I love numeracy, which is literacy with numbers. That’s why I love the second line in “Taxman.” If the taxman is getting 19 pounds and the person taxed is keeping 1 pound, that implies a marginal tax rate of 95 percent, which is the actual rate they paid on their “unearned” income. I put “unearned” in quotation marks because, of course, it was earned—the Beatles earned it on their investments.
George Harrison also knew on whom to blame these high tax rates: Britain’s politicians. That’s why in the background, you can hear the singer castigating greedy, grasping Mr. Wilson and Mr. Heath. Harold Wilson, of the Labor Party, was prime minister from 1964 to 1970, when Harrison wrote the song. Ted Heath led the Conservative Party from 1965 to 1975. He was prime minister from 1970 to 1974, but that was well after the song was written.
Fortunately, Margaret Thatcher became prime minister in 1979. At the time the top rate on both earned income and “unearned” income (you can tell that I hate that term) was a hefty 83 percent. That same year, as well as cutting rates at lower income levels, she cut the top rate to 60 percent and in the late 1980s cut it again to 40 percent.
This is from David R. Henderson, “We Need Another George Harrison,” TaxBytes, Institute for Policy Innovation, May 17, 2023.
Read the whole thing, which isn’t long.
READER COMMENTS
Mark Brady
May 18 2023 at 12:09pm
“At the time [1979] the top rate on both earned income and “unearned” income (you can tell that I hate that term) was a hefty 83 percent.”
The surcharge on investment income (15%) was still in effect in 1979, and this raised the top rate on investment income to 98%, the highest permanent rate since the war. Although the marginal tax rates were lowered during the 1980s, the surcharge on investment income was not abolished until 1985.
David Henderson
May 18 2023 at 12:11pm
Thank you for that correction.
David Seltzer
May 18 2023 at 3:47pm
Mark, what an incentive for tax evasion assuming the risk adjusted net benefit exceeded 2%.
David Seltzer
May 18 2023 at 3:49pm
Meant marginal earnings.
Thomas Hutcheson
May 18 2023 at 3:16pm
Surely the need for a change in taxation depends on the level of the deadweight losses of the marginal tax and the NPV of marginal expenditures.
Don Boudreaux
May 18 2023 at 9:58pm
Mr. Hutcheson: Surely the need for a change in taxation depends upon how consistent the current level of taxation is with personal rights.
Do you believe that individuals are merely pawns of the collective, with no ethical claim to the fruits of their productive efforts superior to whatever claims the collective might make on those fruits? Do you believe that the amount of income that an income earner is justly compelled to turn over to the state is exclusively a question of deadweight losses and the net present value of how the state will spend those funds? Your comment suggests – indeed, implies – that you believe that individuals have no rights. Your comment implies that individual humans are akin to ants in a colony, and therefore that the only value that matters is the welfare of the colony conceived as a unitary entity.
I suspect that you believe yourself to represent the stance of objective ‘science’ – a stance that you likely believe involves only objective measurement and no value judgment. But, if so, you’re quite mistaken. Your position is rooted no less than is mine (and David’s) in a value judgment. Your value judgment is that individual income earners have, to their earnings, no claim superior to that of members of the collective who did not earn those incomes. My (and I’m confident I can here also say David’s) value judgment is that individual income earners do have, to their earnings, a claim superior to that of other members of the collective.
You can in fairness disagree with my (and David’s) value judgment. You’re certainly not obliged to share it. But you cannot squelch our value judgment by pretending that there is some scientific principle that does away with the need to make value judgments.
Thomas Hutcheson
May 20 2023 at 9:52am
I am discussing how _I_ view this issue and implicitly how I think other should view it. A certainly do not shy away from acknowledging the value judgement of redistributing income nor should anyone else. How much I think should be redistributed certainly involves a feeling of the rights of people to enjoy the fruits of their mutually beneficial market interactions with others.
Michael Stack
May 25 2023 at 7:40am
In fairness Hutcheson said “it depends” on the level of the deadweight loss, not that it relies exclusively on it. The latter would allow you your conclusions Mr. Boudreaux, while the former does not necessarily.
Ahmed Fares
May 18 2023 at 5:15pm
Larry King interviewing Mick Jagger:
KING: Taxes forced Jagger into exile. We’ll talk about his life in France, and what it was like to be a man without a country.
JAGGER: Money wasn’t the goal. We expected to be well-off, you know, because in those days you just did if you were successful. And we’re very successful, but we weren’t very well managed. So we had to leave England to acquire enough money to pay the taxes. Because in those days, in England, the high tax rate was 90 percent so —
——
JAGGER: That’s very hard.
KING: You made 100 pounds, they took 90?
JAGGER: Exactly. You made 100 pounds, they took 90. So it was very difficult to pay any debts back. So when we left the country, we would get more than the 10 pounds out of the 100. We might get 50 or something.
source: http://edition.cnn.com/TRANSCRIPTS/1005/18/lkl.01.html
Michael Sierra
May 18 2023 at 7:34pm
The song was released in 1966, not 1970
David Henderson
May 19 2023 at 2:48pm
Correct. I’m not sure why you’re repeating the point I made in my article, but you’re right, as was I.
Comments are closed.