Do you think income tax has proven a big disincentive for people to go out and work?
(To ancitipate an obvious rebuttal: yes, I will admit that inheritance tax has probably put people off the idea of dying.)
(To ancitipate an obvious rebuttal: yes, I will admit that inheritance tax has probably put people off the idea of dying.)
Inheritance tax is very unfair. If you are rich enough, you'll plan around it and avoid it. But if you're not rich enough, your kids will not only lose their parents, they'll be sent a bill from the government. Which at best is a tad insensitive.
Add to that the fact that the thresholds for inheritance tax haven't been raised properly, so that someone with a 1 bedroom apartment in London will be subject to inheritance tax, it all seems pretty unfair, and perverse for the government to effectively profit from peoples death.
You know that your entire income isn't taxed at the highest bracket's rate, right? So, for example, the highest bracket is 39.6% for income above $400k. If you make $410k, $10k is taxed at 39.6%, and the rest of your income is taxed at a lower rate.
Why bother trying harder if the government will take half of anything extra you make?
Given a hypothetical luxury good with a price of $500,000 under a current taxation regime, which do you think is more likely in a regime with, say, 50% higher taxes: That the luxury good ceases to be produced, or that its price is lowered to the point where a similar number of people as before could afford it?
To answer your second question is impossible - we don't know the shape of supply and demand curves nor do we know the initial rate of taxes. E.g. if the original taxes had been 1% then it's just going to bump the price a little bit. If the original taxes had been 50% then it ceased to be produced.
But if you want to know the general relation of taxes and supply and demand consider how things are going to progress as you keep raising taxes. Do you seriously believe prices are going to fall as the taxes raise?
What matters is the people who are actually paying the bulk taxes and making investments.
However, I feel that I'm already paying the government FAR more money than I should be, so I'm simply not bothered about trying to make them more money.
For simplicity sake, consider that first 100K are taxed at 10% and next 100K at 20%. If you made 100K your effective tax had been 10% i.e. you owed 10K to the government, however if you made 200K, even though the first 100K is still taxed at the same rate, your effective rate is 15% because you now owe 30K out of 200K.
Numbers vary, but it's definitely fewer than 5% and possibly fewer than 1% of households that need to do anything at all to avoid the estate tax. And these are people who have benefited immensely from services provided by the government (if only the services that keeps people from stealing their wealth!) and are really doing quite alright; adjusting the tax code to make them do even better seems unfair.
Secondly I have never heard of anyone who didn't want to make more money because of their tax bracket. I do not believe this phenomenon exists, and even if it did, it wouldn't strike me as all that much of a problem in a population with unemployment as high as our own.
http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm
You can get around it by 'gifting' things to your kids, as long as you then don't die for 7 years after etc etc.
On your last point, it certainly does exist. What I think happens is people like me don't bother trying so hard, because I'll be damned if I'm going to give the government more money. However, people who are already making much more than me, just hire a good accountant to 'make the problem go away' - eg register offshore companies etc etc
Are you seriously saying, that when the UK government had a higher tax rate of 97% in the 60s/70s, you would have been more than happy to do that extra overtime work, and would have gladly received your 3%??? Crazy
Anything over 49% is slavery, and will end up crippling the country rather than raising more tax revenue. Which is why it was absolutely right and proper that the current government reduced the top rate from 50% to 45%.