Osbourne to cut top rate tax to 40p

Discussion in 'Economics' started by DesktopCommando, Mar 16, 2012.

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  1. Brotherton Lad

    Brotherton Lad LE Reviewer

    Seems sensible. Most fiscal studies show there's a tipping point somewhere between 40 and 50%, where the tax take falls away.
     
  2. That's because it's the level you need to be earning before you can get a decent accountant.
     
  3. I would be highly interested to see the parallel development of tax yields for capital gains versus marginal income tax over the life of the 50% tax rate!

    It is a complete failure of public policy to say "we are incapable of compelling high earners to pay the rates of tax that Parliament sets, so we must lower the rate"!

    What makes anybody think high earners will not simply avoid 40% as they avoided 50% is beyond me. This is not 1983 and the drop from 98% marginal rates to 60% - it is not that profound.
     
  4. Historically its more like 60-70%, at least US federal tax take has nearly always followed tax rates below that despite what the Club For Growth bangs on about. In the UK the optimal level is probably higher. The simple truth is the better off are greedy and will always dodge their taxes regardless of rates, accountants are cheap.

    On the other hand raising taxes in a recession is just stupid populism, giving rich folk 10% extra to spend is actually a sound Keynesian idea. It might even be good politics if they spend it in the UK economy and create some growth rather than paying off their debts and buying gold in Zurich.
     
  5. As this article points out, a significant slice of slightly higher earners will be soon facing 62.5% effective tax rate:

    Budget 2012: tax cuts for the rich – but what about the 62.5pc tax on the

    By the time you add on the huge chunk of taxes you pay for fuel, VAT, energy subsidies, council tax, and the zillion and one charges in everyday life (toll roads coming next?!), I guess the effective tax rate is nearer 70-80% for most people.

    Nearly every wealth creator i know is already UK non-resident, or is planning to leave soon. Instead of trying to stem the exodus of real tax payers, the government is instead tightening the screw...
     
  6. ...and seeing as only 1% or less of wage earners even come into this bracket, it'll achieve what?
     
  7. Well this includes the high rolling demographic so London's poll dancers and rent boys can expect a bigger tip, every little helps you know. And yes, it does trickel down.

    I'll leave you with that image.
     
  8. Where's the evidence that cutting rates for the wealthy would lead to less avoidance? Even if it is so, where's the threshold? Wouldn't a 2% cut achieve the same and leave more for reducing PSBR? I thought the country was so broke t couldn't even afford to defend itself?

    Seems to me that giving tax breaks ti those on over £150k will probably stimulate the housing market a little - i.e. push decent homes further out of the reach of the rest of us, some money will be pushed into tax free pension pots and squirreled away in ISAs and the rest will be blown on holidays or property abroad. Whereas giving tax breaks across the board by simlpy raising the income tax threshold would give more incentive to those looking to work but strugging on low wages, and be used to pay off some private debt. The rest would probably be spent on the high street stimulating the retail sector.

    After all, "We are all in this together" so a flat cut in the threshold would benefit all working people equally.
     
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