I saw an interesting article this morning as I perused my email and drank my morning tea. Given my choice of beverage, it is appropriate that the item that caught my eye was out of the British press, namely from The Telegraph, dated Thursday, 11/29/12. Written by Robert Winnett, it comments on tax rates imposed on millionaires and the effects of recent changes in those rates.
The arguments made eerily resemble our own in the United States. It also appears that they mirror our own lawmakers’ tendency to cling to ideologies, despite concrete data and evidence to the contrary.
Our politicians in Washington D.C., currently wrestling with the so-called fiscal cliff (which they’ve known about for ages and simply ignored it until they couldn’t any more), would be well served by reading this article and considering it carefully, before they repeat Britain’s mistakes. For their benefit, I offer it here, with thanks to Mr. Winnett. Emphasis and parenthetical comments in the article are mine.
Two-thirds of millionaires left Britain to avoid 50p tax rate
Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p (That’s 50% for my US readers.) top rate of tax, figures have disclosed.
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.
“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.” Mr Osborne argued earlier this year that the 50p rate was deterring entrepreneurs from coming to Britain.
The Chancellor wanted to scrap the top rate altogether for those earning more than £150,000 a year and return to the previous system of a basic and top rate of tax. This was blocked by the Liberal Democrats without a new mansion tax being introduced.
Labour will hold a parliamentary debate today to criticise the decision to reduce the top rate, which Ed Miliband, the Labour leader, has described as a “tax cut for millionaires”. (Does this sound familiar?)
Senior Coalition figures are locked in negotiations (as our US leaders should be!) over next Wednesday’s Autumn Statement which will set out government tax policies for next year.
The Tories wish to freeze out-of-work benefits. The handouts usually rise in line with inflation, which has meant that the unemployed are likely to receive a higher rise than most workers can expect.
It is understood that the Lib Dems will only allow the benefits freeze if taxes on the rich are increased. The Lib Dems have long cherished an increase in taxes for multi-million pound properties. David Cameron has ruled out changes to council tax.