Britain: Tax Increases On The Rich Lead To…The Rich Fleeing The Country?

28 Nov, 2012 by John Hawkins

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One of the biggest mistakes liberals tend to make is assuming a static response from the people being taxed.

This is a big mistake, particularly when you’re talking about the rich. The rich – being rich – have lots of options. They can hire the best accountants to find loopholes, hire lobbyists to create loopholes, shift their money around to protect it from the tax man, stop working, and, yes, as the Britons are finding out,: they can also JUST LEAVE.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than :£1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government.

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.

George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.

Since the announcement, the number of people declaring annual incomes of more than :£1 million has risen to 10,000.

However, the number of million-pound earners is still far below the level recorded even at the height of the recession and financial crisis.

Last night, Harriet Baldwin, the Conservative MP who uncovered the latest figures, said: “Labour’s ideological tax hike led to a tax cull of millionaires.

Far from raising funds, it actually cost the UK :£7 billion in lost tax revenue.

The bad news for the economy is that since those rich guys are leaving, they’ll be spending money like water, paying tens of millions in taxes and hiring people in another country. On the other hand, the good news for people who love class warfare is that since all those wealthy Britons fled the country, it’ll help reduce income inequality because there will be fewer millionaires at the top of the scale. So, by all means, raise that tax rate even higher instead of lowering it. Then maybe some of those millionaires will move here and we can suffer the scourge of inequality on Britain’s behalf in return for increasing the tax base and creating more jobs.