Higher taxes or higher tax revenue?

[TJC1]

Laffer drew a curve graph on a napkin. That bit is true.

[Cyclone]

And did he or did he not say what % the peak was at?

[TJC1]

The laffer curve has no significance to it whatsoever. No hypothetical significance. Its just a curve on a graph. May as well have beem a squiggle.

[unbeliever]

Presumably because of the inverse of the transient effect of increasing the rate, i.e. people will account more of their income as having been received after the decrease. Presumably they've remained high because incomes have been increasing, especially amongst people with incomes above £150,000 who are subject to the top marginal rate. In particular the proportion of their income that's above £150,000 will have increased quite a lot. You'll have heard of the concept of fiscal drag.

 

In general it doesn't seem plausible to me that a lot of people put aggressive tax avoidance schemes in place, or moved to Bermuda or wherever, when the top marginal rate increased to 50%, then dismantled those schemes, or moved back to England, when it was reduced to 45%.

 

That's not unreasonable. However you've neglected other effects, such as not taking on extra work because it's not worthwhile, and companies choosing to site short to medium term projects based partly on the tax regime.

 

Google "french tax exiles in the uk" if you're interested in where some of the extra revenue has come from.

Clearly 75% is above the revenue optimising rate for France.

[L00b]

Quite obviously none of us would.

A far left wing party did come to power, in the '70's. They put the top rate up to 98%, the economy collapsed and we had to go begging to the IMF.

You don't have to go back that far. 40 years later, a bit to the south and right of us, rinse-repeat. Same causes, same effects.

 

Speaking of far leftist taxation, anyone caught the recent stories about Varoufakis' Plan B, in case Greece exited the €?

 

For those who don't know about Plan B, it involved the Greek government hacking (yes, really) the Greek tax system and banks, and siphon-updating domestic € accounts (into new drachma) on the basis of Greek tax numbers.

 

Tsipras owned up today that he'd indeed asked Varoufakis to prepare it. Can't fault them for planning...but the method seemed fairly authoritarian to me (in keeping with the far left ideology I suppose ) and, had they indeed gone 'new drachma', the resulting (equivalent-) tax rate would have easily reached the 80s to 90s after a few weeks of rocket-propelled devaluation coupled with the maintained capital controls.

Edited July 31, 2015 by L00b

[TJC1]

60 to 70 is the optimal rate according to many economists. Sounds good, and if people don't play by the rules let them leave to Monaco or wherever.

 

---------- Post added 31-07-2015 at 15:39 ----------

 

Presumably because of the inverse of the transient effect of increasing the rate, i.e. people will account more of their income as having been received after the decrease. Presumably they've remained high because incomes have been increasing, especially amongst people with incomes above £150,000 who are subject to the top marginal rate. In particular the proportion of their income that's above £150,000 will have increased quite a lot. You'll have heard of the concept of fiscal drag.

 

In general it doesn't seem plausible to me that a lot of people put aggressive tax avoidance schemes in place, or moved to Bermuda or wherever, when the top marginal rate increased to 50%, then dismantled those schemes, or moved back to England, when it was reduced to 45%.

 

Non doms etc love it here. The tipping point is 60 to 70. They will still find ways to avoid tax anyway so really the effect is watered down.

[RonJeremy]

60 to 70 is the optimal rate according to many economists. Sounds good, and if people don't play by the rules let them leave to Monaco or wherever.

 

---------- Post added 31-07-2015 at 15:39 ----------

 

 

Non doms etc love it here. The tipping point is 60 to 70. They will still find ways to avoid tax anyway so really the effect is watered down.

 

When you say let them leave, you mean that you get no revenue from some very wealthy individuals. You are also accepting the existence of the Laffer curve, its relevance and that there is a tipping point.

Thankfully people like you are not in government. Even Gordon Brown accepted that 40% was about the right rate. Except for last nano second of his tenure.

[unbeliever]

When you say let them leave, you mean that you get no revenue from some very wealthy individuals. You are also accepting the existence of the Laffer curve, its relevance and that there is a tipping point.

Thankfully people like you are not in government. Even Gordon Brown accepted that 40% was about the right rate. Except for last nano second of his tenure.

 

It's also worth noting that we had a 60% rate in the UK briefly in the early '80s. It was later cut to 40% resulting in: surprise, surprise; an increase in revenue.

[TJC1]

60 to 70 is many economists optimal rate. Loke or no

[RonJeremy]

60 to 70 is many economists optimal rate. Loke or no

 

None with any sense thinks that.

 

Anyway even if the revenue maximization is at 70% would this be fair to those high earners. It just wreaks of vindictiveness and spite.