Shortly after the United Kingdom’s latest big tax hike, Great Britain’s millionaires started voting with their feet. And the result hasn’t been pretty for the British treasury.
Raising the country’s top income tax rate to 50 percent has cost the UK 7 billion pounds — about $11.2 billion — since 2010, according to London’s Daily Telegraph newspaper, as wealthy taxpayers have intentionally worked less, deferred income to future years, moved their earnings overseas or left the country entirely.
Whatever the reason, the British treasury has been the big loser.
“Tax paid by the top earners fell from 13.4 billion pounds before the top tax rate came in to 6.5 billion pounds in 2010/11,” The Daily Mail reported on Tuesday.
Prime Minister Gordon Brown pushed the tax increase through Parliament before the 2010 elections swept his liberal Labour Party from power. During the 2009-2010 tax year, more than 16,000 Britons claimed annual incomes of more than 1 million pounds.
After the tax increase, that number plunged to just 6,000.
But in 2012, Chancellor of the Exchequer George Osborne — part of the new Conservative Party majority — announced that the 50 percent rate will drop to 45 percent by April 2013, for people who earn more than 150,000 pounds.
Since that announcement, reports the Telegraph, the number of tax-filing British millionaires has climbed back to 10,000.
While current Labour leader Ed Milliband complained about a “tax cut for millionaires,” Conservative MP Harriet Baldwin on Tuesday called the previous tax hike a “cull of millionaires” from the British tax base.
“Labour now needs to admit that their policies resulted in millionaires paying less tax,” Baldwin said.
Daily Telegraph columnist Nile Gardiner, based in Washington, D.C., wrote Wednesday that the British tax debate parallels the current “fiscal cliff” stalemate in the United States, and is “a wake-up call to Barack Obama’s high tax America.”
“Driving many of the country’s most successful people, as well as their money, out of the United States is sheer economic suicide,” Gardiner wrote.
“The American dream rests upon the foundations of economic and individual liberty, a dream that has attracted millions of entrepreneurs to the land of the free for centuries. President Obama’s big government agenda is not only generating more debt, but it is also strangling wealth creation. This is a path to decline, not renewal.”
“As tax rates rise,” the British observer warned, “there will be every incentive for overseas businessmen to put their money elsewhere, rather than invest in big government America.”