A drop in investment caused by the Chancellor slashing tax relief risks outweighing the extra income the Exchequer expects to gain from the changes, according to analysis by CBI Economics.
Its report says the Treasury has “underestimated the impact” of changes to business property relief (BPR), with the majority of family businesses forced to cut investment because of the raid.
Analysts estimate that 125,678 jobs will be lost as a result. Overall, the loss of economic activity will lead to a £2.6bn reduction in income from taxes such as corporation tax, income tax and national insurance over the next five years, the research suggests.
This is much more than the estimated £1.38bn in extra inheritance tax Ms Reeves hopes to raise from cutting BPR, meaning that the Exchequer will be £1.26bn worse off than under the status quo.
There really is a Laffer Curve, the rate of the peak is different for each tax in each society.
I’d not, wholly, greatly trust any one caclulation on where that number is but the existence of it is certain.
Could we be over it here? Sure we could.
Not sure where I hard this, but it was years back – maybe even in comments here. Pollies are greedy for5 money to spend, Therefore tax rates always do rise to just over the peak – it’s when yields start to fall that greed limits them. Not that anyone reallyconsciously thinks about this so much as trial and error leads to tax rates maximising revenue – or, going a bit over that rate.
It’s not just when the m revenue falls it’s when the political gains are outweighed by the losses that the politicos take note.
It’s a rare polly that leaves other people’s money on the table.
“ Analysts estimate that 125,678 jobs will be lost as a result.”
Bullshit.
Around 125,000 or over 100,000 is an estimate, that precise number is just false precision made to fool journalists in to thinking precision means accurate and therefore the research doesn’t need to be questioned.
In a welfare democracy all pollies buy votes by transferring resources to their voter base from disfavoured groups. Lefties take this a step further by using this as an opportunity to administer ideological punishment beatings disguised as “fairness”.
Thus, right-wing pollies will approach the optimum point on the Laffer Curve, but lefties will wildly overshoot out of sheer spite. Hence all the silly bollocks about Rachel From Accounts’ antics. They’re not about raising money. They’re a punishment beating. That they will end up as a net loss to the Treasury is a price well worth paying, as far as she’s concerned.
Funny how polly & Polly are interchangeable without altering the meaning.
“Analysts estimate that 125,678 jobs will be lost as a result.”
This sentence shows the quality of the analysis done. Namely, very poor. Because there’s absolutely no reason to believe that level of accuracy is possible.
Are the analysts going to fall on their swords if 125,679 jobs are lost? Of course not; at most they would argue that that extra job wasn’t lost due to this change.
I’m just amazed that this report of a tax change costing more than it gained was actually published though.
I don’t have a real handle on it but I always wonder whether the measures taken by so many to avoid IHT have a negative effect on the economy in themselves by distorting investment decisions. If so, elimination of the tax would cost nowt, but raising the threshold to a much higher level would possibly pay off.
Advani and Summers – the two Trots responsible for the current progressive view – insist that cuurrent rates actually make asset owners worse off than “higher” rates would. So, yes, you’re quite possibly right.
Analysts estimate that 125,678 jobs will be lost as a result.
I see this kind of thing all the time, especially in halfwit reporting of junk health science. “Eating more than 60g of processed meat a week is linked with a 13.2% increase in bowel cancer risk, scientists say.”
When confronted with a dodgy estimate one should challenge it. As in Claim: 20,000 people each year killed by air pollution in London. Q. What are their names?
“ When confronted with a dodgy estimate one should challenge it. As in Claim: 20,000 people each year killed by air pollution in London. Q. What are their names?”
The Studies Show podcast looked in to how they derive these sorts of numbers. The methodology is reasonable even if some of the actual studies are of poor quality and have their thumbs on the scales.
Probably came up with a model, tweaked it a bit & settled on the version that yielded 125,678. Then didn’t have the good sense to round it to “approx. 125k”. Their work might be solid, but publishing that number makes them look really silly.
My experience says that those on the Left don’t care about negative income from the Laffer Curve unless it is extreme, more often they’re moved by second-hand effects. Example, luxury tax rates hit the boat building industry much harder than expected and some Dem politicians’ constituent’s jobs and businesses were hurt – that got them to reverse course.
Also, there’s enough noise in the system for people to deny cause & effect related to a tax increase’s impact. There’s always something else going on in the world that can be blamed (see Putin’s price hike).
Under President Reagan the US cut income tax rates significantly (also simplified & removed a lot of deductions, etc.). Dems claimed this increased the deficit even though Treasury receipts increased substantially. More revenue after the tax changes still didn’t prevent the charge that this “cost the gov’t money.