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Optimum top tax rate is 48% says OBR

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    I'm surprised this hasn't got more press coverage: remember the debate about how much the 50% tax rate had gained, what the implications of the 45% are etc?

    The [independent] Office for Budget Responsibility included the analysis in their 2012 Economic and Fiscal outlook (see p108-112).

    Their summary says that:

    - When the increase to 50% was introduced in the March 2010 budget the forecast was that it would raise an additional £2.6bn in 2012/13. That was based on the idea of an extra £7.5bn tax liabilities minus £4.9bn of tax lost due to the individuals affected either being able to restructure their tax liabilities, move abroad etc.

    - That original government forecast was based on a TIE (Taxable Income Elasticity) of 0.35 (this is the response of taxable incomes to tax rates, a higher TIE indicates a bigger response in being able to avoid the tax). An alternative TIE estimate at the time was 0.46 made as part of the Mirrlees Review for the IFS (based on responses to top tax rates in the 1960s-1980s).

    - HMRC's analysis of one year's evidence of tax receipts since the change suggests that the TIE used in the original forecast of 0.35 was far too low and should be more in line with the Mirrlees Review one, so the government has now revised its TIE estimate to 0.45.

    - Revising the forecasts with the new TIE means that the 50% tax rate is expected to raise an additional £0.6bn in 2012/13 instead of the £2.6bn (which is why Osborne said in the budget speech it will raise 'next to nothing').

    - The expected cost of cutting the tax rate to 45% is only a loss of £0.1bn to the exchequer. The expected cost of cutting it to 40% would be a loss of £0.7bn.

    - The optimal tax for revenue maximisation is 48% based on the new TIE estimate of 0.45.


    I see Gus O'Donnell commented on this but it hasn't been widely reported: http://www.thisismoney.co.uk/money/n...te-tax-48.html
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    The optimum rate of income tax is actually 0%. Income tax is legalised theft.
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    (Original post by chefdave)
    The optimum rate of income tax is actually 0%. If the "independent" OBR recognised that the income tax is legalised theft they'd realise why we need as little of it as possible.
    Theft as a term is meaningful only because the law says that the theft victim owned the item being stolen and laws says a person doesn't own what is taxed therefore it isn't theft.
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    (Original post by chefdave)
    The optimum rate of income tax is actually 0%. If the "independent" OBR recognised that the income tax is legalised theft they'd realise why we need as little of it as possible.
    Hmm..



    I think you need to rethink your views on what theft is and rethink your reasonings behind thinking a country gaining nothing in the form of income tax is better than the current rates. I imagine you have been listening to a certain Ron Paul too much, and that is a bad thing.
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    (Original post by TheHansa)
    Theft is theft because the law says that the theft victim owned the item being stolen and laws says a man doesn't own what is taxed therefore it isn't theft.
    Hence the word "legalised" in what you quoted. You're missing his actual point.

    Edit: people seem to think I'm trying to support the "taxation is theft" post. No, this post is just pointing out that if you want to argue against that principle, argue against the principle, not the semantics.
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    (Original post by TheHansa)
    Theft is theft because the law says that the theft victim owned the item being stolen and laws says a man doesn't own what is taxed therefore it isn't theft.
    Theft is theft because people think it's theft.

    You can thieve my hard gained coconuts on a deserted island if you like.
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    (Original post by ThePants999)
    Hence the word "legalised" in what you quoted. You're missing his actual point.
    No I'm not. Why should you own you're house, most of your wage and so on? I'm not saying lets get rid of property rights but don't complain too loudly.

    The question was not rhetorical please answer.

    (Original post by mimx)
    Theft is theft because people think it's theft.

    You can thieve my hard gained coconuts on a deserted island if you like.
    Thanks it's not theft now

    Yes and because the government thinks it's theft they have passed it into law making it theft.
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    (Original post by TheHansa)
    Theft is theft because the law says that the theft victim owned the item being stolen and laws says a man doesn't own what is taxed therefore it isn't theft.
    No. You've been brainwashed.

    If a man goes out to work and earns £50 but gets mugged on the way home and loses £20 the state quite rightly calls this theft.

    If a man goes out and earns £50 but has to complete a tax return at the end of the year and hand £20 over to the government the impact on him is exactly the same. This too is theft.
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    (Original post by chefdave)
    No. You've been brainwashed.

    If a man goes out to work and earns £50 but gets mugged on the way home and loses £20 the state quite rightly calls this theft.

