Why bother working at a 100% tax rate?
THERE’S this idea out there, this Laffer Curve thing. The idea is that at 0% tax you’ll not collect any tax revenue. Fairly obvious really. And at 100% tax rate no one will bother going to work. Also fairly obvious. At rates in between people will go to work: and there’s one tax rate somewhere that maximises the tax take.
Of course, everyone argues that we’re never going to have a 100% tax rate. Just not going to happen.
The problem is we’ve actually already got a 100% tax rate. As you move from no work to some work, if you’re a single parent, you do indeed end up hitting income levels where the effective tax rate is 100%. And of course people don’t in fact work through those tax rates. They quite deliberately, and sensibly, stay below them. Which is the real problem we’ve got with welfare. Not that too many get it, not that it all costs too much, but we seem to have managed to make it not worthwhile trying to get out of it.
And how in God’s Name did we create a system with above 100% tax rates on the friggin’ poor fer cryin’ out loud? Seriously, someone should hang for this.