John Cochrane notes that some people have been “advocating that even a 91% federal income tax rate, on top of state, sales, etc, as we had in the 1950s, (not counting all the loopholes!) will actually be good for the economy and also raise lots of revenue.” I’ve definitely heard that. But as Cochrine notes, it’s a fantasy. “Europe has been running a very useful set of experiments on what happens if you address yawning deficits with high income, wealth and property taxes.” He goes on to quote a recent article in the Telegraph.
Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p (percent) top rate of tax, figures have disclosed.
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. . . .
It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.
George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.
Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000.
However, the number of million-pound earners is still far below the level recorded even at the height of the recession and financial crisis. . . .
Far from raising funds, it actually cost the UK £7 billion in lost tax revenue