Wednesday, February 22, 2012

Fifty Percent Tax Bracket Failing to Boost Tax Revenues

The Telegraph reports that Britain's new higher taxes on the rich aren't producing any revenue for the government.  It appears that people are changing their behavior to avoid the levy.
Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.
Not only did revenues to the UK Treasury not go up.  They went down by £509 million, or roughly 5%.

The dynamics of human aversion to punishment as it relates to tax policy are well explained and documented by Arthur Laffer, et al in "The End of Prosperity" (2008).  His ideas are summarized in my post "How to Fight Black Unemployment" (9/13/11).

There's a lesson here about tax policy and populist demagoguery, one that the White House and the national media will studiously avoid learning or disseminating.  That doesn't mean that We the people are obliged to bury our heads in the sand and follow their lead.

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