Soaking the rich

From the WSJ:

A funny thing often happens on the way to soaking the rich: They don’t stick around for the bath. Take Britain, where Her Majesty’s Revenue and Customs service reports that the number of taxpayers declaring £1 million a year in income fell by more than 60% in fiscal 2010-2011 from the year before.

That was the year that millionaires became liable for the 50% income-tax rate that Gordon Brown’s government introduced in its final days in 2010, up from the previous 40% rate. Lo, the total number of millionaire tax filers plunged to 6,000 in 2010-2011, from 16,000 in 2009-2010.

The new tax was meant to raise about £2.5 billion more revenue. So much for that. In 2009-2010 British millionaires contributed about £13.4 billion to the public coffers, or just under 9% of the total tax liability of all taxpayers that year. At the 50% rate, the shrunken pool yielded £6.5 billion, or about 4.4%.

That is hardly surprising – yet those who subscribe to the ‘taxation as punishment’ school of public finance are likely to be surprised. Increased tax rates often leads to reduced revenue.

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8 Responses to Soaking the rich

  1. kingsley

    Don’t worry the French have got this covered if lifting taxes to 50% doesn’t raise enough go to 75%

  2. Whenever you hear about so-called evil tax havens, this is the reason. The rich find ways to transfer their money to low tax environments, prompting high taxing countries to complain about them.

    Vanuatu is our tax haven. If soaking the rich catches on here, that’s where much of the money will go.

  3. dismissive

    Try looking at Australia’s rules on SMSF and becoming a foreign resident. I don’t think I like any legislation that uses the word confiscate.

    Leaving can be VERY expensive.

  4. Income tax rates should be optimal, not based on an envy-derived sense of entitlement. These figures clearly show it to be somewhere south of 50%. Of course, this is not at all surprising.

  5. John Comnenus

    The Anti Laffer. The rich will always take the Laffer line of least resistance to maintain their wealth.

    I think David Cameron (who hasn’t repealed this idiocy) and Vic Premier Ted went to the same school. Be reasonable, give the Left everything they want to appear reasonable and do nothing that might be construed as conservative or libertarian. Alas, I forgot to mention Malcolm (I’m a fan of David Cameron) Turnbull.

    Is there anyone on the Right who will fight for less government?

  6. Leigh Lowe

    There is another take on this in that it demonstrates that the left simply do not understand ingenuity and innovation.
    Everytime they introduce an impost they are surprised, even outraged, when people use their intellect and creativity to avoid it.

  7. Leigh Lowe

    Don’t worry the French have got this covered if lifting taxes to 50% doesn’t raise enough go to 75%

    Yes Kingsley.
    And I read recently of French outrage when that darling of left, Gerard Depardieu, bought a house across the border in Belgium, presumably to avoid being taxed onto oblivion by Francois Hollande.

  8. Ed Snack

    One does need to be careful with the figures. Apparently a good deal of the drop is due to income being “brought forward” into the prior tax year to avoid the higher rates. So there aren’t perhaps quite so many fleeing the country as it would appear. Next year’s receipts will perhaps show a more accurate picture of the change.

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