Wednesday, 11 January 2017

Now this is just wacky

In the UK the Labour Party Leader Jeremy Corbyn has suggested setting a maximum earning limit or, effectively, a marginal tax rate of 100%. Here is a two minute video in which Institute of Economic Affairs Director General Mark Littlewood explains why such a 'maximum wage policy' is economically and socially a terrible idea - and why such a policy would even stand to hurt Corbyn's own agenda.

The most obvious point is that high income earners, who are very mobile, just get up and leave the UK or cut back on the work they do. Littlewood makes this point with the example of footballers in the UK. This would reduce the amount of tax that the government gets from high income earners, not increase it. You must also wonder what effect it would have in the long-run on innovation and growth.

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