When Labour unveiled its tax plans in last year’s general election, the media howls were as hysterical as they were predictable. Asking the top 5% of earners to pay a bit more was, in the Telegraph’s words, a £50bn raid on the middle classes. Here was a “hard-left Socialist blueprint”, frothed the Sun, while the Daily Mail seethed over Jeremy Corbyn’s “class war manifesto”. The truth, though, is this: Labour’s tax plan is not only moderate, it is too moderate to meet the growing series of challenges facing British society.

Labour’s proposals – a 50% rate of tax for income over £123,000 and 45% for earnings above £80,000 – hardly signify bolshevism on a rampage. Indeed, by the standards of recent history, they are weak beer. The average top rate of tax between 1932 and 1980 was 81% , and under Ted Heath’s Tory government in the 1970s the top rate was 75%, with an additional 15% investment surcharge to boot. Margaret Thatcher might have slashed the top rate, but it remained at 60% until the last two years of her reign.

Labour is proposing a top rate lower than those upheld by administrations of all political stripes for most of the post-war era. It is notable that, in that much-maligned age of higher taxes on the rich, economic growth was greater and more sustained, and living standards were rising markedly rather than stagnating and falling, as they are today.

Indeed, there are far more prosperous economies than our own with higher top rates of tax. In Denmark and Sweden – two of Europe’s richest economies – the top rate of tax is 60.4% and 56.4% respectively. A study by this newspaper last year found that a single earner with no children and an income of £100,000 would lose 34.3% to tax after allowances, and national insurance were factored in: way behind Germany, on 38%, or Sweden, on 45%. If raising taxes on those who are thriving is the road to economic ruin, why do societies with much higher standards of living and bigger economies than our own tax the affluent so much more than we do?

The politics of how Labour settled on its tax plans are certainly understandable. Why did Labour choose £80,000 for a 45% tax band, for example? After all, according to the party’s polling, most people think that earning £60,000 or even £50,000 makes you rich. But it was another question that was a clincher: how much did voters expect to earn in five years? Some might have plumped for £60,000 – unlikely in most cases, but still a believable aspiration for some. Yet few believed £80,000 was plausible. This level provided a nice clean number too: the top 5% of earners allowing a commitment to freeze taxes for 95%. Given one of the key lines of attack against the Tories was the squeeze in living standards, this pledge was deemed essential.

The Overton window – what is seen as politically possible at any given time – has shifted dramatically to the left

Labour surely needs to be more ambitious. England’s NHS is ailing as a consequence of the longest financial squeeze in its history. With a growing ageing population, it will lurch from being strained to permanently crisis-ridden, and unable to meet the needs of patients. Then there are Tory cuts to social security, which must be reversed in full. Labour is committed to a statutory living wage, controlling private rents, building affordable housing and promoting high-skill, highly paid jobs through an industrial strategy. Although the party did not have time to model the impact of these policies in time for the snap general election, all these measures will undoubtedly raise living standards and automatically reduce spending on social security.

But these policies will take time to land, and millions of working-age Britons are already suffering because of billions of pounds worth of cuts to social security, cynically designed by hammerer of the poor-turned-newspaper editor George Osborne back in 2015.

During the general election, the Fabian Society suggested using the proceeds of “fiscal drag” to reverse benefit cuts: that is, when incomes rise, more Britons are drawn into higher tax bands, increasing the tax revenues flowing into the Treasury. That’s certainly worth looking into. But it is not enough. In combination with punitive anti-avoidance measures, Labour should restore a top rate of tax of 60%. Income tax should be raised on the top 10%, or even 20%. Then there’s corporation tax. As the Institute for Fiscal Studies observed, Labour’s election pledge to raise the rate to 26% would still keep it as the lowest of the G7 countries. Germany – lauded as the powerhouse of Europe – has an effective corporation tax of between 30% and 33%. That should surely be the aspiration. And as for wealth taxes, Scottish Labour’s new leader, Richard Leonard, has proposed a one-off wealth tax for the richest 10% in combination with new property and land taxes for the well-off. Introduced across Britain, vast sums could be raised this way.

Indeed, public opinion is significantly to the left of Labour. A 2012 YouGov poll found 56% backed a 75% top rate of tax on millionaires, including 40% of Tory voters; it would be interesting to repeat this poll now. A survey in 2014 found 45% backed a top rate of 60% for those earning more than £120,000 a year, with 35% opposed: more than a third even backed an 80% top rate for income above £300,000.

There is another point to this exercise. Labour’s leadership is now secure. By presenting a radical manifesto to the electorate and winning 40% of the vote, Corbyn’s Labour ended the neoliberal consensus. The right are now on the defensive: on the one hand, flitting between having to make the case all over again for neoliberal ideas which, until recently, were seen as facts of life, and conceding ground to Labour – in rhetoric if not in substance – on policies such as tuition fees and council housing.

The Overton window – what is seen as politically possible at any given time – has shifted dramatically to the left. But the danger is that the Labour leadership is seen as the most radical flank of acceptable opinion. That allows them to be caricatured as extreme, with limited political space for them to be more radical.

Thatcher benefited from a series of outriders – from thinktanks to columnists to backbench MPs – making more radical arguments than the Tory leadership was prepared to do at any given time. They shifted the Overton window to the right, allowing Thatcherism to portray itself as moderate in contrast and creating room for the party to be more radical in future.

If a new political consensus is to be built, there needs to be more assertive voices demanding greater radicalism than that offered by Corbyn and John McDonnell. Labour’s 2017 manifesto represented a historic departure from a decaying, stagnant neoliberal consensus. But there is so much further to go.

• Owen Jones is a Guardian columnist