Some of the suggestions I make on behavioural responses may be countercultural to many people. For example, I suggest that many people who are asked to pay more tax work more, rather than less, as a result, although microeconomic theory would usually suggest otherwise. However, microeconomics can be wrong. The reality is that many people live in a world where they have very strong fixed financial commitments, so tax increase requires them to work more, whatever microeconomic theory says.
Microeconomic theory says that there are two interacting effects. The income effect – taxes have risen, I need to work more hours in order to make my nut before I go off fishing – and the substitution effect – taxes are what? Bugger work, I’m off fishing.
The labour supply response to a change in taxes is the aggregate of those two effects. Theere are entire libraries full of empirical work – that is, not theory but observation – estimating who is subject to which and how much.
The general finding being that the low paid on piecework go for the make my nut response, the high paid the buggerit millennium hand and shrimp. This is observation, noting what homo sapiens sapiens tends to do, not theory. The aggregate effects simply are that – for of course there are individual exceptions to everything we say about human behaviour.
He is an ignorant sodding tosser.
Enjoyably, this is how he predicted, 15 years back in a report for the TUC, that higher tax rates on the higher paid would lead to more wives of the higher paid going out to work. The actual empirical finding being that the wives of the higher paid are more subject to the substitution effect – not the income one – than any other group within the population.
Impressive to still be factually wrong after 15 years really……
I always remember PJ O’Rourke talking about how Swedish surgeons would decorate their own homes because of the super high tax rate. It was effectively cheaper for them to take unpaid leave than to earn and pay a decorator.
Capt. Potato invents the Laughter Curve.
Imagine having a primary hobby of sitting around fantasizing about making other people poorer. New nonsense every day, bordering on monomania. It can’t be much of a life.
I saw the genius professor in the flesh the other day. (I had an afternoon in Ely). The fat fucker was outside a coffee shop, on his own, getting hot and angry at a crossword.
“the wives of the higher paid are more subject to the substitution effect”
What does that mean exactly – is it the wives or their husbands who turn down work when taxes rise?
Those on piece work or with overtime available, can extend their work until they’ve reached their necessary nut, but that’s a small-and-shrinking part of the working population. Most people have to ask the boss for a raise, find a new job or go on strike depending, all of which are much harder behavioural responses since they are dependent on others.
The only option that isn’t is “suckling it up”.
If the kartofel fuhrer had ever had a proper job, he might understand this.
Murphy wanted to claim that taxing the men more would drive the women out to work to boost household income. Also he wanted joint taxation. But the people must subject to substitution are wives of high earners in joint taxation systems. Because they can work less in hte market but more at home – get rid of the au pair – more easily than anyone else.
I’m currently paying the maximum I can get tax relief on, into my pension. The aim being to retire at 55 to get out of the current mess where I pay lots of tax/NI for shite services.
There is no way I’m going to pay more tax for the idiots in Westminster to spunk away. They’ve already had well over £450k in tax and £100k in NI during my working life and I’m not even particularly highly paid.
Once retired, I’ve no intention to live in the multi-cultural cess pool that mass immigration has created. I’m off somewhere in the old Eastern bloc (Poland, Hungary, Slovakia) where they don’t put up with the woke bollocks.
Joe Smith
Congratulations, you have now paid enough in tax and ni to more than cover your own lifetime state cost of education healthcare and pension. That adds up to about half a million.
You’ve actually paid a bit more than you think as employers get (virtually) nothing for Employers NI, so it’s really a straight but hidden tax on the value of your work of about another £100k.
Anyway, please keep paying in, the feckless dole scrounders need your money.
Also Krarow is well worth a look.
The low paid tend to “sod it I’ll stay on the dole and watch sky all day”.
The man’s a moron. I’m self employed. I will work less rather than give more to the taxman. If it looks like I might slide into the next tax band, I’ll take an extended holiday before I pay those greedy fuckers one more penny than I absolutely have to. Tax is little more than state sponsored theft and I treat it accordingly.
On pension tax relief, once you earn enough they take that away as well except for a rump amount which was as little as £4K recently. Earn £350k and that’s almost all taxable. At least the Truss effect meant they raised the allowances hugely.
We are now actively planning to move on retirement to avoid paying any tax to HMRC. Capital Gains, dividend income, pension income, and most likely death will all occur outside the UK if at all possible.
When I was fairly high paid, I told my (then prospective) wife that it would be her choice whether she worked or not. She chose to work until our first child was born because she thought that her job was beneficial; and restarted work, unpaid, for a charity after our younger child started school. She subsequently moved into paid employment because the County Council asked to act as a liaison between Social Services and that Charity and later to do more because she was clearly more competent than their staff.
The amount of tax I paid was totally irrelevant.
Joint taxation makes a lot of sense for the family.
The current system encourages dishonesty so that the personal allowance gets transferred to the stay home spouse – pretending that wife does £12,700 of secretarial work or £49,999 of IT support for your business.
Just legalise the transfer of allowances.
And let everyone keep a personal allowance over £100k, that 65% marginal rate up to £125,400 is a particular bug bear of mine, and reinstating the allowance should be a tax cut that pays for itself according to the lit.
‘When jobs website CV-Library asked 2,000 workers what is most important to them, 60pc said “my happiness and a better work life balance”. Barely one-in-five chose “money to support my lifestyle choices” and just 18pc said “having a successful career”.’
From an article in the Telegraph today with the headline ‘How an epidemic of working less gripped the economy’