Words mean things. The criterion for Rolle’s theorem to apply is that the function in the interval be differentiable (which implies, minimally: continuous). Are you saying that the function is pathological? We’re not talking about individual behaviour, but aggregate tax take as a function of rates.

Even if things don’t conform exactly to the criteria, they are sufficiently close for the Laffer curve to apply.

The Englishman would likely wind up paying 60%, unless you could offset your English tax against the foreign tax, which I think is how the US system works. Somehow I don’t think the Russians would let me off my 13% tax on the grounds that I am paying 40% to the UK treasury.

I would be fascinated to read your explanation of why Rolle’s theorem is an over-simplification.

Which brings to another problem , existing latent pressures Suppose you are not injecting policy into passivity suppose as seems infinitely more likely society is actually composed of a dynamic and unstable equilibrium of competing forces in tension. As an example I have been chatting to clients today and a lot of them ( in construction ) are clinging on. Waste has been shed , ambitions reappraised and some cannot afford another set back. Now we are coming into what is almost certainly going to feel like a god awful hangover after Browns cheeky pre-election drinky. How do youi calculate when the tipping point is reached . Tax avoidance after all is a matter of tipping points being reached not uniform effect . It seems like to me , and to the IFS, that any tax on financially literate will raise revenue initially but it will reduce and then actually lose revenue as tipping pojhts accumulate over time . Getting that revenue back may be difficult whatever you do . Have New Labour ever got their revenuie estimates right ? . No they always guess to high , so caution is warranted

Politically you have dealt with the “Tax Payers Union” well I think . As you rightly say the pot of gold is Mr and Mrs. Ordinary with family and mortgage any Government with aspirations to intervention or even staying where they are right now has its eye on that . Once the principle of progressive taxation is inserted then like Speed Cameras and CPZ s they spread from easy to justify areas into the real objective which is wide coverage . It has been the endless tactic of the left to split the Tax Payer and the shared memories of the country tell us that progressive taxation does not come alone in real life .

I am , obviously , a rather ignorant layman on the subject but I could go on and on and on inventing other factors that are likely to remain incalculable and this may account for the odd fact of Economist uniquely misunderstanding the Economy when almost everyone lese got it . All of this makes me rather interested in what has actually happened which as I understand it is how the IFS calculated the loss that will occur over timeworn the new high rate( it is a range of possibilities but the conclusion was a significant loss )

Tim I musty congratulate you Seeing the inevitable link between high tax and shutting down freedom quite as starkly reminds me of what seemed the rather antiquated classical Liberal idea of ones freedom to leave being a vital one . For a long in the industrial age it appeared an absurdly bourgeois idea but its time seems to me to be coming again .

es, they believe that speculation increases price volatility: when every fule kno that it dampens it.

as I’ve been trying to find some definitive ones and can’t really.

Just read the comments on said website.

Really?

Dick’s world seems to run on the premise that we are all idiots and he has a double figure IQ.

If these commenters actually exist they are trainee accountants applying 11 years too early.

Must try harder, dick. Sorry. Typo. Dick.

He doesn’t know much about finance and he knows nothing about tax. Perhaps UK Tax Research means he’s trying to find out more about it.

I love the idea of taxing debits. It’s no different to charging VAT on every transaction but not allowing anyone to reclaim input tax. Not even the headcases in the EU would go for that one.

Doesn’t understand the difference between tax evasion and tax avoidance. Seems to think that company residence can be decided by a country just saying “You are mine, all mine”. What if every nation did that? Doesn’t understand marginal rates of tax.

Jeez, there really seems to be no end to this guys ignorance. Looking at his photo on his website (I wouldn’t have publicised myself if I were you, Dick) he should have stuck to commentating on the snooker.

I hear you banging on about the Laffer Curve still which I personally would’nt as I think it is too much of an over simplification to be taken seriously. However that is not to say that very high tax rates can have damaging effects it is just that the cause of this is the more the rate of progression it too steep and the effects on confidence as to the future rates too.

