Raising taxes on the wealthy resulted in lower tax revenues


By zzyzzx   Follow   Wed, 28 Nov 2012, 10:25am   1,215 views   22 comments
In Baltimore MD 21230   Watch (1)   Share   Quote   Permalink   Like (2)   Dislike (2)  

http://www.telegraph.co.uk/news/politics/9707029/Two-thirds-of-millionaires-left-Britain-to-avoid-50p-tax-rate.html

Two-thirds of millionaires left Britain to avoid 50p tax rate

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.

“Labour now needs to admit that their policies resulted in millionaires paying less tax and come clean about whether they would reintroduce this failed policy if they were in power.”

Mr Osborne argued earlier this year that the 50p rate was deterring entrepreneurs from coming to Britain.

Viewing Comments 1-22 of 22     Last »     See most liked comments

  1. Call it Crazy


    Follow
    Befriend
    929 threads
    11,833 comments

    1   10:28am Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (2)  

    Coming to a country near you.... stay tuned!!

  2. edvard2


    Follow
    Befriend
    53 threads
    3,807 comments

    2   10:28am Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (3)  

    This is the USA... Not the UK...

  3. Call it Crazy


    Follow
    Befriend
    929 threads
    11,833 comments

    3   11:39am Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (2)  

    edvard2 says

    This is the USA... Not the UK...

    Not yet.... wait till your socialized Obamacare kicks in....

  4. zzyzzx


    Follow
    Befriend (10)
    862 threads
    7,323 comments
    Baltimore, MD

    4   11:41am Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (2)  

    edvard2 says

    This is the USA... Not the UK...

    The same thing would happen here. It has before.

  5. Call it Crazy


    Follow
    Befriend
    929 threads
    11,833 comments

    5   12:25pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (3)  

    robertoaribas says

    If you are honestly going to trot out Laffer curve BS at this point, admit that you have no clue about economics!

    That's why we have you here Mr. MBA!!!

  6. rooemoore


    Follow
    Befriend
    47 threads
    1,367 comments
    male
    Larkspur, CA

    6   12:31pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    robertoaribas says

    are you guys really this slow?

    Actually, I think they are slower.

  7. david1


    Follow
    Befriend (2)
    9 threads
    790 comments
    33 male
    Fort Mill, SC

    7   12:35pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike (2)  

    This phenomenon is an explanation for why unemployment falls and economic activity increases when taxes are raised.

    Low tax rates encourage profit taking. High tax rates encourage investment.

    Simply put, a business owner, when he pays a 50% tax rate, only pays 50 cents when he invests a dollar into advertising or hires a new employee. The other half of the investment is paid by the government - in taking less tax revenue.

    When tax rates are 15%, the business owner pays 85 cents and the government takes 15 cents. The business owner has less incentive to hire or make investments and more incentive to take profits.

    Higher tax rates = less incentive for profit taking.

  8. edvard2


    Follow
    Befriend
    53 threads
    3,807 comments

    8   12:36pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike (2)  

    Call it Crazy says

    Not yet.... wait till your socialized Obamacare kicks in....

    Yeah- you're right. When that kicks in more people will be healthy. Hence why the original post is null.zzyzzx says

    The same thing would happen here. It has before.

    Have you actually been to the UK? Well I have. Comparing the US to the UK is not at all a worthy comparison because the two could be anymore different on any scale.

  9. edvard2


    Follow
    Befriend
    53 threads
    3,807 comments

    9   2:11pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (2)  

    Melmakian says

    So? What's your point other than the geography lesson?

    Its the point I made before. Which is that the UK an the US are very different and hence making a blanket statement that people in one country will behave the same as another isn't very useful or worthy of comparison.

  10. david1


    Follow
    Befriend (2)
    9 threads
    790 comments
    33 male
    Fort Mill, SC

    10   3:45pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Melmakian says

    Oh god. It's idiot central here.

    It should be pretty easy for you to lay out an argument that disproves what I said.

    Just show where higher tax rates have correlated with higher unemployment and lower economic activity.

    My argument is simply the opposite: Higher tax rates correlate to periods of higher economic growth and lower unemployment.

    Should be pretty easy to use the internet to prove me wrong and back up your criticism.

