Why Raising Taxes Too High Doesn't Work, U.K.'s Example

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The news from today's Times (of London) should be carefully read by American politicians who would raise taxes on America's top earners:

"High earners will cost the public purse hundreds of millions of pounds through tax dodges as they avoid the new 50 percent rate of income tax, a minister indicated yesterday."

Wealthy people have ways of getting around taxes, in this case a top rate of 50 percent in Britain. The article continues:

"Mike Warburton, senior tax adviser at Grant Thornton, one of Britain’s biggest accounting firms, said that clients were pursuing four main ways to avoid paying half their salary in tax: bumping up this year’s pay; storing up pay in their firm to be drawn down at a later date; leaving the country; or choosing to pay it to charity rather than the taxman. "

It will be interesting to see how effective Obama's raising of taxes on the rich will work out. In his budget released yesterday he's let the Bush tax cuts expire.

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