Even though he’s allowing the budget to grow twice as fast as inflation, some people seem to think the new U.K. Prime Minster is a fiscal conservative. I’m skeptical. Not only is spending rising much too fast (there are promises of more restraint in the future, but I’ll believe it when it happens), but Cameron and the Tory/Liberal coalition government are increasing the value-added tax and increasing the capital gains tax. Perhaps worst of all, they are leaving in place the new 50 percent tax rate that former Labor Prime Minister Gordon Brown imposed in hopes that class-warfare policy would help him get elected. But as this Daily Telegraph story suggests, it is quite likely that the higher tax rate will lose revenue as productive people escape to Switzerland and other jurisdictions not influenced by the politics of hate and envy.
One-in-four hedge fund employees has already left London to move to Switzerland, which is said to have a more stable tax regime, according to consultancy Kinetic partners. Calculations by the company claim the UK could have already forgone about £500m in tax revenues, based on the 1,000 or so hedge fund managers it says have already left the country. …High-profile departures this year include Alan Howard, founder of Brevan Howard, and Mike Platt, founder of BlueCrest Capital.
This story shows both the power of the Laffer Curve and the importance of tax competition. The greedy politicians in England doubtlessly resent the “brain drain” to Switzerland. Like their U.S. counterparts, politicians view taxpayers as serfs who are supposed to blindly produce more income for the ruling class to expropriate and redistribute.
While I’m obviously not a big fan of British fiscal policy, America is worse in one important way. At least British taxpayers have the liberty to leave without being raped by the U.K. tax authority. Once they leave the United Kingdom and make their home in Switzerland, they are no longer British taxpayers. Americans who want to move, by contrast, are unable to escape the punitive internal revenue code. Indeed, the United States is one of the few nations in the world to have exit taxes, an odious approach generally associated with loathsome regimes such as the Soviet Union and Nazi Germany.
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[…] in 2010, I excoriated the new Prime Minister of the United Kingdom, noting that David Cameron was increasing tax rates and expanding the burden of government spending (including an increase in the capital gains […]
[…] in 2010, I excoriated the new Prime Minister of the United Kingdom, noting that David Cameron was increasing tax rates and expanding the burden of government spending (including an increase in the capital gains […]
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[…] in 2010, I excoriated the new Prime Minister of the United Kingdom, noting that David Cameron was increasing tax rates and expanding the burden of government spending (including an increase in the capital gains […]
[…] in 2010, I excoriated the new Prime Minister of the United Kingdom, noting that David Cameron was increasing tax rates and expanding the burden of government spending (including an increase in the capital gains […]
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[…] Laffer Curve is one of my favorite issues (see here, here, here, here, here, etc). But it is a very frustrating topic. Half my time is spent trying to convince […]
[…] Laffer Curve is one of my favorite issues (see here, here, here, here, here, etc). But it is a very frustrating topic. Half my time is spent trying to convince […]
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[…] Indeed, her poorly researched column doesn’t go far enough. She failed to point out that Cameron is leaving in place the new 50 percent top tax rate, even though it almost certainly will result in less tax […]
In a very striking exception to their culture of individual freedom, Americans, are one of a handful of nations that not only assess exit taxes but also leave the exit itself (i.e. the permanent revocation of citizenship and right to return) as the only option to not paying taxes on income earned in far away lands.
As anyone who has tried to acquire US citizenship from abroad will tell you, acquiring, and thus re-acquiring US citizenship is almost impossible. So if you give up your citizenship to live with your family in a faraway land without paying those additional taxes that will primarily enrich the American motherland, and then at some point want to return to the US to take care of your ailing older parents, or otherwise be reunited with your extended family, then forget it. Americans say that since you wanted to commit the treason of not paying taxes to the motherland while living in a faraway land for a few decades, you are forever banished to never be able to return and be reunited with the rest of your family.
In this action of never letting you return, Americans punish not only you, but the family that you leave behind in the US. It is this aspect of extended retribution against the family that is left behind that is most reminiscent of Soviet and Nazi regimes.
This policy is a striking departure from America’s culture of freedom. And the fact that there seems to be majority support amongst Americans for such policies (otherwise why would politicians enact them in a democracy?) does not bode well for those left behind on the wrong side of the exit tax curtain. Such oppressions certainly lend credence to those who claim that America’s culture of individual freedom is more a result of historical coincidence rather than rational thought on behalf of its citizens.