The UK may be on to something

Posted: Dec 09, 2011 |Comments: 0 |

In 2009 the UK announced a new 50% bank payroll tax on bonuses of more than GBP25,000.  The intent was to raise money to pay for the massive bank bailout they (like us) had to undertake in 2008. 

What if the tax had been an income tax rather than a payroll tax?  Individuals who work at these places would have suffered and they would have been more inclined to choose another profession - provided the surtax was big enough. We are constantly being told that our best and brightest are choosing careers in areas that do not benefit the country as a whole.  We lose physicists to Wall Street and our best lawyers to Washington where they become lobbyists.  No one starts up a manufacturing business and our top graduates rarely choose to teach.

Rather than just ignorantly flattening the income tax system we could create brackets based on economic utility.  The marginal rates for bankers would be 85% on all incomes above $500,000 and 60% for income above $50,000.  Lobbyists and personal injury lawyers - same thing. 

If you work for a firm that manufactures goods in the US, the rate would be 10%.  If the firm just imports the goods from China - 85%Teachers -10%.  Education bureaucrats - 85%. Research scientists - 10%. Medical GP's -10%  Cosmetic surgeons who work on the rich (not the injured) - 85%.Army volunteers - 10%  3rd party military contractors - 85%

The corporate tax system could be similarly aligned.  If your company outsources then a flat corporate tax of 50% would be levied.  If you're angry about it, that's OK - you can relocate your horrible parasitic enterprise elsewhere.  If you employ ony US workers and you are a manufatcuring company then there is no corporate tax applied at all.  Tax dodging companies will have a 50% VAT applied to their goods sold in the US.

Every university student and executive would have to take these extreme differences into account as they choose majors and headhunters.  Even support personnel and hourly workers would be affected so they too would seek out manufacturing companies rather than hedge funds.

Instead of subsidizing businesses that we feel are important (like Solyndra) we should be forcing our best and brightest to work for them.

Retrieved from "http://www.articlesbase.com/economics-articles/the-uk-may-be-on-to-something-5470871.html" Christopher Evans - About the Author:

Chris Evans is an investment research analyst - a CFA and CTA, with a degree in economics from Cornell.

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