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."It is believed." No kidding, Sherlock. By now it ought to be obvious to even the most greedy politician that if you crank up marginal rates, you'll surely get less money than your static model tells you, and it's possible, should you crank them up high enough, you'll get less money than you were collecting at the old, lower rates. Anyone who claims that they can close the deficit by raising marginal rates on some small minority who can afford tax accountants is either stupid or lying. They've got to be lying, because it's difficult to imagine how a person could be so blitheringly stupid and still manage to eat solid food without choking to death.*
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...
Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.
Laffer's famous curve has showed as much since the 70s. But one thing that always bothered me about how conservatives used it is that they always argued that by setting rates lower, you could maximize government income. They are correct, obviously, but why in the world would a conservative want to maximize government income? Big government is by its very nature liberal/progressive - the more money government has, the more society-molding things they'll find upon which to spend it.** It seems that one efficient way for conservatives to limit government is to go along with higher rates, which will result in less revenue immediately and in the end, in less government.
Higher rates won't bring in more money, or at least not nearly as much more money as is promised. But it's not about the money; it's about envy. The people to whom the higher rates should apply are generally smart enough to avoid them. That's good news. The better news is that the people who demanded higher rates on everyone else get to sleep well in the knowledge that the rich are paying their "fair share" - which will, ironically, be less than they pay today - even while the pool from which they vote themselves largesse every election grows smaller and smaller.
*The voters who elect such politicians are not that blitheringly stupid, they are simply looking for the government to raise their morale by punishing people who have the audacity to make more than them.
** Of course, this only applies to governments in which spending is limited to actual revenues, such as most state governments, in the short term. But it applies to everyone in the long term.