For example take the income tax regime of 1979; by the time one was on the cusp of the 83% rate the average had only risen to around to around 50% so the additional income was only worth a third of the value of the rest of the income after tax (17p to 50p per pound). Thus a 50% increase in gross income would only net a 17% increase in the net.

Hence in the case of an entrepreneur running a business at this level of profit the average tax rate on the upper half of their income was 74% leaving 36p in the pound after tax. So it wouldn’t be worth while for going half the current profit by reinvesting worth 36p to chase additional income worth just 17p. You would have to double your outlay just two net the same amount of after tax income as you have forgone.

It is this steepness, the reduced value of the marginal pound relative to the average after tax, that matters. This makes reinvestment less appealing relative to spending the current level of profit. In addition entrepreneurs appear to have a higher elasticity relative to paid employment.

Also once you get to high income, say the top one percent around £150,000, then they may account to 12.8 % of pertax income but an additional marginal band introduced at this level only impacts on the half of income above this level of about 6%. Additionally the figures for the top one 0.1 percent is an income of about £350,000 and a rate set at this level would be incident only on about 2% of all pre-tax income, and of course we are already getting getting about 40% of that already so so only 1.2% of income could be redistributed evan if we had complete confiscation of all income above the £350,000 level.

In reality with the very high rates post WWII the pretax income share of the top one percent fell from ~13% in 1945 to about 6.2% by 1979 so that suggests that the compression of differentials by a highly progressive tax affects the behaviour of those individuals, particularly reinvestment in business expansion, such as to reduce to overall yield.

Thus it not simply the rate a la the Laffer Curve that matters but the rate on increase in rates that is important. Of course the to raise significant revenues the progression has to occur in the region around the average incomes from the minimum wage unto the the double the average income at the 90th percentile as this is where in aggregate the money is and rapidly the tax base for bands impinging on income above this level rapidly declines. How steep the the progression can be is a matter of judgement (I mean guessing), but a think most countries have about 80% of the average after tax at the margin; i.e. a 50% pay rise would yield 40% after tax.

Also one needs to take into account to politics and the effect on confidence too. A steep progressive tax acts as a signalling function; if the the government feel justified in taking the bulk someone income, why that much, why not even steeper and higher rate, which damages confidence in terms of reinvestment. That allied to the fact that a moderately graduated tax will rise to around 40%-60% at the top one percent and further increases yield diminishing returns, suggests that the top rate should be at about this level. The fact that most government around the world have a number of rates rising to a top rate of around half of income at the top 10% or 5% income level is surely no coincidence.

Look at when Thatcher lowered the top rate to 60%, while high by our standards, reduced the compression of the differentials a lot from the 83% region and signalled an idealogical direction which gave confidence to entrepreneurs, and hence big fortunes were made in the eighties, so it is more than just the level but the direction of travel.

Hence while I expect that the new 50% rate will not raise the 0.6% of pretax income that a static analysis would suggest due to the signalling effects, (i.e. hit the rich) even though it doesn’t make the tax system massively steeper, a few percent across the board would not have any effect on people’s incentives. Any overall effect would be confined to the relative efficiencies of state verses private spending of the money raised.

“that child, in adulthood, has to file an IRS tax return even if he or she never sets foot in Jefferson’s Republic again.”

…as has happened to the ever-so Amerian Boris Johnson:
http://www.boris-johnson.com/2006/08/29/american-passport/

They keep sending out mass emails asking for ideas for their manifesto and I always reply saying “Sack a few million public sector workers, have a citizen’s income scheme and replace as many taxes as possible with Land Value Tax.”

I sometimes even get a halfway civil reply.

The idea of the US as a land of untrammelled free enterprise is a joke. To take another example, about half of the US mortgage market is effectively run by the state (the state-backed mortgage agencies such as Freddie Mac, etc).

Oh, and Richard Murphy is a weapon’s grade cock end.

After a certain period, you even lose the right to vote if you are living elsewhere.