Spin Time

[briantrumpet]

They are separate things.
The Laffer curve is to do with when people stop earning extra because the tax burden is too high.
Trickle down economics is the assumption that as your disposable income income increases, you spend more.
TDE is true to a point, particularly among lower and middle earnings, but once you earn beyond a point, you tend to just save the extra, not spend it, which is where TDE falls down.

I didn't say they were the same thing, but they are both promulgated by those who think that giving tax breaks to the already-rich is going to improve the lot of the less well-off. Both are smokescreens to justify Trussian tax cuts. The Laffer Curve is only ever invoked to suggest that taxes should go down, not that the tax take might increase by raising taxes.

 

[Pross]

A 1p cut in tax is the Tories election bribe pledge for Wales next year. Considering the things that seem to be people's biggest concerns relate mainly to under-investment I don't get why politicians resort to this sort of thing in the build up to an election but I suppose it plays well to the 'we need to spend more by taxing others more, not me' brigade. I'm not sure how much difference £400 a year makes if you have to pay for private health / education or drive eerywhere because there's no public transport option.

It's probably a better option than Nige's plan to re-industrialise Wales and re-open the mines - considering the last deep mine in the UK closed n 2015 and the last one in Wales in 2008 I assume he'll be issuing visas to miners from Poland and other Eastern European countries to staff these mines or dragging old men back from retirement as mining is known to not be very physically demanding. He's also going to cut all that woke nonsense around environmental issues - something Wales has actually got a really good record with at present.

Who says populism is based on fantasy promises?

 

[monkers]

I'll explain the principle, which isn't too difficult to understand, but strangely lefties seem to struggle with it...

View attachment 8226

Tell me which bits you disagree with:
- Pretty clear that when the tax rate is zero, no tax is collected
- Similarly, when the tax rate is 100% (I.e. the state takes everything you earn) the tax collected will also be zero because nobody would bother doing any work on business.
- At somewhere in the mid range of tax rates, clearly tax is collected as we see this in pretty much every country.
- So going from the mid range to 100%, the tax collected must decline.

If you don't believe the Laffer curve, then are you saying that tax collected will stay constant or even rise as the rate gets to very high levels? I.e that everyone will just continue working/trading and will pay whatever is asked?

Most people will realise that the incentive to work and do business declines when tax rates are very high and that explains the drop off. We saw a good example in the UK in the 70's when the corporate tax rate was over 50%, the top income tax rate on earned income was 83% with a 15% surcharge for investment income. And they wondered why there was a brain drain and why they had to go cap in hand to the IMF....

Yeh, yeh, Steevo lefties are too dim to understand, so you thought you ought explain it.

Only then you went on to get it wrong.

The Laffer curve works to show when people are exercising options, like spending their money. People paying tax are not exercising a choice (except those funking billionaires that I've been talking about).

In sales you might use Laffer to decide where your most profitable price point is.

If you are the government you might use Laffer to find the tax price point that reduces cigarette consumption, or discourage the use of petrol as a fuel for cars without actually banning petrol cars. That is a legitimate way to use Laffer with regard to tax.

But trying to say that it is legitimate to give billionaires the option not to pay tax because of Laffer, you're funking joking right?

 

[Rusty Nails]

It seems there are many who share Trump's simplistic, self-serving, limited and dogmatic knowledge of economics and tariffs.

They love a chart or diagram.

 

[Stevo 666]

Pretty difficult to disagree or agree with such broad generalisations, especially the meaningless extremes of 0% and 100%. They are so broad and simplistic as to be irrelevant to decision-making for national tax levels.

I'm trying get the principle across first.

The underlying practical point is that you can't just assume that hiking tax rates will raise tax revenue, especially when those extra taxes are being levied on internationally mobile taxpayers or capital. I gave an example from the 70's above. Another one was the top income tax rate hike to 50% in 2010 just before Labour were kicked out (raised almost nothing), and more recently with the relatively large numbers of non-doms and wealthy taxpayers leaving the UK.

 

[monkers]

I'm trying get the principle across first.

The underlying practical point is that you can't just assume that hiking tax rates will raise tax revenue, especially when those extra taxes are being levied on internationally mobile taxpayers or capital. I gave an example from the 70's above. Another one was the top income tax rate hike to 50% in 2010 just before Labour were kicked out (raised almost nothing), and more recently with the relatively large numbers of non-doms and wealthy taxpayers leaving the UK.

 

[Stevo 666]

It's not a real thing, it's a theoretical thing. An idea - and one that doesn't really work because it is too simplistic.

