A devastating blow against Brown’s “tax the rich” plan from the Institue of Fiscal Studies today. How much will the new 45 percent tax rate for those over £170,000 raise? “Approximately nothing” says the IFS and adds that “HM Treasury would raise more with, eg, a 44 percent rate”. This reminds us why most developed countries have cut their top marginal rate: it discourages risk-taking.
After the briefing, I asked why a higher tax could fail to collect more revenue. Mike Brewer from the IFS replied: “People will contribute more to their private pensions. Convert more income into capital gains. Emigrate. Work less.” I asked him if, then, Brown’s 45 percent tax rate could be described as “futile” and he just smiled.
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