If You Tax Something, You Get Less of It

Mark Perry:

In this previous CD post, it was reported that world-class Jamaican sprinter Usain Bolt won’t be competing [sic] in this weekend’s Aviva London Grand Prix because of a new U.K. tax rule that imposes a top rate of income tax of 50 percent on athletes, not just on the income earned in the U.K., but also on a proportion of their worldwide sponsorship and endorsement income.

Now it looks like some of the leading professional golfers aren’t so sure they want to play in this year’s Ryder Cup, scheduled to take place in Wales in October. The European Tour’s director of public relations said today that [sic] the tax rule was “seriously hampering our efforts.”

When Arthur Laffer says people have the ability to shift their income, this is what he means.  They have the freedom to decide how and if they’ll earn income.  Contrast this with many other people who need to work just to pay their bills and their taxes.

The highest tax bracket income earners, when compared with those people in lower tax brackets, are far more capable of changing their taxable income by hiring lawyers, accountants, deferred income specialists and the like. They can change the location, timing, composition and volume of income to avoid taxation.

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