Elliot Keck (who he?) had this recent excellently sharp item over at CapX:
It can be infuriating making the case for free markets. Too much time has to be spent batting away obviously terrible, tried-and-failed ideas. Proposals for a wealth tax are just the latest iteration requiring many a wall to be bashed with many a head. Just in the last few days, a group called ‘Patriotic Millionaires’ has urged Rachel Reeves to consider a ‘simple way’ to grow the economy with a tax of 2% on wealth over £10 million per year. A recent piece in the New Statesman concluded that a wealth tax wouldn’t be straightforward, but it could work. The new director of the Institute for Fiscal Studies has also called for a one-off wealth tax.
This is mad. As a TaxPayers’ Alliance study of wealth taxes has demonstrated, they’ve failed everywhere they’ve been tried. When Labour considered one in the 1970s, they concluded it would be unworkable, despite capital being far less mobile then than it is today.
We are already seeing the wealthy flee at a shocking rate (just look at the Adam Smith Institute’s millionaire tracker), forced abroad by changes to non-dom rules, punitive marginal tax rates, shoddy public services, increasing crime and the imposition of VAT on private schools, to name just a few incentives. When this is pointed out to proponents of wealth taxes, as I recently found on LBC, the response is not to dispute the problem but to bemoan the fact that every time the rich are asked to pay their ‘fair share’, they throw their toys out the pram and flee.
Yet now those who have the temerity to be affluent are being told to cough up to clean up the almighty mess made by our political class. It’s yet another reason for the wealthy to line up for the last chopper out of Saigon. Rather than criticising those who leave, we should increasingly be thanking those who choose to stay.
Everybody seems to be leaving everywhere. Wonder where they’re all going?
For most people, leaving isn’t really an option.
Those thanks will no doubt consist of making the remainers pick up the extra tab that the leavers didn’t pay.
When the order is “the people in this room will kick in a combined $15B to the gov out of fairness”, you don’t want to be the last guy left in the room. Gets very expensive.
tax of 2% on wealth over £10 million per year
We already have that; actually it applies to wealth under £10M as well. It’s called “inflation”.
It is logical – for both economic and social (cultural) reasons.
In some places, such as Denmark, high taxes are counter balanced by a sense of community – wealthy people may not wish to leave “their people”, their community, the nation of which they feel part.
But Britain, or rather its ruling establishment, has turned its back on all that – the British establishment (or rather the United Kingdom branch of the international establishment) has a deep hatred of the British people (I think George Orwell was the first to notice this – with the leftists who were going into the establishment even in his life time), their history, culture, and so on – and seeks to utterly transform the United Kingdom (“decolonise” it – an odd way of saying they wish it to be colonised) crushing all aspects of the existing nation, the existing people – culture, history ..
So ever higher taxes, and ever more regulations are not mitigated by any sense of a single people, a nation in the traditional sense. So people who are financially able to leave are starting to leave.
The Marxists, falsely, said “workers of the world unite – you have nothing to lose but your chains” – a better slogan for some modern Western nations would be “leave if you can – you have nothing to lose apart from high taxes, endless regulations, crime, filth, and endless attacks on your history and culture, attacks on your right to even exist as a people – a nation”.
You British billionaires should celebrate that you can leave. Here in the Land of the Free and Home of the Brave you are taxed if you are a US citizen irrespective of where you live. You can renounce your US Citizenship but in doing so you pay an absolutely gigantic exit tax on all your wealth, and, if the state department determines you are renouncing your citizenship to avoid taxes then they will ban you from ever re-entering the US, even as a tourist.
This theory of taxation based on citizenship is only used in two countries: the United States and Eritrea. I’m fairly sure there aren’t too many billionaires in Eritrea.
American taxation is based on the idea that the government owns you rather than the British idea that you owe a fee for using the British economy. Moreover. the IRS via the state department, has been reaching out all over the world to try to make every country in the world implement IRS policy on US citizens. As a consequence it is extremely difficult for American citizens to even open a bank account in a foreign country — most foreign banks don’t want to deal with the hassle of the IRS all over their books. Even Switzerland, home of the iconic “swiss bank account” has been forced to compromise their bank secrecy to accommodate the IRS.
Here in the Land of the Free and Home of the Brave you are taxed if you are a US citizen irrespective of where you live.
Indeed. What’s striking is that relatively few Americans I know are fully aware of this.
As Fraser Orr rightly points out, the US tax code is based on a remarkably oppressive idea, that wherever a person of US birth lives, they must account for their income etc and report to the US.
To renounce one’s US citizenship is a costly step; for billionaires, the cost of renouncing is high.
Given that relatively few US people live as expats, there are not many votes in changing the system.
