference last fall, rested on the
“wrong headed” argument that “if you allow the rich to get
richer, somehow that money will trickle down into the pockets of all
the rest of us.”

But Starmer and Reeves have both changed their tune over recent
months. In June, Starmer openly backpedaled on his commitment to press
for a higher tax rate on top incomes if Labour triumphs, as polls now
predict [[link removed]], in Britain’s
next elections. Then Reeves, asked if Starmer’s about-face meant
that Labour was abandoning the tax-the-rich path, started spouting a
standard rich people-friendly line.

“I don’t see a route towards having more money for public services
that is through taxing our way there,” she told
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reporters. “It is going to be through growing our way there. And
that’s why the policies that we’ve set out are all about how we
can encourage businesses to invest in Britain.”

“We have no plans for a wealth tax,” Reeves went on
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to emphasize at the end of August. “I don’t see the way to
prosperity as being through taxation. I want to grow the economy.”

But that economy’s growth, the British labor movement detailed
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last month, is enriching only the already rich. The UK, says Trades
Union Congress general secretary Paul Nowak, now needs “ to start a
national conversation about how we tax wealth in this country.”

That conversation appears to be exactly what the Labour Party’s
current leadership seems intent on quashing. Britain’s 50 richest
families, notes
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the University of Sheffield’s Prem Sikka, hold more wealth than the
entire bottom 50 percent of the nation’s population. Yet the Labour
leadership, he points out, will not consider broadening “the tax
base by levying a wealth tax.”

This leadership, Sikka goes on, wants Labour “to be seen as a party
of fiscal responsibility,” a stance that can only bring on a
continuation of the Conservative Party’s “austerity and real wage
cuts for public sector workers.”

“The UK is splitting apart,” a _New Statesman_ analysis last month
would agree
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“fueled by a tax system that entrenches inequality.”

The United States, in the meantime, faces the same split and a similar
inequality-entrenching tax system. The Democratic Party in the United
States also faces, like the British Labour Party, a general election
in 2024. Will the mainstream leadership of the Democrats  follow the
Labour Party’s leadership lead and reject the sort of bold moves
needed to fix that tax system? Or will the Democratic Party take
inspiration from the serious tax-the-rich agenda of the New Deal years
so long ago?

The struggle to answer questions like these will define and determine
our future.

SAM PIZZIGATI, AN INSTITUTE FOR POLICY STUDIES ASSOCIATE FELLOW,
CO-EDITS INEQUALITY.ORG. HIS LATEST BOOKS INCLUDE _THE CASE FOR A
MAXIMUM WAGE_
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AND _THE RICH DON’T ALWAYS WIN: THE FORGOTTEN TRIUMPH OVER
PLUTOCRACY THAT CREATED THE AMERICAN MIDDLE CLASS, 1900-1970_
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* Taxation; Inequality; Thatcher; Reagan;
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