Opinion: Britain’s politics of “fairness” stops tax reform

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The World

WASHINGTON — On Thursday, the people of Britain will choose their next government.

Recent polls indicate that David Cameron’s Conservative Party will win, albeit narrowly. What Cameron will do with his mandate is anyone’s guess. The Tories have moved to the middle of the political spectrum, jettisoning much of Margaret Thatcher’s legacy of expanding economic freedom.

Indeed, Britons may be forgiven for seeing little difference between the Conservatives on the one hand, and the Labour Party and Liberal Democrats on the other hand. That is a shame, for Britain’s economy, like that of much of Europe, calls for a large dose of Thatcherism.

Britain has given the world freedom as we know it. From the signing of the Magna Charta through the Glorious Revolution to the English Bill of Rights, the English strove to protect their freedoms and limit the power of the monarchy.

This proud history was all but ignored during the three prime ministerial debates that took place in April.

During the last debate, for example, Cameron, Gordon Brown of the Labour Party and Nick Clegg of the Liberal Democrats used the word “freedom” only two times, according to my count of the BBC transcript. They said the word “free” five times — but all in the context of the supposedly “free” services that they promised to lavish on the electorate. The words “responsible” and “responsibility” fared somewhat better — four times. But the winning words were “fair” and “fairness.” They were mentioned 22 times — almost always in connection with taxing the rich.

Here is a typical example from Brown, the current prime minister: “We’ve set out a four-year deficit reduction plan and that starts from 2011. It’s designed to have tax rises that are fair, spending cuts that are equitable, and at the same time growth in the economy that is essential for recovery. Our four-year deficit reduction plans include a rise in the top rate of tax above £100,000, taking away pension tax reliefs for those above £100,000 at a higher rate and a National Insurance rise.”

 This threat by Brown — who has already increased the top rate of income tax from 40 percent to 50 percent — was unopposed by either Clegg or the supposedly business-friendly Cameron.

Few people like the rich. They are a convenient punching bag come election time in most countries. In Britain, so it seems, “fairness” amounts to little more than taxing the most productive members of society “until the pipes squeak.”

Those memorable words were uttered by Labour Party’s Denis Healey who was the Chancellor of the Exchequer in the 1970s. It was under his stewardship of the economy that Britain finally ran out of money and had to endure the humiliation of borrowing billions of dollars from the International Monetary Fund.

Experience shows that high marginal tax rates on the rich have adverse economic effects. The most productive — and thus the richest — members of society work less, hide their assets from the taxman or leave for more hospitable jurisdictions. The country as a whole suffers from slower growth and fewer jobs. Instead of increasing the flow of money into the treasury, the tax revenue tends to decrease.

Margaret Thatcher and Ronald Reagan understood that. In the 1980s they reduced income tax rates and revived the British and American economies in the process.

Regrettably, the lessons of the 1970s appear to have been forgotten. Behind the mask of “fairness” that Cameron, Clegg and Brown wear so conspicuously lurks economic populism.

That is bad news for those Britons who wish to be free to pursue their goals unmolested by excessive government. That is bad news for Britain, which, under a heavy burden of rising debt, needs growth that only economic freedom can facilitate.

Marian Tupy is a policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity and author of the study “The Rise of Populist Parties in Central Europe: Big Government, Corruption and the Threat to Liberalism.”