Financial Times:
Free lunch: The wrong tax reform
25 June 2015
For the first question, the argument for lowering the rate is that a higher rate makes people behave in such a way that there is less income to be taxed in the first place. So a higher rate may not bring in much more money for the government - and may in theory shrink the total revenue. Whether this is the case with the UK's top rate is not obvious. In part this is because it has only been left unchanged for short periods - the 50p rate lasted three years and everyone expects the Tories to lower the 45p rate as soon as they see fit - so any behavioural change reflects people's attempts to time their tax burden rather than a long-term effect of a stable rate. But Alan Manning from the London School of Economics reports that the range of estimates agree on a small if uncertain effect on government revenues.
This article was published by the Financial Times on June 25, 2015
Link to article here
Related publications
'Top rate of income tax', Alan Manning, CEP 2015 Election Analyses Series, April 2015
Details here
Related video
'Top rate of Tax'
If politicians want to raise the top rate of tax, they need to do more to tackle tax avoidance and evasion. That is the main argument of Alan Manning.
View video here
Related links
Alan Manning webpage
Community Programme webpage
Labour Markets Programme webpage