Laffer Curve no longer funny in Britain

The British Treasury revealed that increasing the top tax rate from 40% to 50% “actually cost the UK £7 billion in lost tax revenue” (Telegraph).

The tax hike was put in place two years ago, just before the Labor Party was bounced by the voters. The effects were striking:

Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax, figures have disclosed.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.

No. Really?

It is a fundamental axiom of microeconomics that if you tax something, you will get less of it. Macro-economists (to say nothing of accountants) never seem to understand.

This year, the Conservative-Liberal Democratic Coalition reduced the tax rate to 45%, and would you know it…

Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000.

With any luck, the crew in Washington (or “crews”) will remember: when you tax something, you get less of it.

Cross-posted to Virginia Virtucon

About these ads

2 Responses to Laffer Curve no longer funny in Britain

  1. [...] Laffer Curve no longer funny in Britain (rightwingliberal.wordpress.com) [...]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 45 other followers

%d bloggers like this: