The interaction of pensions and tax rules means that some doctors – and other well paid professionals on a similar defined benefit pension path – face tax rates of over 100% on marginal earnings. Therefore, obviously enough, doctors in that situation tend not to do the extra work. This is causing chaos in the NHS.
It’s also an interesting example of the point that the Laffer Curve is obviously true. Or, to be precise and accurate, that there’s a rate of tax at which the substitution effect overcomes the income one and people really do withdraw their labour and we have a smaller economy.…See More