Tax rates over 50% - Confiscation or Justified

[Geoffrey Howe]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

US being largest economy often sets the tone so Reagan's tax cuts more or less set the tone and others at various times followed.  In 1980, most developed countries had top rates over 60%, whereas today none do.  Although to be fair only a few countries went over 90%.  UK went as high as 95%.  By contrast Germany never went above low 60s and France I believe maxed out around 2/3.  Today most developed countries have top rates between 40-55% with average in mid 40s.  For developing countries most are in 20s or 30s with only a handful over 40% (India and China exceed 40% but most don't) while over 50% only applies in around a dozen or so countries, mainly in Europe but Canada and Japan are over 50% while Israel is exactly 50%. 

Well Geoffrey Howe cut them before Reagan, but simply from the very high levels of the 1970s. It was Nigel Lawson who brought them down to where they are now.

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

By making the "overtaxed" high earners poorer than they otherwise would be. My argument is that the rich getting poorer and thus having less power relative to everyone else can be a (limited) social good in itself.

"You'll fall on the wrong side of the Laffer curve!" is a trap too many wonkish socdems fall into. Their presumption is that income taxes etc. can only be justified (rather than "confiscation") so long as they provide more revenue. I disagree.

How will they be poorer if they're not paying the tax?

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

By making the "overtaxed" high earners poorer than they otherwise would be. My argument is that the rich getting poorer and thus having less power relative to everyone else can be a (limited) social good in itself.

"You'll fall on the wrong side of the Laffer curve!" is a trap too many wonkish socdems fall into. Their presumption is that income taxes etc. can only be justified (rather than "confiscation") so long as they provide more revenue. I disagree.

How will they be poorer if they're not paying the tax?

Essentially, the Laffer curve means that past a certain level in taxes, total revenue decreases even as taxes rise. They are paying the higher percentage of tax, but from a pie that is smaller to begin with because higher taxation of an activity results in less of the activity happening to begin with.

For instance, a 70% income tax bracket would discourage certain employers from paying out salaries that extend into that bracket (they would know most of the money in that bracket would not go their employees).

One of the main reasons there is less revenue is because of tax avoidance at those levels, meaning inequality wouldn’t be reduced as much. If the pie is smaller there is going to be less redistribution. Finally, it’s important to bear in mind that the (e.g.) 70% is only the marginal rate.