Realist, not conformist analysis of the latest financial, business and political news

British Surgeons Prove The Laffer Curve

The Laffer Curve is simply a truth about our universe

That is, British surgeons not just test the Laffer Curve, one meaning of prove, but actually prove to be true the central contention. There’s a level of taxation at which people withdraw their labour, thereby making the economy smaller – and thereby reducing tax revenues.

We have reached this in the UK already:

Patients will face longer waits for operations this winter as surgeons refuse to work overtime because of a pensions “tax trap,” senior doctors have warned.

More than two thirds of consultant surgeons say they have cut their hours, in a bid to protect their earnings

A combination of tax and pensions rules mean doctors can be hit with tax rates of more than 90 per cent on their earnings – including their pension contributions – if they earn more than £110,000 a year.

It means consultants are substantially cutting back on any overtime or weekend work as they can be taxed thousands for earning a penny over the threshold.

A poll of almost 2,000 doctors reveals that 69 per cent of surgeons have reduced the amount of time they have spent working in the NHS as a direct result of pension rules.

Don’t allow anyone, ever, to say that the Laffer Curve is incorrect. The only useful argument to have about it is what is that top tax rate which causes the fall in economic activity and thus revenue. Denial of the existence of such a rate shows that the tax denier should be no-platformed. After all, that’s what we do these days with people who deny obvious scientific reality, isn’t it?

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4 years ago

There is also a different, separate, argument to have – is £110,000 too low a rate upon which tax relief on pension savings start getting the cut, or is £110,000 too much to be paying what appears to be a large number of doctors?

For both cannot be false at the same time, surely?

4 years ago
Reply to  PJH

If you are writing the tax code and your philosophy – rather than “primum non nocere,” don’t cross the Laffer point of diminishing returns – is to massage private decisions so the prices of things are pretty, then you WILL cause diminishing returns.

4 years ago

And docs surely reduce further the time spent with patients, even before hitting the threshold, in order to carefully review their annual income to make sure they don’t hit it.

Arthur the Cat
Arthur the Cat
4 years ago

“they can be taxed thousands for earning a penny over the threshold”

That is considerably more than a 90% tax rate, more like 200,000% and up.

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