55% is over the peak of the Laffer Curve for income tax

Taking money away from someone is taking money away from someone. Therefore the taper - the amount by which Universal Credit is reduced - is the same as income tax plus NI on wages. Thus:

For every £1 I earned, my Universal Credit was reduced by 55p.

….

One week I sat across a Formica table from my job coach and sobbed that I was very close to running out of money and didn’t know what to do. Her response was unexpected – and illegal. “Look for cash-in-hand work,” she whispered, adding that I might find success helping non-English speakers hone their language skills.

….

In the end, I realised that if I couldn’t find well-paid work, I would try to make the most of my time in unemployment by improving my skills.

I signed up for a six-week evening philosophy course on Nietzsche and began taking art classes.

Doing Nietzsche seems an extreme response to any incentive at all but there we are. Still, a 55% tax rate is so extreme that people will do that rather than hunt for work and even the JobCentre lady thinks it too much to the point of advising upon tax evasion and direct lawbreaking.

55% is too high a tax rate, one over the peak of the Laffer Curve we’d suggest. Top end taxes upon income, including employer paid, get to that level, as does, near enough, dividend tax when the original corporation tax is included. We require tax rate cuts and yes, tax rate cuts for the higher paid and richer - because that will increase tax revenues. As also tax cuts for the poorer because that will also do so.

This observational evidence is nicely backed by the academic, which says the peak on incomes in the US is 54%. Given that the UK system has more allowances - we can leave the country, for example - ours will be lower. Tax rate cuts now!

Tim Worstall