In 2011, Britain saw a dramatic decrease in the number of affluent citizens in the country after then-Prime Minister Gordon Brown instituted an astounding 50% tax rate on Britons earning more than $1m. In fact, less than half of those who reported incomes exceeding one million reported the same after tax rates increased.
Naturally, wealthy Britons took steps to either reduce their taxable incomes through the exploitation of loopholes or simply fled the country altogether. It is estimated that the loss in revenue due to fleeing Britons amounts to more than 7 billion pounds. In Britain, if tax rates are raised too high, revenues decrease. But, this is not a phenomenon unique to our friends across the pond. Anyone hear about France’s richest man applying for citizenship in Belgium after a promised skyrocketing of French taxes? Or why it benefits French companies to cap the number of employees to 49 as to avoid expensive regulation?
To curb the exodus, British Chancellor George Osborne announced a decrease in the top tax bracket from 50% down to 45%. While still amazingly high, the number of $1m/year earners shot up almost immediately in the country, although still short of the original number previous to 2011.
Are we paying attention, U.S. government? The United States needs to learn from history that nations cannot punish the wealthy for the supposed benefit of the rest. Further, punishing tax rates naturally deter entrepreneurs from doing business in the country. Fleeing British business owners attest to the fact. How about the number of overseas bank accounts? Outsourcing jobs to cheaper nations? Taxes have consequences, and unfortunately the American people are forced to shoulder the burden of governmental ignorance of basic economic concepts.
Rhetoric from career politicians in Washington indicates a steadfast commitment to killing entrepreneurship and success in the United States as federal bureaucrats continue to blow through piles of taxpayer dollars on hollow initiatives, clumsy stimulus packages and never-ending wars throughout the world.
Barack Obama has repeatedly promised to raise taxes on “the rich”, to punish those for having more than the rest of us. Deficits are running high, and so is economic uncertainty. Spending less and downsizing government is never the solution in a government where politicians are unaccountable and the American people seem unwilling to make a drastic change in their leadership at the voting booths. And so, government spending will increase, taxes will rise and business owners and would-be entrepreneurs will continue seeking safe havens overseas from punitive tax rates.
The more successful nations in the future will be those who create a welcoming culture where success is praised, not punished, and where the free market dictates policy, not career bureaucrats.
Mark my words.