The Corner

Higher Tax Rates? Obama Should Ask the British

President Obama, that great uniter of men, wants Americans to make videos explaining just how much they want to raise taxes on the rich. As the New York Times reported on Sunday:

Already, supporters are being asked to record YouTube videos of themselves talking about the importance of raising taxes on the rich. Aides said those videos would be shared on Facebook and Twitter and would be forwarded to centrist Democrats, as well as to mainstream Republicans, who they hope will break with their Tea Party colleagues.

Right on! Nothing says E Pluribus Unum like encouraging Americans to make short films explaining why their fellow citizens should be forced to pay more of their money to the state. Still, if the president really wants to adopt a class fight, perhaps he should cast his net further afield and ask the British — past masters of class politics – to explain how effective higher tax rates for the wealthy really are. From the Telegraph yesterday:

Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax, figures have disclosed.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government.

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.

George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.

During the Democratic primary in 2008, Barack Obama acknowledged that he was in favor of tax hikes for the sake of tax hikes, famously conceding that he’d support an increase in the capital gains tax rate “for purposes of fairness,” even if it didn’t bring a single penny more in revenue. If you define “fairness” as “encouraging emigration” then he might be onto something, for, as I noted back in February, Britain’s 50 percent rate — instituted to “close a hole” in the budget — did very little except make the case for its own abolition:

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.

I have a modest video contribution to the president’s project here.

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