We can't solve the fiscal crisis by taxing the rich 5

Matthew Sinclair Economics 101

In 2008 Maryland introduced a new, higher tax rate for millionaires. Last year, 30 per cent of their millionaires disappeared:

"Maryland's chief tax collector reported that the number of millionaires in the state plunged 30 percent last year to the lowest level in four years and that some wealthy residents might have moved."

This shouldn't really surprise anyone and doesn't just apply to Maryland. The Institute for Fiscal Studies (PDF) and the Centre for Economics and Business Research (PDF) have both estimated that the new 50p rate will lose money. Today's Compass report, which suggests we can attack the deficit and more just by taxing the richest ten percent of the population, is complete nonsense. As Tim Worstall points out, their best evidence that won't lead to a flight of high-income people is a finding from the Work Foundation that many heads of big British companies are British, which is rather marginal evidence and hardly sufficient to disregard the findings of the IFS and CEBR.

There is a serious debate to be had over the proper response to the fiscal crisis. The Compass report isn't part of it.

Matthew Sinclair

Matthew is Director of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)

Follow @mjhsinclair

AdrianS

The very rich will always have the money to be mobile and find a friendly tax haven some where if things get to hot. However HMRC are signing treaties with many tax havens now, so potentially many people who have salted their untaxed earnings in these little oasis will be getting a tax bill and a nice little penalty as well. I think the US is doing the same!
Steve Robson

Funny how Tories always believe that reduced money for the poor and public sector workers is always a must, but completely different rules apply for themselves and their mates. Must be hard to live with such hypocracy, however you try to justify it.
Adam Wissen

Don’t forget Steve that once we’ve closed all the tax havens and loop holes, the rich will use their talents to build a super-duper intergalactic spaceship and fly off to a planet far far away and form a uptopian, tax free society while the rest of us regress back to the stone age.
http://strangersbar.blogspot.com Blue-Eyed-Boy

What’s a shame is that this is the simplest thing in the world to think of, yet the proportion of the voting population who believe it is ridiculously small.
Every budget Gordon raised taxes on cigarettes claiming he wants to discourage smoking and raises taxes on alcohol claiming he wants to discourage excessive drinking. Yet this moron can’t stomach it that taxing people for having money stops them from getting rich and living in Britain.
Hasn’t he ever been to the duty-free shops of foreign airports and seen the Brits queuing up to buy cheap untaxed fags and booze to avoid the high tax in Britain? Is it so ridiculous to think we won’t do the same with our jobs?
JohnK

Higher income tax on top earners will not be paid by top earners it will be paid by the companies they work for as they will increase their salaries to match. It is a tax on business. What it does do is put more of a spotlight on the top earners hence making it easier to justify replacing them. But all this is just the labour administration making themselves out to be a more egalitarian party. It will not raise enough taxes to cope with the massive debt created by the current administration.