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Where tax goes up to 60 per cent, and everybody's happy paying it
Political parties have been vying to offer the biggest tax cuts as the credit crunch tightens its grip on Britain. In their view, low taxes are now the best way to get the economy going and to help out families.
Cutting or keeping taxes low has always proved popular with the electorate: in 1992 the Conservatives' election campaign slogan 'Labour's tax bombshell' made the most of the then shadow Chancellor John Smith's intention to increase the higher rate of tax from 40 to 50 per cent. Labour lost.
But is this the best way to proceed in the long term, and would UK taxpayers get better value for money if they paid more, rather than less?
One way to examine the issue is to compare state help provided by the British government to one which traditionally charges much higher taxes: Sweden. Swedes support the second-highest tax burden in the world - after Denmark's - with an average of 48.2 per cent of GDP going to taxes. Yet Sweden, along with equally high-taxing Denmark and Norway, tops almost every international barometer of successful societies.
Swedes' personal income tax can be as little as 29 per cent of their pay, but most people (anyone earning over £32,000) will pay between 49 and 60 per cent through a combination of local government and state income tax.
By comparison, the UK's tax burden is 36.6 per cent of GDP, the basic rate of tax is 20 per cent and the higher rate 40 per cent, plus National Insurance at 11 per cent for those earning between £105 and £770 a week, and 1 per cent for anything earned above this limit.
Mark Tobolsky for Indybay