An English friend alerted me to the fact that the British have been changing their income tax rates every year or two recently, thus providing some interesting data on the effects of such changes. The top income tax rate started at 40 percent (sounds high, but I am not sure that they have the same state and local income tax that we have in the U.S.; perhaps this 40 percent rate was pretty similar to what someone in California might pay, for example). In 2010 the top rate was increased from 40 to 50 percent and the number of people reporting incomes over 1 million pounds fell from 16,000 to 6,000. Now the rate will be set at 45 percent and the number of high income taxpayers is going up to 10,000. (Source: Daily Mail)
I was kind of surprised at the sensitivity of collections (which went down with the rise in rates) to these changes. In America we have been taught that people in Europe and the U.K. love to pay taxes to support a welfare state.