    If a man goes out and earns £50 but has to complete a tax return at the end of the year and hand £20 over to the government the impact on him is exactly the same. This too is theft.
    Even if one plays this pointless semantic game and agrees that it's 'theft', I'm not sure how that makes it bad in every situation ever. It doesn't.

    I mean OK let's say it is theft... so?

    It's like saying abortion is killing babies and expecting someone who is pro choice to be convinced because you've made it sound all mean.
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    (Original post by ThePants999)
    Hence the word "legalised" in what you quoted. You're missing his actual point.
    Income tax isnt dishonest, thus is not theft.

    It can easily be argued income tax is taken in such a way that the money taken does not belong to you, given the agreement you made when you work is to have it taken. Essentially, you are not stopped after your shift and informed that income tax is now a real thing, you know about it beforehand. Thus it is not theft.

    Income tax is not used purely to deprive yourself of any benefit from it in order for the person (government) to gain benefit from it, as it goes towards many things a person would use and benefit from in day to day life. Thus it is not theft.

    So, care to tell me why it is theft?
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    (Original post by chefdave)
    No. You've been brainwashed.

    If a man goes out to work and earns £50 but gets mugged on the way home and loses £20 the state quite rightly calls this theft.

    If a man goes out and earns £50 but has to complete a tax return at the end of the year and hand £20 over to the government the impact on him is exactly the same. This too is theft.
    I appreciate the point, but the man's job depends upon and often takes from society. If I own a car factory I'm using resources other people could be using, I'm contributing to climate change, I'm taking workers other businesses could be using, I couldn't exist without the wider community so I should give back. I don't owe the thief anything more than I owe the old lady so his act was theft.
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    I've been wondering about this, the politics gets in the way of simple maths like this, it's much easier for them to announce they are changing the top rate of tax to a nice rounded number whereas actually the rate that will bring in the most money isn't going to be a nice round number.
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    There should be a low, flat tax. I'd suggest 20-25%.

    High tax rates are a fine for success. They are a penalty for aspiration.

    If we truly want to keep this country afloat, we must encourage wealth creation and the entrepreneurial spirit.
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    (Original post by Benniboi1)
    I've been wondering about this, the politics gets in the way of simple maths like this, it's much easier for them to announce they are changing the top rate of tax to a nice rounded number whereas actually the rate that will bring in the most money isn't going to be a nice round number.
    I doubt they can calculate the optimum rate to within 1% (or even 5%), never mind fractions of a percent.
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    (Original post by Aspiringlawstudent)
    There should be a low, flat tax. I'd suggest 20-25%.

    High tax rates are a fine for success. They are a penalty for aspiration.

    If we truly want to keep this country afloat, we must encourage wealth creation and the entrepreneurial spirit.
    The rich get the most from society. They benefit the most from infrastructure, they get corporate welfare, you could argue they get the most from the defence budget because they have the most to defend, need I continue? The relationship between what a person gets from the government and how a rich a person is, is clearly non-linear, the tax system should reflect this.
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    (Original post by mimx)
    I doubt they can calculate the optimum rate to within 1% (or even 5%), never mind fractions of a percent.
    Fair point.

    If someone's worked it out to be 48% though then I'd rather it were at 48% than rounded up or down to 50% or 45%.
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    48% is not the "optimum" rate. It is the optimum short term revenue rate. We need to have a much lower top rate to encourage top rate earners to work/stay here.
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    (Original post by TheHansa)
    The rich get the most from society. They benefit the most from infrastructure, they get corporate welfare, you could argue they get the most from the defence budget because they have the most to defend, need I continue?
    Doubtful. The cost of infrastructure and the like pales in comparison to social programs I believe.

    Certainly if you take the ratio of tax contributions into account it won't even be close to proportional with regard to utilisation of government provision.
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    (Original post by mimx)
    Doubtful. The cost of infrastructure and the like pales in comparison to social programs I believe.

    Certainly if you take the ratio of tax contributions into account it won't even be close to proportional with regard to utilisation of government provision.
    Let's kill the poor, no because the rich need the poor to become rich, the rich are living off the poor, so social programs are necessary.
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    (Original post by Tommyjw)
    I think you need to rethink your views on what theft is and rethink your reasonings behind thinking a country gaining nothing in the form of income tax is better than the current rates. I imagine you have been listening to a certain Ron Paul too much, and that is a bad thing.
    No, I think you need to isolate taxation and forget about the NHS, education, pensions etc when we're discussing the morality of government revenue.

    If I emptied the contents of you bank account but then recycled that money and bought you some food and clothes would this be enough mitigate the initial theft? If the answer is 'no' why make a special exception for the state?

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