Does Higher Tax Lead to Lower Economic Growth?

A look at whether higher tax rates lead to lower economic growth? UK tax burden has risen is this holding back growth. How does UK compare to other countries

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[lucasdeyton]

It's not necessarily the rate of tax, it's the weird tax traps that seem to take place uniquely in the UK. You have massive drop offs at the 100k mark that incentivises people to keep their income under this amount unless they're earning over £130k. It's not just the marginal increase on that income. It's loss of personal allowance, free childcare, Higher NI, and a plethora of other weird, honestly unexplainable pain points at this income level. It makes people dump this money in their pension to keep their income below this level, keeping money out of the economy and tax revenue from being generated.

[maxharbig]

It's taxing the "wrong" people that screws the economy. Then again how do you tax the "right" people when they can register their companies in tax havens or have non domiciled status.. All you have to d has o is look at Jacob Rees Moggs Somerset Plc registered in the UK but has never traded so never paid any UK tax. If you look at where his other companies are registered thyey are either in Brotish posessions or the ROI. Nothing against Moggy personally for taking advantage of an antiquated crappy system.

[Mitjitsu]

The issue is that poor and middle class have incomes. While the rich have profits and losses, because of that they have the ability to make their tax affairs tremendously complicated. We need to move away from the concept of taxing labour and instead tax wealth, but I doubt the current political class would ever want to do that.

[kobemop]

The reason why Singapore has "low taxes" is because they have state-owned enterprises (which help lessen the tax burden pushed towards the working class). It's also not a "free market" countries that Libertarians and other similar schools purports to. However, Western countries treat state-owned enterprises like a disease, and a majority of Western countries have privately-owned enterprises (also them canbalizing the public sector). Yes, up to a certain point you can't tax your way to growth. Yes, also higher taxes aren't amicable to attracting foreign investments (which is one of the driving factors for economic growths). China was able to get around this due to their high degree of state-ownership within the economy. The West to some degree like the US (mostly) are returning to some form of protectionism (and putting on massive tarriffs) obviously to protect the business interest of private American businessmen.

[thomasjgallagher]

Just looking at the comments, I'm sensing people kinda missed the point of the video, which was a good summary. Taxes gain a more visceral response. As an American in Europe, there is a bit of a tax shock on some things, but the longer one is here and kicks around the situation, I think one sees tax is a distraction. I think the most enlightened part of the video is the "professor's" acknowledgement of how rates affect his desire to work. Therein seems to be a big difference between the two sides of the Atlantic. There's a sizeable difference in gross and net incomes between the US and Europe and it seems to be getting larger as the US seems to be establishing itself as the destination for getting sophisticated and complex things done and being paid well if you can participate in it. Europe seems to be arguing about how to slice up a shrinking pie rather than growing the size of the pie. That's not true of everywhere in the EU, but certainly among the biggest economies.

[kenville]

The issue in the UK is that employed people pay by far the highest rates of tax, despite other cohorts being better off and/or using the same public services. Why is income from employment taxed higher than other forms of income streams? When you factor in direct taxes and Indirect taxes, employed people are paying 50% of their total income in taxes. Ad you have to then ask, why are public services so poor when all this tax is being paid? Anyone who has a skill is better of leaving this country for a better quality of life where you ger more for your money.

[vvwalker]

As someone who pays +50% tax (incl. Income tax, NI, council tax, VAT, fuel duty, alcohol duty, TV licence), I can understand why so many people are moving abroad. Low taxes that everyone pays will always beat high taxes that nobody pays

[TheOmfg]

I earn 100k from a swiss company. I’m already leaving the UK. I am not working my ass off to pay close to 50% ( business and income tax ) of it to either a lab or tory gov. They spend it so poorly its a joke.

[RoofLight]

Council tax banding is outrageously unequal and needs urgent reform and updating.
It is not right that the royal family pays the same for their sandringham estate than a terraced house in Woolwich.
Also the fact that virgin, Amazon, google and other multinational corporations can avoid paying their due taxes in the uk to the tune of billions a year is unconscionable and wrong.

[alexmiller]

Personally, i think the fact our mortgages and rent are so high, especially after the rate hike a year ago, this chews up so much more of our disposal income, and without money to spend, this will depress the economy

[mrmeldrew]

The 40% rate at £50, 000 is utterly punitive. My wife earns very little working part time and getting hit for tax at that rate really sticks in my throat.

[AxolotlFrieze]

Could you look at council tax revaluation or other changes in tax that the new Labour government may bring in to fund the shortfall in spending?

[jamesgeorge]

No one should pay more than 50 % tax, its immoral.

[Epidian]

Monaco isn't allowed to have French residents. Part of the deal the house of Grimaldi did with the 5th Republic so they could survive.

[PEdulis]

In my view, the most fair change in taxation would be to tax all incomes equally. I never understood why taxing "honest work" should be so much higher than taxing "passive income". Do you see any reason for this other than those mostly earning passive income lobbying for it?

[kjchronister]

Although I have interests in global economics I don't watch the news anymore... I have enough FUD lol. Thanks for this news and offering your insight on how to navigate during unfortunate times/events like this. You're right about keeping level headed when investing so that's why I think it's important to limit the amount of FUD we consume. I don't watch the media but the news that you present has enough to know issues going on without riding the emotional rollercoaster if I were to watch the news everyday. Now I buy and just trade long term more than ever, I have made over 16 btc from day trading with Francine Duguay in few weeks, this is one of the best medium to backup your assets incase it goes bearish.

[cookiejar]

There are some paradoxes as well. When Bulgaria cut taxes to a 10% flat tax, tax revenues actually went up because people stopped doing tax avoidance. Ironically, this tax cut was also introduced by a socialist government. Perhaps this can be a lesson to similar countries where tax avoidance is a problem.

[wrighty]

The obvious answer to the video title is yes - look at our current situation. You can't tax your way out of a hole. Its a compound issue with 7 million on out of work benefits (funded by tax) and those low earners caught by income tax. Then they raise corporation tax and dividend tax for those looking to go out and take risks running their own business, these people are further suffocated by IR35. We are taxed 20%-50% on our income, then 20% VAT on everything we buy, road tax to drive our cars, capital gains on our investments, inheritance tax on things our elders worked hard for. Its FAR too complicated and the government need to get people spending instead of wasteful spending and getting greedy putting their hand in the pot. Its not their money - they stole it from everyone who has a job or is trying to make head way in life.

[Daytona]

The sanity check for taxation is how much it raises vs how much it costs to collect. istr there are taxes in the UK that consistently cost more than they raise - another vid Tejvan ?
As a check on badly designed taxes, and to highlight them, the government should work out peoples tax for them and tell them the cost of doing so, when they bill them.

[fern]

The boss is in town with the good question : Does Tax Lead to Lower Economic Growth?
How does the taxer use money better than the taxee?