Do Taxes on the Rich Raise More Revenue?

Robert Frank in the WSJ:

"The debate over taxing the rich in the U.S. seems to center on “fairness” – who pays too much or too little. Yet there is little discussion about a more immediate question: Would it raise the expected revenue?

Great Britain's recent experience may be instructive. The U.K. is imposing a new tax rate of 50% for those making £150,000 a year (about $236,000). There is a fierce battle between British Chancellor George Osborne, who wants to scrap the tax, and many Liberal Democrats, who want to preserve it.

The Chancellor has asked for a study to find out how much revenue the tax has raised, though hard numbers won't be available until next year. It was expected to raise £2.7 billion a year.

A report from Britain's  Institute for Fiscal Studies said the tax is costing the treasury £500 million a year, instead of earning billions. The reason: High earners are simply finding ways to avoid the tax. Top earners are hiding income or moving their earnings offshore.

“It looks like the 50% rate may be too high and that it is possible it will reduce tax revenues,” Paul Johnson, director of the IFS, told the Telegraph." 

MP: I think the answer is usually "No."

HT: Peter Parlapiano