Don’t we rather expect an accountant to be able to count?
This argument makes no sense at all. It is true that latest estimates (not data) suggest that those with the highest incomes will have paid more than £8 billion more in 2013/14 when compared to 2012/13 but let’s be clear why. They were told that if they delayed their income from March 2013 until sometime in April 2013 the tax rate would fall by 5%, and so they did just that. And as a result income was understated in 2012/13 and overstated in 20913/14. Official estimates show there is no expectation that this pattern should recur and of course there is not. This is a not a phenomena of the tax rate; it is a phenomena of the change in rate.
If in doubt, note that when the rate was introduced £16 to £18 billion of income was shifted, producing the almost exact opposite effect.
£18 billion shift in income. OK, equal and opposite effect. And the difference in tax rate is 5 p in the pound, or 5%. And 5% of £18 billion is £0.9 billion. Yet the rise in tax paid is £8 billion, some nine times the effect of income shifting.
So, given the numbers that Ritchie himself is using we’d probably come to the conclusion that while income shifting is indeed a thing it cannot explain the effect we’re seeing. Meaning that we might actually want to ascribe this to Laffer Effects.
As we might well do in fact. If we check the Diamond and Saez paper on the peak of the Laffer Curve again then we get a 54% tax upon income (note, tax upon income, including NI, employers’ NI) as the peak of the curve in a system with allowances. Allowances here meaning things like a different capital gains rate, investment tax breaks, the ability to change residence and thus tax jurisdiction and so on.
Hmm, theory and empirics meeting. How unusual that is in economics! And how obvious of Ritchie still to be on the wrong side of it.