BRITAIN'S SHARP swing in tax strategy deserves attention in this country, since there is a good deal of support for trying the same thing here. Prime Minister Margaret Thatcher's new Conservative government is cutting the progressive income tax, particularly in the top brackets. To make up most of the loss in revenue, it is raising the value added tax - in effect of sales tax, collected on the value added at each stage of manufacturing a product.
The idea is to shift the nation's tax burden off earnings and onto consumption. Here in the United States, the same principle is advocated by the chairman of the Senate Finance Committee, Russell B. Long (D-La.), and many of the people who speak for business.
In both countries, this strategy springs from a sense of anxiety and exasperation over poor economic performance. Labor productivity is one of the fundamental determinants of a country's standard of living, and Britain and the United States in recent years have shared the poorest productivity record in the industrial world. In the decade 1967 to 1977, productivity in Japan and the Netherlands doubled - and average manufacturing wages in the Netherlands, incidentally, are now higher than in the United States. In France and Germany, productivity rose 70 percent. In Britain and the United States, it rose 26 percent.
A powerful reason for low productivity, the argument goes, is low investment in the modern tools and equipment that enable people to produce more. Following this logic, a government ought to tax spending, rather than income from savings and investments. That is the experiment on which Britain is embarking with the value added tax.Whether it will work according to theory remains very much to be seen. But if the British investment and productivity figures begin to respond, there will be rising pressure for the value added tax here.
The case of this kind of taxation is weaker in this country than in Britain. Taxes on investment income are far more oppressive in Britain. There is also the matter of British membership in the European Common Market, which requires it to keep in step with continental fiscal systems that traditionally have relied heavily on the value added tax.
Mrs. Thatcher's increased reliance on it will, of course, shift the tax burden downward on Britian's income scale. She argues that it's necessary to revive the British economy, but prolonged social strife over income shares is not likely to help productivity. Mrs. Thatcher will also have to concede that the value added tax will increase inflation at a time when the British inflation rate is already rising again. As an economic experiment, the Thatcher tax policy is extremely daring, but also extremely risky.