Saturday, December 1, 2012

Britain’s millionaire exodus is a wake-up call to Barack Obama’s high tax America

By Nile Gardiner World Last updated: November 28th, 2012
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Millionaires and their wealth are not just fleeing Hollande’s France, with its new 90 percent top rate tax. They’ve also been escaping Britain’s 50 percent tax too. As The Telegraph’s Robert Winnett reported earlier today, “almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax.”

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.

Since George Osborne announced a reduction of the top rate to 45 percent in his April budget “the number of people declaring annual incomes of more than £1 million has risen to 10,000.” This is a figure still significantly below earlier levels, and it will be a huge challenge for Britain to recover its lost wealth. As Conservative MP Harriet Baldwin puts it, “Labour’s ideological tax hike led to a tax cull of millionaires,” costing the UK around £7 billion in lost tax revenue.

There are important lessons here for the White House, and the figures coming from the UK should be a wake-up call for President Obama, who has pledged to force "the wealthiest Americans to pay a little more in taxes.” Specifically, Obama wants to raise the top rate tax in the United States for those earning $250,000 a year or above by nearly five percentage points, from 35 percent to 39.6 percent (which may rise as high as 43.4 percent according to Jennifer Rubin at The Washington Post). Compare this to the current top marginal individual income tax rate in Singapore of 20 percent, and Hong Kong at 15 percent.

Combined with the rising cost of Obamacare, which is already forcing many US businesses to shed jobs, this will have a disastrous effect on the US economy. Small businesses will be especially hard hit, with large numbers of small business owners caught in the new tax bracket. Even the White House itself admits that more than 600,000 small businesses will be slammed hard by the new tax hike (hat tip: Keith Koffler). Other estimates, based on Treasury Department figures, suggest that up to 1.2 million businesses could be affected, threatening more than a million jobs.

Obama’s tax increase will also act as a major disincentive for foreign entrepreneurs to invest in the US economy, build businesses and create jobs. As a 2010 survey of America’s Fortune 500 companies showed, over 40 percent “were founded by immigrants or their children.” There are 90 immigrant-founded Fortune 500 companies in the United States, employing more than 3.6 million people, generating $1.7 trillion of revenue. As tax rates rise, there will be every incentive for overseas businessmen to put their money elsewhere, rather than invest in big government America.

It is also an illusion to believe that high earners in America do not contribute enough money to the coffers of the federal government. As I noted in a previous piece, what Obama refers to as “the wealthiest Americans” already pay more than their “fair share” in taxes:

According to the Congressional Budget Office, the top 1 percent of US earners already pay 22.3 percent of all federal income taxes (based on 2009 figures), even though their share of total income earned is just 13.3 percent. The top 2-5 percent of American earners pay 17.3 percent of the total share of federal income taxes paid, even though their share of total income earned is 12.5 percent. The top 20 percent of Americans pay 67.9 percent of total federal income taxes, while their share of total income earned is 50.8 percent.

Under Barack Obama, the United States has steadily fallen down the index of the world’s freest economies, and is now ranked tenth in the world, below Australia, New Zealand, Switzerland and Canada. If he succeeds in raising the top rate tax in his second term, it will fall even further. Trampling economic freedom is hardly the best way to handle America’s huge debt, which stands at a staggering $16.3 trillion and rising. Instead of increasing revenues, tax hikes are likely to reduce them, as the British example has clearly shown.

Driving many of the country’s most successful people, as well as their money, out of the United States is sheer economic suicide. 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.

The Government may already have a plan in place to avoid this problem.

The general idea of the “Tax Collection Responsibility Act of 2007” was to discourage people from leaving the United States and taking their savings with them. In essence,it imposed a 30% tax on all assets above $600,000. This included the cash valueof property and bank

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