Last night I was a speaker in an Intelligence Squared debate on the motion "Tax the rich (more)". It can be heard on the Spectator magazine website here.

I, of course, was against the motion. Our side won easily and gained many more of the 'don't knows' than the other side. Our case was given great assistance by the data. According to a detailed study by the Institute for Fiscal Studies earlier this year, if you taxed the rich more, there is a good chance that you would reduce the proportion of tax revenue which they pay. It was pretty difficult for the pro-tax side to argue with that. Polly Toynbee chose to ignore the point entirely in her speech and then later said "It's just not true!" without supplying any evidence.

The background to the paradoxical fact that taxing the rich less, induces them to pay more money is the simple history of the past 30 years. In 1978/79 when the top tax rate was 83%, the richest one per cent of the population contributed 11% of the income tax paid. The top rate was then reduced to 60% in the following year. The investment income surcharge of 15% was abolished in 1984 and then the top tax rate was brought down to 40% in, if I remember rightly, 1988/89.

The innocent would have assumed that this would lead to a massive reducation in tax contributed by the rich. In fact, by 2001/02, the contribution of the richest had doubled - yes, doubled - to 22%. If you were to increase the tax rates on the rich, all the evidence suggests you would be in great danger or reversing this benign process.

Kelvin MacKenzie gave by far the most outrageous and amusing speech which made the evening entertaining as well as interesting.

ADDED LATER

In my speech I referred to a study published by the Institute for Fiscal Studies. This suggested that the marginal rate at which the richest one per cent are taxed is currently 53% (this includes indirect taxes). It further suggested that the rate at which the treasury could extract the largest amount from these people was 56.6% or 40% or 49% depending on different ways of analysing the data. The paper commented on the latter two estimates, "...both these estimates imply that cuts in the Marginal Effective Tax Rate facing the richest 1% would actually increase revenues".

The paper can be accessed on the IFS website at http://www.ifs.org.uk/mirrleesreview/press_docs/rates.pdf .

Posted by James Bartholomew • Indexed in Tax and growth

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I have just returned from Shanghai where I visited the room where the first National Congress of the Communist Party of China took place. Mao Zedong was there in a small dining room along with 12 other voting delegates and two non-voting delegates from the Comintern. These men, representing a mere 53 members, inaugurated a party that has ruled the people of China (now numbering 1.3 billion) for nearly 60 years. It is extraordinary to think how an organisation starting with so few became so powerful.

The man who came to dominate Communist rule was, of course, Mao Zedong. He won the power struggles within the party and, as a by-product of his power-hunger and his communist views, an estimated 30 million people died of starvation. The agricultural communes he created were a catastrophe. People who had looked carefully after land and produce that was their own, failed to do so when the land was owned by large communes. Production fell. Starvation resulted. This crisis was made worse by Mao's idea that everyone should melt down their steel This took much time and energy, further damaging food production. Then there was the cultural revolution, one of several episodes of political terror.

Mao - communist zealot - was surely responsible for more deaths than any other person who ever lived. He should be regarded as one of the vilest men in history, in the same league as Hitler.

Mao's policies have been ditched. In the end, his political enemies, notably Deng Xiaoping, took over and abandoned his disastrous policies. But the extraordinary things is that Mao is still treated as a revered figure. I was astonished to see his complacent face beaming out from the the paper currency. The room where he was present at this first congress of the Chinese Communist Party is treated as a kind of shrine. It is a notable example of 'double-think'. Although we, in Britain, are not exempt from such double-thinking. For example, many people still regard the post-war Labour government led by Attlee as a great government. Yet it set about disastrus nationalisations which have since been undone. But this is a more minor episode and the Attlee government was full of men shining with honour compared to Mao.

There may be an attempt - certainly among some of the people described in the brilliant 'Wild Swans' which I am currently reading - to argue: "Yes, Mao made mistakes. But he created order and drove out the foreigners. For these things he should be admired."

These, I suspect, are very bad reasons to revere the man. Plenty of countries got rid of foreign colonialists through the 20th century. The list would be too long to write down here but it would obviously include South Africa, Malaysia and India, to name just a few. It was possible to get rid of foreign colonialists without mass terror and starvation. In fact China itself is now the disreputable colonialist in its continued control of Tibet.

The fact that, in the end, Mao lost the battle of ideas is very obvious when you visit the room in which he had that celebrated meeting. When you emerge, you find yourself in a district called Xintiandi. It is the smartest shopping district in Shanghai. Close by this shrine to communism are many shops and restaurants owned by capitalist and, often, foreign enterprises including Starbucks, Shanghai Tang (wonderful clothes, handbags and so on), Paul's (the French patisserie chain) and a branch of Chopard (the Swiss jeweller).

I wonder when, if ever, the Chinese will stop treating Mao as a hero and treat him as the villain he really was?

Posted by James Bartholomew • Indexed in Politics

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