Trump ironically wants to introduce a “golden visa” system for the US; maybe, just maybe, someone could point out to him that the IRS’s worldwide reach is a bad thing for US business because it discourages Americans from heading abroad, starting companies, and spreading the reach of US business.
I occasionally talk to a group called “American Citizens Abroad” that lobbies about this stuff.
There’s a scene in Apollo 13 where the crew of the stricken spacecraft are about to slingshot around the Moon, and one of the astronauts tells Mission Control he was late in filing his annual IRS return.
There are many, many things I loathe about the tax codes of the UK, continental Europe, etc, but at least they don’t have this worldwide, or for that matter, intergalatic scope.
I know a former US national in Portugal who’s a HNWI. He managed to get a Portuguese passport and rather than go through the expensive bureaucratic ordeal of renouncing his US nationality, he stuffed his US passport in a shredder, stopped filing US tax returns, and resolved to never go back to the USA ever again. His wife is European and he doesn’t much like his extended family in the states, so he’s just fine with that.
Why did you think Musk wants to get to Mars so badly? No US IRS offices.
Yet.
” You can renounce your US Citizenship but in doing so you pay an absolutely gigantic exit tax on all your wealth”
There is a de facto exit tax in the UK as well. In order to fully leave, you have to sever all your connections with the UK. Which means selling all your assets, business and property etc, so you are no longer connected in any way to the UK, beyond having family living here. And that incurs capital gains taxes, currently at 24% for business and financial assets and 28% for property that is not your principle residence.
So if you have lived here all your life, have assets you’ve owned for many decades, a business you started from scratch, then you would have to pay nearly a quarter of it to leave. There are scenarios where you could leave free of tax, but they involve things like inheriting the assets from a deceased spouse when they are revalued at death for CGT, so hardly helpful if you want to leave the country right now.
As a farmer facing the new IHT regime, owning a farm thats been in the family since prior to 1982 (its sale value thus being largely all capital gains) I’ve discovered there’s no way to leave without paying the UK State about a quarter of my assets.
At least Americans can move State – and thus reduce their tax burden somewhat.
People can radically reduce their Property Tax by moving State – for example I used to think that Property Tax is New Jersey was ten times (in terms of Dollars paid for a similar house) what it was in parts of Alabama (actually quite nice parts of Alabama) – but it was shown to me that the difference is actually more extreme than that.
As for income tax – the recent almost doubling of the State Income Tax in Massachusetts, from 5% to 9% for wealthy people, has seen more and more wealthy people leave Massachusetts for States where there is no State Income Tax.
But it is not just money – as I have pointed out in a previous comment on this thread, culture also matters.
Who wants to stay in Boston to hear the leftist Mayor (rather like the leftist Mayor of London) lecture you, all day every day, on how evil America is – how white Americans are utterly vile and should be wiped out for their racism-sexism-homophobia-transphobia-Islamophobia and on and on?
Mr Knight of Nike used to say he stayed in Oregon, in spite of the high tax on him, because it was his home – he had been born there and he wanted to stay there till he died.
But if a place makes it clear that it is no longer your home – indeed that it hates you and wants you to suffer and die, then why pay high taxes to stay there?
Similarly, I’ve worked out I can’t retire without giving the state something like half my assets.
Industry, manufacturing, has largely left the big cities – and finance is mobile.
With modern communications technology is really necessary to be in London or New York (dodging criminals) to work in investments or other financial services?
Why not move to Florida?
Why not indeed.
And wasn’t there recently a Norwegian ‘wall of shame’, with pictures of rich Norwegians who didn’t want to be fleeced of their wealth to pay for political overspending? These rich people had fled and taken their money with them.
@Paul Marks
At least Americans can move State – and thus reduce their tax burden somewhat.
That is true, and it is one good thing about federalism. In fact Mississippi just changed the law to eliminate their income tax, along with about a dozen other states. California is the worst with a top tax rate of 13%, which means that, along with FICA, marginal tax rates there can easily approach 50%. This is why rich people are fleeing states like California and New York. However, in a new development what a LOT of these high tax states are doing is conducting tax audits on people leaving back the two or three years it is legal to do so to try to squeeze every penny out of them. And if they can throw a few in jail, mores the better.
Why not move to Florida?
I’m a Musk fanboy, but this is one place I disagree with him. I think working remotely is an almost unadulterated good. There are some circumstances when it doesn’t work, and if he can leverage it to put a scythe through the federal workforce I’m all for it. But the one good thing that came out of Covid was ubiquitous remote working and there is a growing pressure to remove this. I think requiring everybody in the office 5 days a week is probably not coming back as a normal expectation, but to me hybrid is almost the worst of both worlds. The advantage of working remotely is that you can live anywhere. That “one day a week in the office” robs workers of that benefit.
