Ritchie on the Laffer Curve

As I’ve always said: we’re already on the downward sloping part of the Laffer curve. That means cutting rates means less tax. And as night follows day, that’ s what is happening.

Could even be true. So Ritchie\’s evidence is:

Last month Treasury receipts from VAT and income tax – which we all pay – rose by 6.4 per cent relative to October 2011.

So we\’ve lowered the top income tax rate and raised by a grand or so the personal allowance for income tax and receipts have risen.

We might indeed be on the left hand part of the curve now but clearly we were on the right hand side of it before these tax changes.


14 thoughts on “Ritchie on the Laffer Curve”

  1. Additional rate cut doesn’t come into effect until next April..

    Tim adds: Excellent! Then all of the rise in income tax comes from raising the personal allowance!

  2. The reduction in the Additional Rate to 45% becomes effective in April 2013.

    Which just goes to show that Portuguese scandium oligopolists may not be the best people to comment on UK taxation.

    Murphy is talking about corporation tax, not income tax. His evidence is that a 7.7% relative reduction in the corporation tax rate has resulted in a 10.3% fall in revenues for one particular month. Someone more sceptical in his handling of evidence might have suspected that other effects could be at work.

  3. I thought the upward sloping part of the curve was the part where raising tax rates raises revenue and lowering tax rates lowers revenue?

  4. “all of the rise in income tax comes from raising the personal allowance”

    There are no other possible factors? In an economy of between 60 million and 7 billion “actors”?

  5. Afaia, latest income tax data showed receipts fell between 2010-2011 and 2011-2012.. by almost £2bn if memory serves?..

  6. However, Sir Murphalot seems to have missed the impact of falling company profits.

    BP springs to mind, as do all those banks with PPI compensaton charged against profits.

    £12-£15bn so far iirc, though it needs somebody else to comment on how the timing has hit October figures.

    eg, Guardian on Barclays setting aside an extra £700m:

    “The additional £700m is likely to result in Barclays reporting a loss for the third quarter, figures for which will be released on 31 October. The bank also admitted that it may need to put yet more money aside in the future.”

    Murphy is gloating about a drop of £900m, and that is about 80% is it from a single one-off charge from a single company.

    You’re off on this one, Tim, but Murphy’s claim is baseless.

  7. Correction, of course it’s the *tax* on £700m of profits that the Govt has lost, which is more like .. um .. £180-200m?

    Point still stands, however, and there are more banks.

  8. The other slightly remarkable thing is Ritchie “as I’ve always said”. Usually he denies that the Laffer curve exists. Sometimes he qualifies that “for any meaningful tax range”.

    So, regardless of reality and just looking at WGCE consistency, some imaginary right wing theorem is now sufficiently supported by Ritchie that he always subscribes to it? That’s a bit of a change of heart.

  9. Yes, surely the glorious thing is that he accepts that the Laffer Curve exists?

    More rejoicing over one sinner who repenteth…

    (even if he does seem to read it from right to left)

  10. Didn’t that man from Chicago once say, If cutting taxes increases government coffers you aren’t cutting them enough!

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