British Realize What Tax Hikes on Wealthy Do: Millionaires Flee, Revenues Plunge

Wednesday, 28 Nov 2012 11:58 AM

By Michael Mullins

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America’s debate on whether increasing taxes on the wealthy will lead to more government revenue has apparently already been settled in Britain where similar hikes have seen two-thirds of the country’s millionaires depart and revenues plunge by the billions.

Following an increase in taxes on the nation’s high-earners, which was introduced two years ago by the country’s former Labour Party Prime Minister Gordon Brown, nearly 10,000 of Britain’s 16,000 millionaires left the island nation rather than pay a 50 percent tax rate.

Rather than raising funds, as had been argued by British liberals, it actually cost the country £7 billion in tax revenue — approximately $11.2 billion in U.S. funds.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

“Labour’s ideological tax hike led to a tax cull of millionaires,” remarked Harriet Baldwin, the Conservative MP in regards to the figures in The Telegraph.

“Labour now needs to admit that their policies resulted in millionaires paying less tax and come clean about whether they would reintroduce this failed policy if they were in power.”

Under the direction of David Cameron, the United Kingdom’s current prime minister who heads the Conservative Party, the millionaire’s tax rate will be decreased to 45 percent in 2013. Since the announcement of the tax reduction on high earners earlier this year, the number of British citizens filing annual incomes in excess of a £1 million has risen to 10,000 individuals, still 6,000 less than the original figure prior to the introduction of the 50 percent tax rate.

“Next April, David Cameron will be writing a cheque to each and every millionaire in Britain for £40,000," said Ed Miliband, the current leader of the Labour Party. "If I was in government tomorrow, one change I would make in relation to the better off – first change in a Labour budget – we wouldn't be cutting the top rate of income tax from 50 to 45p. If there was an election tomorrow [reversing the cut] is what we would do.”

The disagreement over tax rates on the wealthy in Britain mirrors the ongoing conflict between Republicans and Democrats in the U.S., with President Barack Obama saying he will not extend Bush era tax cuts on those earning more than $250,000 a year.

Much like their conservative counterparts across the pond, Republicans argue that the wealthy will take asset-protecting measures, including relocating, that will hobble the economy if Obama allows the current tax rates for wealthy to expire, resulting in an overall loss in revenue.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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