It was tested under the Reagan administration and cost America two trillion dollars.

See my comments above. And tell which of the bullet points in my explanation you disagree with.

Where was the US on the curve when Reagan cut taxes?

 

[Stevo 666]

View attachment 8230

Yep, except you don't want to listen. It's an inconvenient truth for lefties.

 

[Stevo 666]

View attachment 8237

Please explain why.

Also interested in your thoughts on the examples that I gave.

 

[Stevo 666]

Yeh, yeh, Steevo lefties are too dim to understand, so you thought you ought explain it.

Only then you went on to get it wrong.

The Laffer curve works to show when people are exercising options, like spending their money. People paying tax are not exercising a choice (except those funking billionaires that I've been talking about).

In sales you might use Laffer to decide where your most profitable price point is.

If you are the government you might use Laffer to find the tax price point that reduces cigarette consumption, or discourage the use of petrol as a fuel for cars without actually banning petrol cars. That is a legitimate way to use Laffer with regard to tax.

But trying to say that it is legitimate to give billionaires the option not to pay tax because of Laffer, you're funking joking right?

I'm not saying that. Put as simply as possible, if you tax internationationally mobile taxpayers too much, many of them will go eslewhere. Same for internationally mobile capital. I gave real life examples, feel,free to rebutt them.

 

[Rusty Nails]

I'm trying get the principle across first.

The underlying practical point is that you can't just assume that hiking tax rates will raise tax revenue, especially when those extra taxes are being levied on internationally mobile taxpayers or capital. I gave an example from the 70's above. Another one was the top income tax rate hike to 50% in 2010 just before Labour were kicked out (raised almost nothing), and more recently with the relatively large numbers of non-doms and wealthy taxpayers leaving the UK.

I am sure that at certain levels of taxation some of the wealthiest people will decide to leave and their contribution will be lost, but am just as sure that governmental decisions are made in the full knowledge that this will happen and take that into account. The important point, financially, is that the overall level of tax revenue will increase, or not decrease significantly.

There is no magic formula that says exactly what level of increase will lead to what number of people who will leave, especially as that number will depend upon many personal reasons other than just monetary.

I can fully accept that, at the extremes, punitive levels would adversely affect tax revenues but believe that the correlation between increases in tax levels and numbers deciding to relocate isn't a straight line. I am certain however that calculating the optimum level is beyond the abilities of anyone on this forum.

 

[icowden]

Still doesn't get around the top 1% earners pay the lions share of the tax revenue

Well, no. Because that isn't true. It's one of your made up "facts".

According to the OBR, the top 1% of earners generate 30% of income tax revenue. If you go down to the top 10% of earners, then you cover 60% of income tax revenue.

Now the startling bit is that to be in that top 10% you only have to be earning £65,000 per annum. You need to be earning £185,000 to get into the top 1%.

But - if you earn over £1m per year, instead of paying 45% tax on most of it, the average big earner pays 35% income tax because once you have big money you can pay a good accountant who will maximise your capital gains and other reliefs.

Another one was the top income tax rate hike to 50% in 2010 just before Labour were kicked out (raised almost nothing), and more recently with the relatively large numbers of non-doms and wealthy taxpayers leaving the UK.

Well non-doms can't leave the UK because they have already done it. Although you are right that since the rules were tightened to make them actually pay tax, some have left completely. There is a projected increase for 2024-25 due to changes in NI and capital gains tax. That said, 16,500 millionaires left the UK between 2017 and 2023. Any idea why?

 

[Dorset Boy]

But - if you earn over £1m per year, instead of paying 45% tax on most of it, the average big earner pays 35% income tax because once you have big money you can pay a good accountant who will maximise your capital gains and other reliefs.

Err, capital gains are not earnings..... They are gains on investments.

 

[C R]

But - if you earn over £1m per year, instead of paying 45% tax on most of it, the average big earner pays 35% income tax because once you have big money you can pay a good accountant who will maximise your capital gains and other reliefs.

Err, capital gains are not earnings..... They are gains on investments.

Ooh, the semantics defence.

 

[Dorset Boy]

Ooh, the semantics defence.

Yawn!
Not defending anything, but it does help if people actually understand things properly.
If you are PAYE earning £1 million then it will all be salary (income tax rates).
If you are a business owner drawing £1 mill it will probably be a combination of salary So (Income tax) and dividend (Dividend Tax rates).
If you are trading investments to make your million then you will be paying a combination of Capital Gains Tax, Income Tax rates and Dividend Tax rates.