\”Bankers’ bonuses and pay at the top end of the financial services industry have driven Britain’s rising inequ ality over the past decade, new research from the London School of Economics shows.\”
But there are bankers, economists and Tories out there who deny this very obvious reality.
It could be said that this is a statement of the bleeding obvious.
And it could be asked why we needed research to prove this.
I dunno who he thinks has been denying this very obvious reality. Some small group of people start making money like gangbusters, inequality of incomes goes up.
Well, the and is this little giggle in the report he\’s quoting (quite apart from Ritchie\’s assumption that a rise in inequality is bad, m\’kay?):
There are two common arguments against raising marginal tax rates on bankers (or
indeed more generally on high-skilled high-earners). First, it is suggested that the
behavioural responses of labour supply and effort, changes in the form in which
compensation is taken and reduced compliance will result in the tax yield being
significantly lower than expected. Evidence suggests that such responses are larger for
highly paid workers facing higher marginal tax rates.
And they footnote this as follows:
Gruber and Saez (2002) suggest that the overall elasticity of taxable income with respect to marginal tax
rates lies between 0.4 and 0.6, with higher elasticities for the highest earners.
Which is a little problem for Ritchie. For in one or other of the reports he\’s written recently he insists that raising the top rate of tax will actually increase tax revenues. For he argues that high earners have \”lower\” elasticity of taxable income with respect to marginal tax rates.