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

November 25, 2009 3:56 PM

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.

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.

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