Why Nigel Lawson was the most redistributive Chancellor of the Exchequer

When I was at the Fabian Society debate last Sunday with Ed Balls, the subject of taxing the rich came up. I warned them they were chasing a false God, that it will result in less tax yield. The rich will have less incentive to earn more, and more incentive to dodge tax. I gave a figure which one of those in the audience later accused me of making up. It’s pivotal to understanding how this country is financed, so here it is…

The richest 1% of this country pay 23% of all income tax collected (table here) in 2008-09. The richest 5% pay 42% of the tax. These ratios should warm the heart of the most ardent redistributionist. Brown’s wise refusal to raise the top rate of tax has seen the richest shoulder a greater share of the burden. In 1999-00 these ratios were 21.3% and 39.6% respectively. I credit Brown with doing this knowingly: he knew that to get the richest to shoulder a greater share of the burden, you don’t raise the top rate of tax.