CRP Blog

Monday, November 24, 2008

Will Britain offer preview of Obama tax policy?

It's not Margaret Thatcher's Britain any more, it seems. Reports out of London indicate the Labor government in Britain is about to boost tax rates with the top rate to hit 61%, a rate not seen in the country since the 1980's.

The top marginal tax rate is the portion of each additional dollar (or in Britain's case, Pound) earned that the government takes in the form of taxes. Economists have demonstrated repeatedly that the incentive to work and invest is directly tied to the marginal tax rate -- why bother working or investing more if the government is simply going to take it away?

Just like the Labor government in Britain, Barack Obama and Company want to raise marginal income tax rates here, further reducing Americans' incentives to work and invest -- particularly important in this economy.

You can already see what high marginal rates do to economic growth and opportunity -- just look across the pond to Europe, where high taxes have depressed economic growth for decades, leading to higher unemployment and slower improvements in living standards.

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