UPDATE: Here’s an example of the kind of evasive behaviors folks will engage in when faced with the prospect of higher taxes: Costco to Pay Special $3 Billion Dividend. This will allow holders of Costco stock to pay the 15% dividend tax rate before it goes up next year (nearly double for some brackets).
People with means will do what they must to avoid being dunned by higher tax rates. England provides an excellent example. Instead of increasing revenue to the treasury, the higher tax resulted in two-thirds of millionaires disappearing, and revenue went down – significantly.
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.
Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000. However, the number of million-pound earners is still far below the level recorded even at the height of the recession and financial crisis.
Last night, Harriet Baldwin, the Conservative MP who uncovered the latest figures, said: “Labour’s ideological tax hike led to a tax cull of millionaires. Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.
via Two-thirds of millionaires left Britain to avoid 50p tax rate – Telegraph.