High tax rates really do stop people working
In the Bristol, North Somerset and South Gloucestershire NHS healthcare region he works for, just 9.4pc of GPs work full-time – the lowest share in England. But it is far from an isolated problem.
Telegraph analysis of NHS data shows that fewer than one in five GPs (19pc) now works full-time, down from 27pc in 2019.
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They also warn that working more hours threatens to leave them out of pocket because of a tax system that punishes those who earn over £100,000.
Tax rates go over 60% at that point, what with the withdrawal of the personal allowance. Rather more if we think of the withdrawal of freebie child care, isn’t it?
…senior colleagues warn newly qualified GPs against full-time work.
The result?
Just 11pc of fully qualified GPs aged under 40 now work full-time, compared with 19pc in 2019.
Of course, some of this is the feminisation of the profession, something we’ve remarked upon a number of times before. Women are more likely to go part time given maternity and children issues. Perhaps it shouldn’t be so in a truly equal society but it is, still, so.
But the examples being used here are of men, the statements are more general and there are those tax issues. At some level of taxation of income people do supply less labour. The substitution effect dominates the income effect and that’s where we get our Laffer Curve from.
No, it’s not true that the level of tax at which labour is withdrawn marks the peak of the Laffer. But where it’s sufficiently pronounced that the tax revenue from the withdrawal of labour beats the increased rate of taxation. But still, we are at minimum seeing the effect at which the process starts to happen.
As we should of course. The best academic work - Diamond and Saez - tells us that the peak of the Laffer is 54% tax upon incomes. No, not income tax, all taxes upon income. That £100,000 barrier is well above that, we’d expect to see such effects here. People really do stop working when they think it’s not worth it.
Which is something to really keep in mind. We’ve not got any detailed and specific calculations on what level of a wealth tax marks the peak of the Laffer. We have some indications, even some ideas. At least one of which is that any wealth tax, any taxation of actual capital at all, is over that peak when considered across time.
The Laffer Curve really does exist, the peak rate will be different for each and every tax in each different society. We are already seeing it in taxes upon income in the UK. Let’s not now institute wealth taxation over said peak, eh? Which, as we say, might well be 0%.
Tim Worstall