Daniel Hannan writes in the UK The Telegraph with Memo to the Occupy Protesters: here are ten things we evil capitalists really think.
If you want the rich to pay more, create a flatter and simpler tax system. This is partly a question of closing loopholes (mansions put in company names to avoid stamp duty, capital gains tax exemption for non-doms etc). Mainly, though, it is a question of bringing the tax rate down to a level where evasion becomes pointless. As Art Laffer keeps telling anyone who’ll listen, it works every time. Between 1980 and 2007, the US cut taxes at all income levels. Result? The top one per cent went from paying 19.5 per cent of all taxes to 40 per cent. In Britain, since the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the wealthiest percentile has risen from 14 to 27 per cent.
Hannan captures the essence of the Laffer Curve; making tax evasion pointless. In fact it may have worked so well that too many have no reluctance to tax increases since they pay so little. The Laffer curve effectiveness may vary based on the type of tax and other factors. Taxes easier to avoid will react stronger to changes than others. Taxes are one of several friction costs. If we raise some friction costs (regulations) while we lower others (taxes) we may see less benefit.