Not enough jokes, but still interesting
Mr Cam is reportedly thinking about rescinding Gordo's tax rise for those earning over £150k pa.
Good. And let's hope his thinking doesn't take too long. Because the point about Gordo's new 50p tax rate is that it will almost certainly cost the government money.
Why?
Well, it's a textbook example of the famous Laffer Curve - the idea that beyond a certain point, increases in tax rates will reduce tax revenue, as individual taxpayers change their behaviour to escape the higher rates. In the words of the Institute for Fiscal Studies, higher income tax rates incentivise taxpayers to "work less, retire earlier, emigrate, contribute more to pension or charity, convert income to capital gains, incorporate, and invest in tax avoidance".
Now, according to the government's own forecasts, the new 50p rate will raise £2.4bn pa, even after taking account of those behavioural responses on the part of taxpayers.
But according to the independent and authoritative IFS, it "could actually cost money".
For one thing, the IFS points out that the government's figures exclude the impact of the higher income tax on consumer spending. That will undoubtedly fall, cutting VAT and other indirect tax receipts "by up to £1.5 billion". Which slashes the government's £2.4bn revenue figure by over 60%.
The IFS has also done its own analysis of experience during the 1980s when the Thatcher government famously cut top income tax rates and saw a substantial rise in income tax revenues from higher rate taxpayers. They identify a much stronger response than the government assumes.
Indeed, they estimate that the revenue maximising marginal income tax rate for those on incomes of £150k and above is just 41%.
Cutting the gobbledigook, the IFS is saying that Thatcher/Lawson's existing top 40% rate is more or less spot on the peak of the Laffer Curve, and any increase is likely to cost the government money.
Here's the IFS's stunning picture:
As we can see, whereas the IFS places the peak of the Laffer Curve for high earners at a marginal income tax rate around 40%, the government places it at well over 50%.
Now, who are you going to believe?
So given that Gordo's new tax is going to make his fiscal black hole even blacker and even deeper, you may be asking why he's going to do it?
You're not? Well, I'm going to tell you anyway.
You see - and brace yourself because this may come as a shock - our leader is an unreconstructed socialist. He not only believes that government is better at spending our money than we are ourselves, he also believes that high incomes for the few are A Bad Thing.
So although this measure will end up costing all of us, and although we'll all have to pay more taxes, and although we'll all be poorer as a result, we will benefit from knowing that the rich have been whacked good and hard. According to the IFS, there are only 350,000 of those bastards, and we all know they've got it coming. Think how much better we'll feel as we pay our own eye-watering taxes.
The thing is though, Mr Cam is not a socialist. If reports are to be believed, he's a Tory. And Tories... well, they're supposed to believe in prosperity and individual effort and enterprise and all that other stuff.
Aren't they?
Mrs T and I are off this weekend for a few days sunning ourselves on the glittering promenades of Manchester. Wouldn't it be great if George stood up and gave us another of those game changing speeches of his.
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