Higher top tax rate will slow economic performance

A new study from the Adam Smith Institute in the United Kingdom provides overwhelming evidence that class-warfare tax policy is grossly misguided and self-destructive, says Daniel J. Mitchell, a senior fellow with the Cato Institute.

  • The authors examine the likely impact of the 10-percentage point increase in the top income tax rate, which was imposed as an election-year stunt by former prime minister Gordon Brown and then kept in place by his successor, David Cameron.

  • They find that boosting the top tax rate to 50 per cent will slow economic performance.

  • And because of both macroeconomic and microeconomic responses, tax revenues over the next 10 years are likely to drop by the equivalent of more than $550 billion.

    President Obama wants to impose similar policies in the United States and there is every reason to expect similarly poor results, says Mitchell.

    Source: Daniel J. Mitchell, A Victory for the Laffer Curve, a Defeat for England's Economy, Cato-at-Liberty.org, April 4, 2011.

    For text: http://www.cato-at-liberty.org/a-victory-for-the-laffer-curve-a-defeat-for-englands-economy/

    For study: http://adamsmith.org/files/tax-paper-final%281%29.pdf

    For more on Tax and Spending Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=25

    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 12 April 2011
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