Skip to comments.Surtax on wealthy in UK results in lower revenue
Posted on 02/22/2012 7:57:32 AM PST by Kaslin
Barack Obama has spent the last several months insisting on a tax hike for higher income earners in the US, casting it as an issue of “fairness” and of deficit reduction. In his State of the Union speech, Obama used the word “fair” or a derivative nine different times, and calling for the wealthy to pay their “fair share” of taxes — even though the wealthy account for a much higher percentage of income-tax revenues both as a share of the revenues and as a share of income than the rest of the population. Democrats have tried to push through a “surtax” on income over a million dollars in a year in order to put Obama’s rhetoric into reality.
Speaking of reality, the UK did exactly what Obama and the Democrats propose to do here — pass a surtax on high-income earners. The new tax rate of 50%, which took effect at the beginning of the year, was expected to raise a billion pounds in extra revenue each month. So how did that work out? Tax revenues dropped by more than £500 million:
The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.
Senior sources said that the first official figures indicated that there had been manoeuvring by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.
The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.
Oopsie! It turns out that the wealthy can find ways to shelter income when government drives the cost of taxes high enough to make it worthwhile. If that means taking their money and going where the tax laws are more welcoming to investment, then this particular population has fewer barriers to making that solution work than most of the middle class. Instead of gaining more revenue, the UK will end up losing revenue, and not just from the sheltering — but also in lost economic growth as the wealthy have to put that capital to sleep rather than make it work in the economy.
Obama’s plan to hike capital-gains taxes to 20% and push a surtax on higher earnings will produce the same result here. The capital that might have gone to work in the US will go to work somewhere else or not at all, which will not just kill the direct revenues expected in static tax analysis from the hike, but also discard the revenues that would have occurred had the capital been put to work here. That’s the lesson from the British face-plant on surtaxes, and hopefully the US learns that lesson the easy way.
Obama and the left here would not care if revenue dropped after a tax hike, they think the hike is fairness.
Will British Millionaires Flee to U.S.?
Well then, why not just invade their bank accounts and take it all. That would certainly stimulate the economy. One must remember, though, that stimulus is not only quantitative, it is also directional and that directionality is vertical.
Insanity: Continuing to do the same thing and expecting a different result.
Therefore....Libs/Lefties/Socialists are certifiable.
The Gipper was soooooo right on when he said, ‘whatever you tax more you get less of it’....
Remember when President Obama was a U.S. Senator talking about how raising taxes is about "fairness?" We do. In the following clip, Charlie Gibson explains how history shows lowering the capital gains tax actually increases government revenue. Gibson asks Obama, with the facts showing lower tax rates actually increase revenue, why raise the capital gains tax at all? Then Senator Obama responds by saying raising taxes is about fairness.In his own words:
John Lennon wrote "The Tax Man" for a real reason.
I once saw Roger Moore on Johnny Carson, saying he was a Swiss citizen, a tax refugee from the UK.
So why do they harp on about it? Answer: Because it plays to the crowd. The US is in a financial hole, therefore they either need to raise more money (via taxation) or spend less (by cuts), or both. Taxing the rich is always going to be the most popular option with the masses, because "the rich" means "other people". In other words, it's an appeal to envy. There are few more destructive things in society than the green-eyed monster, but in the short term, it suits the Democrats very well. When nothing good economically happens from their raised taxes on the rich (and nothing will) then they can simply blame the rich. They win whichever way it goes. They avoid the hard unpopular decisions on tax and spending cuts that are desperately needed to fight this problem, and slip the ire of the electorate by sliding the blame onto someone else.
George Harrison wrote “Tax Man”, but...I take your point.
the true rich know exactly what to do and how to do it to escape taxation in ways not available to middle income people....
It sure does and you know what else? It is allowing this administration to do unConstitutional things. Get the people familiar with "us vs them" actions, use to attacking fundamental parts of our culture and law and who knows, we could end up having the gub'mint telling the Church what to do...
They would rather be the ones running North Korean prison camps than seeing everyone get better off.
We must keep our eyes on the truth and the truth is what Saul Alinsky advised his Marxist followers - The issue (fairness) is never the goal. The goal is always to gain more power. Fairness is simply a false issue designed to gain power. That is true of all Democrat issues.
Once they gain power, they will kill and imprison millions and blame their failure on the masses they claim to represent. They will kill you for your benefit. That is how serious this situation is.