Monday, April 27, 2009
I am 61 years old. I have lived and worked in Britain all my life. Not even in the dark days of penal Labour taxation in the Seventies did I have any intention of leaving the country of my birth.
Despite a rumour put around some years back, I have never contemplated leaving Britain for tax reasons. But in the 40-plus years I have been lucky enough to work here, I've seen a bit. So I must draw your attention to what is really proposed in this Budget.
Here's the truth. The proposed top rate of income tax is not 50 per cent. It is 50 per cent plus 1.5 per cent national insurance paid by employees plus 13.3 per cent paid by employers. That's not 50 per cent. Two years from now, Britain will have the highest tax rate on earned income of any developed country.
I write this article because I fear the inevitable exodus of the talent that can dig us out of the hole we find ourselves in. It is inevitable, given that other countries are bidding for entrepreneurs.
Give up? Suppose I said "composer" rather than "author". Link below.Meanwhile, let's consider what Senator Tom Bakk, whose bill to put up tax rates in Minnesota is now in conference with a competing bill by Rep. Ann Lencewski (she deserves her own post, which will have to be tonight), said about alcohol and income taxes:
The new income taxes would raise virtually everything Senate DFLers were looking for in new revenue to help erase a $4.6 billion deficit through the middle of 2011. They are also proposing across-the-board spending cuts and using federal stimulus dollars.So people would drive across the border for alcohol if we raise the tax on booze, but if we raise the tax on work they'd stay put? Not just the top rate either. As Sen. Julianne Ortman pointed out on my show Saturday, the Bakk plan gives us two of the top ten state income tax rates in the U.S. Bakk seems impervious to the idea that life location decisions are as influenced by tax rates as booze purchase decisions.
Senate Taxes Committee Chairman Tom Bakk said tax cuts of the 1990s were unsustainable and the state needs more money for priorities such as schools, even though the Senate voted to cut K-12 education.
Bakk said the reductions would be deeper without new tax dollars.
"It's a huge deficit that the state is facing. Everybody's going to have to participate in the solution," said Bakk, a Democrat from Cook who is preparing to run for governor.
...Bakk said eliminating the current mortgage interest deduction could hurt Minnesota's high rate of homeownership and higher alcohol taxes would drive some liquor shoppers across the Wisconsin border. [Both these provisions are in the House bill --kb]
Bakk said about 85 percent of taxpayers would pay more under his plan, but most of the money would come from people with the highest incomes. ...
The Senate tax bill would raise the lowest rate, 5.35 percent, to 6 percent on income of up to $31,860 for married couples filing jointly. The middle rate would rise from 7.05 percent to 7.7 percent on income between $31,860 and $126,580. The current top rate would climb from 7.85 percent to 8.5 percent on income of $126,850 to $250,000.
The new fourth-tier rate of 9.25 percent would apply to incomes starting at $250,000 for married couples, $141,250 for single taxpayers and $212,500 for single heads of household.
The Briton who doesn't believe this? Andrew Lloyd Webber. H/T: Stephen Karlson. Webber notes a young entrepreneur in the stage construction industry:
Under the new tax regime, he will have to pay 13.3 per cent to employ himself before he pays himself anything. And then he will have to pay 51.5 per cent on what's left.I realize Sen. Bakk lives on the other end of the state, but he might want to pay a bit of attention to Sioux Falls.
This is a guy at the cutting edge of his profession who works all over the world. He is in demand in every major territory where entertainment is produced. He has a young wife and two children. Last Thursday he told me that he and his wife had decided that the UK was no longer where they wanted to live.
His wife thinks the State education system is inadequate. And she fears that a bankrupt Britain will increasingly be a worse place in which to live as the horror of our present financial mess hits us all in the solar plexus.
He says that he is young enough to set up shop somewhere else. The new tax rates were the final straw. These talented young people know they will make it impossible for them to educate their kids privately in the UK.
So Britain plc loses not just the 40 per cent he would have paid in personal taxes under the old regime - plus NI and everything else - but... Come on, I don't need to explain the knock-on effect. It's obviously huge and immensely damaging ...