Why we need a proper debate about the 50p tax rate

As every Hitchhikers fan knows, the answer to life, the universe and everything is 42. The question about the new tax on the super-rich is framed in a similar way. Will it raise £2.4bn as the Treasury claims? Or will it lose about £800m as the IFS model suggests? All of this – the future of Britain’s status as a low tax economy – depends on the gradient of the Laffer curve. And if the debate is had properly, and had now, then we may be able to stop David Cameron making a dreadful mistake.

CoffeeHousers will know the idea behind the Laffer curve, but perhaps not the story. In 1976 Prof Art Laffer, from the University of Chicago, was explaining the basics of tax collection to Donald Rumsfeld in the Hotel Washington over dinner. A journalist from the Wall St Journal was there too. It’s basic, Laffer said: tax nothing, you raise nothing.