Laffer and the Yeti
My post "Oh no, not again" about Ed Balls' 50p tax rate policy sparked something of a debate. This post at Pieria disagrees with my view that the 50p rate is pointless and argues that it is justified as a response to growing inequality. I have now posted a response, also at Pieria, which focuses on the morality of taxation - and debunks both the Laffer curve and "trickle down economics". Here's a taster:
"In this recent post, I argued that Ed Balls’ policy of reversing the Conservatives’ 5p cut in the top rate of tax was pointless. My argument was principally an economic one. Balls had stated that the tax increase would be used to reduce the deficit, but research from both HMRC and the IFS suggests that such a small increase would make little or no difference to tax revenues. Deficit reduction cannot possibly come from minor adjustments to tax codes. What is needed is growth.
"But this is not to say that higher taxes on the rich are necessarily a bad idea. Beliefs about the relationship between tax rates and tax revenues (the so-called Laffer curve) are largely unsupported by evidence.
"The Laffer curve is rather like the Yeti...."Read on here.