Daily Archives: May 8, 2010
I expect a lot of people due tax refunds will be submitting around this time of year, just as soon as they have the relevant documentation. I wonder if the level of tax refunds in the first quarter of the tax year might offer a measure of the Laffer effect?
Unfortunately it won’t, because it can’t tell us anything about revenue lost due to economic activity that simply hasn’t taken place because tax renders it worthless. We know that low-income jobs (and voluntary work) are often taxed at effective rates in excess of 100% due to loss of means-tested benefits, which is why only foreigners can be recruited to many jobs. I understand now a lot of high earners such as doctors are cutting down on work rather than pay marginal rates of 74% (rising to 76%), and for the same reason I’ve lost the appetite for a payrise.