    We will find out who is mayor of idiot central...

  11. zzyzzx


    Follow
    Befriend (10)
    862 threads
    7,323 comments
    Baltimore, MD

    11   4:08pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (2)  

    edvard2 says

    Its the point I made before. Which is that the UK an the US are very different and hence making a blanket statement that people in one country will behave the same as another isn't very useful or worthy of comparison.

    Wealthy people are already leaving France.

  12. dublin hillz


    Follow
    Befriend
    54 threads
    1,922 comments
    Dublin, CA

    12   4:37pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Whenever someone contemplates leaving their home country, a multitude of factors have to be considered. While taxes may be one of the aspects under consideration, I highly doubt that taxes by themselves would cause any logical person of high net worth to leave the united states.

  13. david1


    Follow
    Befriend (2)
    9 threads
    790 comments
    33 male
    Fort Mill, SC

    13   5:38pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Melmakian says

    The entire 1970s.

    Ahem. Ok. Here is unemployment data from the BLS and GDP growth from the BEA for the 1970s. Top Marginal tax rate in the 1970s was 70%. GDP growth first, unemployment second. GDP in chained 2005 dollars.

    1970: .2%, 5%
    1971: 3.4%, 6%
    1972: 5.3%, 5.6%
    1973: 5.8%, 4.9%
    1974: -.6%, 5.6%
    1975: -.2%, 8.5%
    1976: 5.4%, 7.7%
    1977: 4.6%, 7.1%
    1978: 5.6%, 6.1%
    1979: 3.1%, 5.9%

    That means that GDP grew at a geometric annual average of 3.2% in the 1970s, with average unemployment of 6.2%. This, with the top marginal tax rate at 70%.

    Now lets look at the 1980s when Reagan lowered tax rates to 50% from 1982 through 1986. I think you know where this is going but lets do it anyway.

    1982: -1.9%, 9.7%
    1983: 4.5%, 9.6%
    1984: 7.2%, 7.5%
    1985: 4.1%, 7.2%
    1986: 3.5%, 7.0%

    That gives a geometric annual average growth of 3.4% and average unemployment of 8.2%.

    Then lets look at 1987-1992, when Reagan/Bush lowered the tax rates again to 38.5, then 28%.

    1987: 3.2%, 6.2%
    1988: 4.1%, 5.5%
    1989: 3.6%, 5.3%
    1990: 1.9%, 5.6%
    1991: -.1%, 6.9%
    1992: 3.4%, 7.5%

    This gives us, obviously, the lowest marginal tax rates on record. (at least since 1930) And we have average annual geometric growth of 2.6% and average unemployment of 6.1%.

    The 1970s had better average annual growth (.6% higher, or about 19% better annual growth) than the late 80s/early 90s with tax rates roughly 2.5 times higher, with unemployment .1% higher.

    The 1970s had slightly lower average annual growth (.2%, about 6% lower) than the early 80s when taxes were reduced from 70% to 50%, but unemployment was much lower, 6.2% vs. 8.2%.

    Melmakian says

    The 1929 through the 1930s.

    GDP growth was as follows 1930-1931, when the top marginal tax rate was 25%: BLS doesnt have unemployment data back then.

    1930: -8.6%
    1931: -6.5%

    That is average annual "growth" of -7.6%.

    Then taxes were raised to 63% in 1932-1935:
    1932: -13.1%
    1933: -1.3%
    1934: 10.9%
    1935: 8.9%

    That is average annual growth of .9%. So we go from a 25% top tax rate and average GDP LOSS of 7.6%, to a 63% tax rate (again, 2.5 times higher...) and average GDP GROWTH of .9%.

    Then taxes were raised again to 79% in 1936-1939:
    1936: 13.1%
    1937: 5.1%
    1938: -3.4%
    1939: 8.1%

    That is average annual geometric growth of 5.5%. That looks a whole lot better than -7.6% annually.

