What the IMF really said:
For some perverse reason both the Daily Mail and the Guardian wrote up a recent International Monetary Fund (IMF) report as supportive of the Labour party's policy of increasing tax rates.
Both took a quote from the IMF's fiscal monitor which did indeed read as follows
The quote above refers to OECD countries as a whole, and is NOT specifically aimed at Britain. The report goes on to suggest that
But this is not the case in Britain.
As we all know that extreme right winger George Osborne cut the top rate of income tax in Britain a few years ago from ...
50% to 45%.
That's right, after the Osborne top rate tax cut (which appears to have cost the UK exchequer a big fat zero in lost tax revenue), the top rate of income tax in Britain of 45% is currently one percentage point ABOVE what the IMF recommends as the optimum rate.
So they are not recommending tax increases in Britain at all.
Once you increase taxes above a certain level, you don't bring in any more revenue as people start doing things like employing creative accountants, moving money overseas, or not bothering to work as hard. There is some scope for argument about what rate of tax brings in the most money but I have always suspected that it is somewhere in the decile from 40% to 49% and definitely below 50%. The IMF figure of 44%, if perhaps quoted with spurious precision, sounds about right to me.
People just will not regard it as fair, or work as hard, if you take away half or more of every extra pound they earn.
As the Economist magazine explains in further detail in an article called taxing the rich,
"So not really support for Mr Corbyn at all."
Both took a quote from the IMF's fiscal monitor which did indeed read as follows
"there would appear to be scope for increasing the progressivity of income taxation without significantly hurting growth for countries wishing to enhance income redistribution."and those newspapers took that as encouraging a rise in tax rates in Britain. Actually that is NOT what the report says.
The quote above refers to OECD countries as a whole, and is NOT specifically aimed at Britain. The report goes on to suggest that
"Assuming a welfare weight of zero for the very rich, the optimal marginal income tax rate can be calculated as 44 percent."and compares this with the average top tax income tax band in the OECD of 35%. So there is scope for those countries whose top rate of income taxes is in that area to increase it.
But this is not the case in Britain.
As we all know that extreme right winger George Osborne cut the top rate of income tax in Britain a few years ago from ...
50% to 45%.
That's right, after the Osborne top rate tax cut (which appears to have cost the UK exchequer a big fat zero in lost tax revenue), the top rate of income tax in Britain of 45% is currently one percentage point ABOVE what the IMF recommends as the optimum rate.
So they are not recommending tax increases in Britain at all.
Once you increase taxes above a certain level, you don't bring in any more revenue as people start doing things like employing creative accountants, moving money overseas, or not bothering to work as hard. There is some scope for argument about what rate of tax brings in the most money but I have always suspected that it is somewhere in the decile from 40% to 49% and definitely below 50%. The IMF figure of 44%, if perhaps quoted with spurious precision, sounds about right to me.
People just will not regard it as fair, or work as hard, if you take away half or more of every extra pound they earn.
As the Economist magazine explains in further detail in an article called taxing the rich,
"So not really support for Mr Corbyn at all."
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