@Jim
There is a de facto exit tax in the UK as well. In order to fully leave, you have to sever all your connections with the UK.
I’m way out of date on His Majesty’s tax code, in fact, last time I looked it was Her Majesty’s tax code, but I find this surprising. I knew a British guy who started a chemical company and when he was ready to cash out, he moved to Monaco. He told me if he stayed there for five years he could eliminate his capital gains on the sale. That’s what he told me and that is what he did. I’m not privy to his tax returns, but that is what I thought of when I read your comment. But perhaps he arranged his affairs with that in mind — for example, by basing his company abroad. I used to have a British accountant when I ran a small consulting company there who knew a few tricks, but I can say that the British tax code is much tighter than the American code, probably because we have more money here to buy politicians than you do?
BTW, there is a famous story of Louis B. Mayer, the Mayer of MGM. On his retirement in 1951 he was paid some large retirement package. Unfortunately the tax rate at the time was 91%, so he literally bought a group of politicians who changed the tax code to add a provision that only applied to him, to reduce it down to 25%. Sounds like he had a great return on his investment.
Of course I’m totally in favor of doing anything legal to reduce one’s tax burden. The less money these bastards have the better off we will all be.
Here in New Zealand, the top 10% of earners pay 70% of the tax so each 1% pays 7% of the tax take.
The other 90% pay 30% of the tax take or 0.333%.
So those top earners pay 21 times the amount of tax than the rest, and as they are top earners, are unlikely to use the services that their taxes pay for (e.g. education, health services, social security benefits etc.) as they’ll pay for them out of their own pocket. About the only thing that they will use that the Government provides is driving on the road.
But those rich bar stewards are not paying their fair share of tax so tax them more … Yeah, right.
I dare say that the rest of the world won’t be too far off those figures, more or less.
I got out of the UK 15 years ago for other reasons than taxation (though it was a factor) and have gone Galt as far as work and taxation is concerned.
“At least Americans can move State – and thus reduce their tax burden somewhat.”
That is so of Canada too. Despite all the separatist noise, many a Québécois – or Québécoise, for that matter – has headed west for Ontario or further again to Alberta (no provincial sales tax!) in search of fiscal relief and better opportunities.
“And wasn’t there recently a Norwegian ‘wall of shame’, with pictures of rich Norwegians who didn’t want to be fleeced of their wealth…”
No doubt the photos felt really bad about it. Meanwhile, I wonder how many of the ‘Patriotic Millionaires’ have sent voluntary cheques of appropriate magnitude to HMRC.
Good comments by several people.
Fraser Orr – I was unaware of what Mississippi had done. Thank you for pointing it out.
The differences in Property Tax in the United States truly are extreme.
For example, there are eight (8) counties of New Jersey (New Jersey – so this is not a New York City thing, New York City has been a tax nightmare all my life – but New Jersey did not use to be) where the medium (the medium – not the mean) Property Tax is over ten thousand Dollars a year. Yet in spite of this (and very high income and sales taxes) New Jersey is still drowning in debt.
There are several (not just one) counties and parishes in Alabama and Louisiana were the medium Property Tax is around 200 Dollars a year.
Yes you read that correctly – ten thousand Dollars compared to two hundred Dollars.
“Yes but wages in Alabama are lower” – yes, but not that much lower.
There is a way round the “I want to live in X place – but the office is in Y place” problem.
More the office as well.
Back during the Civil War, when the Federal Banking Acts were passed (they should not have been passed – but that is a different matter) people had to physically be in New York City to work in the banks and so on. Arguably that was still true in 1913 when the Federal Reserve Act was passed (it also should not have been passed) – but why now?
Why are the banks and the stock exchange (and so on) in New York City now? With modern computers and what-not.
The tax on individuals in New York City (City and State combined) is higher than even that of California.
Why not just move the physical location of the office (if the office has to have a physical location) to a better place?
“But New York City will die without the tax money from the Wall Street financial industries”.
Such places are going to die anyway – places like NYC and Chicago are drowning in debt and are not very nice places to live, let-them-go.
Of course the Mississippi State Income Tax will not be gone for a number of years – and who knows what will happen over those years (circumstances may change – preventing the income tax actually going).
But Mississippi is now already not a high tax State – and contrary to what people assume about the Deep South, it-used-to-be-so.
Under people like Governor Bilbo (sadly not Bilbo Baggins) Mississippi used to be much bigger government State, in proportion to the size of its economy, than Massachusetts and other States, now the reverse is true.
Indeed even when I was born Mississippi still had prohibition – you could, at least in theory, be fined or imprisoned for selling someone a drink in Mississippi.
There was a reason that Mississippi was known for poverty – and that reason was statism, at least relative to the size of the economy.