    Any other time periods where you are going to point out high tax rates leading to lower economic growth? Oh, yea this one:

    Melmakian says

    See what happened in the early 1960s after the Kennedy supply-side tax cuts reduced the top rate from 91% to 70%

    Ok, well that was the Revenue Act of 1964: Kennedy was shot in November 1963 so it wasn't him, but lets not let that little fact get in the way. And it was lowered to 70%! Yes, economic activity did pick up, from an average of 4.5% five years before the tax reduction to an average of 5.2% five years after.

    Let's not lose sight of the fact that the rate was still 70%! Let's raise the top marginal rate back up to 70% and have GDP growth of 5.2% and unemployment of 4.2%. I'm game if you are. That's the point - I wouldn't call 70% tax rates "LOW" and you'd be shot by the most liberal member of Congress for mentioning that, but hey, "Lower" is all relative. So yes, I concede here: If you "lower" tax rates to 70%, it will spur economic growth and lower unemployment. First we would have to take them to 91% to duplicate the effort though....

    Melmakian says

    Clinton era had stubbornly higher unemployment than usual for post-recessions UNTIL 1998

    Yes, that stubborn 5.6% average unemployment in 1995, two years after Clinton took office in 1993 is nothing compared to that quick snap-back 9.6% in 1983, two years after Reagan took office.

    Melmakian says

    when Congress forced Clinton to accept capital gains tax cuts. We had a boom afterwards and only afterwards.

    Oh, I know you mean when they were 28% in 1993-1997 and lowered to 20% 1998 - 2003. Lets look at that "boom." Again GDP growth:

    1993: 4.5%
    1994: 4.4%
    1995: 2.5%
    1996: 3.7%
    1997: 4.5%

    That is an average of 3.5%.

    1998: 4.4%
    1999: 4.8%
    2000: 4.1%
    2001: 1.1%
    2002: 1.8%
    2003: 2.5%

    That is an average of 3.1%.

    Melmakian says

    We already know.

    NEXT!

  14. mmmarvel


    Follow
    Befriend (4)
    4 threads
    1,097 comments
    Missouri City, TX

    14   5:45pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    david1 says

    Let's not lose sight of the fact that the rate was still 70%! Let's raise the top marginal rate back up to 70% and have GDP growth of 5.2% and unemployment of 4.2%. I'm game if you are.

    Only if you are also game to let the tax rates on EVERYONE be what they were then. AND if you will allow the government to ONLY spend the same amount (percent wise) of GDP as they did back then. Yeah, then the game would be on.

  15. zzyzzx


    Follow
    Befriend (10)
    862 threads
    7,323 comments
    Baltimore, MD

    15   5:52pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike (2)  

    mmmarvel says

    Only if you are also game to let the tax rates on EVERYONE be what they were then. AND if you will allow the government to ONLY spend the same amount (percent wise) of GDP as they did back then. Yeah, then the game would be on

    I agree! I'd love to see us get rid of all the per kid deductions and credits and expand the tax base so that EVERYONE pays something.

  16. zzyzzx


    Follow
    Befriend (10)
    862 threads
    7,323 comments
    Baltimore, MD

    16   5:54pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike (3)  

    david1 says

    Ahem. Ok. Here is unemployment data from the BLS and GDP growth from the BEA for the 1970s. Top Marginal tax rate in the 1970s was 70%. GDP growth first, unemployment second. GDP in chained 2005 dollars.
    1970: .2%, 5%
    1971: 3.4%, 6%
    1972: 5.3%, 5.6%
    1973: 5.8%, 4.9%
    1974: -.6%, 5.6%
    1975: -.2%, 8.5%
    1976: 5.4%, 7.7%
    1977: 4.6%, 7.1%
    1978: 5.6%, 6.1%
    1979: 3.1%, 5.9%
    That means that GDP grew at a geometric annual average of 3.2% in the 1970s, with average unemployment of 6.2%. This, with the top marginal tax rate at 70%

    You can't really compare data from the 70's, which was before things like outsourcing ad massive imports to today's economy. If those things existed back then, the economy would be in the shitter just the same as it is today.

  17. david1


    Follow
    Befriend (2)
    9 threads
    790 comments
    33 male
    Fort Mill, SC

    17   6:14pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    By the way, here are the links:

    http://data.bls.gov/pdq/SurveyOutputServlet
    http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2011-nominal-and-inflation-adjusted-brackets
    http://www.bea.gov/national/index.htm#gdp
    http://www.cch.com/wbot2012/029CapitalGains.asp

    mmmarvel says

    Only if you are also game to let the tax rates on EVERYONE be what they were then.

