Saturday, September 17, 2011

The Patron Politician of Lost Causes

A recent report from the Institute for Fiscal Studies has pointed out that the 50p top tax rate is—from the point of view of raising money—worse than useless.
The 50p rate of income tax is costing the Treasury up to £500 million a year as high earners shelter their money abroad, a leading think tank has warned.

Yes, the Laffer Curve really does exist. Naturally, Timmy elaborates...
The argument is that this rate is increasing the use of (entirely legal) tax mitigation strategies plus some people are buggering off.

Yes, I know, there are those who insist that we should just make it illegal for people to bugger off out of the tax system but we’ve signed a number of international treaties that say we cannot do that.

But here we have it, at least some independent and non-politically partisan experts state that 50 p on income tax is over the peak of the Laffer Curve: even in this short term.

Not much point in having it then really, is there?

Quite so. The 50p tax rate decreases the amount of money that the Treasury gets and—as an extra special Fuck-up The Country bonus—it drives capital abroad rather than it being spent or invested in the British economy.

All of the above was reported on the 14th September: so, as a follow-up, what was reported today (the 17th September)? Yes, that's right...
Nick Clegg has said axing the 50p top income tax rate too early could "destroy" public support, as the Lib Dems gather for their conference.

So, despite the fact that the 50p rate of tax is costing the Treasury some half a billion quid a year, Nick Clegg supports it because he thinks the British people are entirely motivated by spite. Well, he may be right but...
The coalition agreement drawn up between the Conservatives and Mr Clegg's party says the government will work towards increasing the tax-free personal allowance to £10,000 - a Lib Dem policy - and that would be prioritised "over other tax cuts".

Yes, fine. Except that if you abolished the 50p rate of tax, you fucking moron, you would have another half a billion quid to put towards your—admittedly, very worthy and entirely correct—policy of letting the poor keep a little more of their cash.

Casting himself more and more in the role of the Patron Politician of Lost Causes, Nick Clegg really is a silly sod, is he not...?

UPDATE: JohnB presents an alternative view (or, rather, an additional view)...
The Telegraph piece is bullshit laundering, and it's at least as bad as anything you've had a go at climate journalists for.

Here's some digging into the source of the data—the new IFS report says nothing about effects of the 50p rate at all. Rather, the Telegraph has dug up the IFS's *projections* about the effects of the 50p rate *from before it was introduced*, and presented them as if they were an assessment of what's actually happened.

Which is shoddy journalism. It'll be an interesting test of the IFS's integrity to see whether it complains to the Telegraph about being misrepresented in this way...

8 comments:

john in cheshire said...

Tax should not be levied at all without the explicit will of the majority of the people in our country (and I don't count immigrants in that figure). And if a tax is to be levied, then it should not exceed 20% of a persons total income.

Lord Blagger said...

Very simple. I'm thinking of starting a couple of businesses. I've the funding. I've the ideas. I've the people.

Next step. Do we set up in the UK?

No. The message is that entrepreneurs aren't welcome.

Lola said...

If we are going to have to have income tax (and personally I think not) then everyone must pay it. Otherwise there is no connection between what the government does for you and the money it takes to do it. There must be no free ride. So, better than a high 'tax allowance' better to have much lower taxes levied on all income. Tithes work for me.

Anonymous said...

john: fuck off.

Anonymous said...

Lord Blagger: I guess small businesses aren't so welcome at the moment, but the coalition is dropping corporation tax rates.

Lola: There is no connection between income tax and what the government does for you. NI is a tax on employers and reduces jobs, income tax is a tax on working and reduces economic growth. The main argument for the personal allowance is that it's not worth spending tax money on collecting small amounts of tax. Alternatively, you can view it as a citizen's income (although currently, it applies to Commonwealth citizens, EEA citizens and all UK residents.)

john b said...

The Telegraph piece is bullshit laundering, and it's at least as bad as anything you've had a go at climate journalists for.

Here's some digging into the source of the data - the new IFS report says nothing about effects of the 50p rate at all. Rather, the Telegraph has dug up the IFS's *projections* about the effects of the 50p rate *from before it was introduced*, and presented them as if they were an assessment of what's actually happened.

Which is shoddy journalism. It'll be an interesting test of the IFS's integrity to see whether it complains to the Telegraph about being misrepresented in this way...

Manu said...

Unfortunately, I fear that too many voters in the UK are either indeed motivated by spite, or just are too ignorant of economics, for anything sensible to be done in Westminster on this topic...

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