Scotland shows the limit of high taxes
22 December 2023
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IEA Research reference in The Telegraph
Sharper Axes, Lower Taxes, an IEA paper written in 2011 by for Academic and Research Director Prof. Philip Booth, has been referenced in a Daily Telegraph article discussing Scotland’s new 48p top rate of tax.
The piece said:
“‘Behavioural responses’, it outlines, will cause big reductions largely offsetting the gains calculated on ‘static’ assumptions of no taxpayer response. The new 48pc top rate, it says, will bring in virtually nothing at all.
“This use of ‘dynamic costing’ is a most welcome contribution from Scotland’s equivalent of the Office for Budget Responsibility (OBR).
“But dynamic costing should not stop at these basic effects on revenue due to labour supply shifts. The effects go far further, to impacts on capital investment and productivity growth from both business taxes like corporation tax and the higher rates of income tax paid by entrepreneurs on their profits.
“These do two key things: they reduce the return on capital, reducing investment and capital through substitution with labour.
“The best accessible review of the post-war evidence on how growth is damaged by tax is still the Institute of Economic Affairs’ Sharper axes, lower taxes, published in 2011 and edited by Prof Philip Booth.”
Read the full piece here.
You can also read Sharper Axes, Lower Taxes here.
The piece said:
“‘Behavioural responses’, it outlines, will cause big reductions largely offsetting the gains calculated on ‘static’ assumptions of no taxpayer response. The new 48pc top rate, it says, will bring in virtually nothing at all.
“This use of ‘dynamic costing’ is a most welcome contribution from Scotland’s equivalent of the Office for Budget Responsibility (OBR).
“But dynamic costing should not stop at these basic effects on revenue due to labour supply shifts. The effects go far further, to impacts on capital investment and productivity growth from both business taxes like corporation tax and the higher rates of income tax paid by entrepreneurs on their profits.
“These do two key things: they reduce the return on capital, reducing investment and capital through substitution with labour.
“The best accessible review of the post-war evidence on how growth is damaged by tax is still the Institute of Economic Affairs’ Sharper axes, lower taxes, published in 2011 and edited by Prof Philip Booth.”
Read the full piece here.
You can also read Sharper Axes, Lower Taxes here.
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