    Fine. By the way, here are the inflation adjusted brackets:
    14.0% $0
    15.0% $5,783
    16.0% $11,566
    17.0% $17,349
    19.0% $23,132
    22.0% $46,264
    25.0% $69,396
    28.0% $92,528
    32.0% $115,660
    36.0% $138,792
    39.0% $161,923
    42.0% $185,055
    45.0% $208,187
    48.0% $231,319
    50.0% $254,451
    53.0% $300,715
    55.0% $370,111
    58.0% $439,506
    60.0% $508,902
    62.0% $578,298
    64.0% $693,958
    66.0% $809,617
    68.0% $925,277
    69.0% $1,040,936
    70.0% $1,156,596

    mmmarvel says

    ND if you will allow the government to ONLY spend the same amount (percent wise) of GDP as they did back then. Yeah, then the game would be on.

    Get down to 19.8%? Ok. Current GDP is 15.1T, so that is 3T in total expenditures. 2013 Federal expenditures in 3.8T, so we need to cut 800 billion. Let's see:

    Department of Defense, $666B discretionary, lets cut that one 50%. That is $333B.
    Homeland security, $55B discretionary, lets cut all that one.
    National intelligence program, $52.6B, lets cut 50%, so $26.3B.
    Department of Agriculture, 26.8B, lets cut all that (they still have 127.7B mandatory spending)
    HUD, 41.1B, lets cut it in half, so 20.6B.
    The rest of the discretionary budget (669B) gets a 15% haircut. That is another 100B. That total is 504B.

    Then we have to go after the mandatory spending for the other 296B. Lets see... well that total is 2,293B, so if we cut another 12.9% across the board there, we get the 296B.

    We would run a pretty hefty surplus with spending at that level and the increased tax rates.

    Of course cutting spending like that would probably lower GDP by 3-4%....

  18. david1


    Follow
    Befriend (2)
    9 threads
    790 comments
    33 male
    Fort Mill, SC

    18   6:21pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    zzyzzx says

    You can't really compare data from the 70's, which was before things like outsourcing ad massive imports to today's economy.

    I compared the 70s to the 80s. You mean to tell me that I cannot compare 1978 to 1985 because of outsourcing and massive imports?

  19. Christopher


    Follow
    Befriend
    2 comments

    19   7:09pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Exactly

    Chris
    Owner Cel Financial Services
    IRS Registered Tax Return Preparer
    Registered bonded California CTEC Tax Preparer
    Please visit my website for all your Income Tax Fillmore needs.
    Please visit my website for all your Fillmore Income Tax needs.
    http://www.taxprepfillmore.com/

  20. HEY YOU


    Follow
    Befriend (3)
    906 threads
    2,307 comments

    20   7:47pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    When I make $1.00 over $250,000,I think I will have to pay a $0.04 tax increase, Damnit.

  21. Philistine


    Follow
    Befriend
    695 comments
    Los Angeles, CA

    21   8:27pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    zzyzzx says

    You can't really compare data from the 70's, which was before things like outsourcing ad massive imports to today's economy. If those things existed back then, the economy would be in the shitter just the same as it is today.

    You're missing the historical trajectory. If you are one of those that says, "Today is different from Yesterday is different from Tomorrow," Christ, then pack it up and eat canned peas until the the end of the world.

  22. Kevin


    Follow
    Befriend
    41 threads
    2,655 comments

    22   10:17pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Based on everything I've seen throughout the history of taxation in the united states and abroad, there appears to be little to no actual correlation between tax rates and economic activity. There are high tax countries with high GDP growth and high tax countries with low GDP growth. There are low tax countries with high GDP growth and high tax countries with high GDP growth.

    Whatever impact tax policy has on the economy, it's nothing compared to other factors.

zzyzzx is moderator of this thread.

Email

Username

Watch comments by email
Home   Tips and Tricks   Questions or suggestions? Mail p@patrick.net   Thank you for your kind donations

Page took 127 milliseconds to create.