November 28th, 2012

Astounding news: millionaires are not dummies and will act in their own self-interest

Yes folks, believe it or not, it’s true [emphasis mine]:

In the 2009-10 tax year, more than 16,000 people [in Britain] 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…

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.

We don’t know what really happened to all those millionaires, or why. But that up-down-up-down pattern is mighty indicative that the tax-raise and tax-cut were partly or even mostly to blame.

And it’s “interesting” that a lot of people don’t seem to get the difference between tax rates and tax revenues, the difference that makes a difference. So, why don’t they get it? One reason is that tax rates are something you can legislate, whereas the tax revenues that result can only be estimated (often wrongly), calculated ex post facto, and any drop can be blamed on some other factor.

What’s more, tax rates are what politicians campaign on. Lately the public seems to like to stick it to the rich, and so liberals who advocate such tactics (such as our very own president) are often elected. What happens later in terms of actual revenues is easier to ignore and/or explain away—and after all, what we are really interested in these days is the show, the narrative, the appearance of things (fairness! reducing income inequality!) rather than the actual long-term results.

[NOTE: And yes, I’m aware of all the brouhaha around the blogosphere lately about the fact that the higher rate is not paid on the millionaires’ entire incomes. I’m not going to get into that issue right now, except to say that there’s disagreement among more expert pundits than I on the subject of how much the tax hikes really affect the rich. Here’s a summary of some of the major points, and also see this.]

21 Responses to “Astounding news: millionaires are not dummies and will act in their own self-interest”

  1. Tesh Says:

    Math is hard. It deals with facts and realities. Politics avoid that sort of thing.

    Amidst this “tax the rich” nonsense, I’m reminded of Bill Whittle’s classic “Eat the Rich” video. Andrew Klavan did a riff on it too, if I remember right. The numbers are pretty simple… and they are chilling.

  2. roc scssrs Says:

    It’s simple: if you go to the store and buy something on sale that you don’t need, you save “X”%. Whereas if you don’t buy it, you save nothing.

  3. kcom Says:

    Cause and effect. Who knew?

    All these assumptions seem to be based on everything else being equal. But when you change the input parameters of a scenario, things are no longer equal. Therefore the responses won’t be equal and the outcomes won’t be equal.

  4. LisaM Says:

    Obama freely admits that he knows higher tax rates lead to lower revenue and vice versa, and that he doesn’t care. He’ll do it anyway, “in the interest of fairness.” Did the media report this video? If so, no one cared.

  5. neo-neocon Says:

    LisaM: I certainly read about it (and I believe I even wrote about it). But mostly only on the right.

    My guess, though, is that at this point the majority of Americans would agree with what he said. If they didn’t agree in 2008, they would agree now. He has stoked the flames of class warfare in the interim.

  6. Geoffrey Britain Says:

    Yes, millionaires will act in their own self-interest and so will the left. The left, those seekers of utopia are hard at work in the UN working on closing the ‘loophole’ of those millionaires having the option of changing their country of citizenship to “escape paying their fair share”.

    IRS Launches New Global Program to Target ‘High Wealth Individuals’

    To do so, the left needs to destroy national sovereignty which they are attacking on a multitude of fronts;

    EU should ‘undermine national homogeneity’ says UN migration chief

    Proposals for a global tax on the Internet are on the table so as to provide the UN with a source of independent revenue. UN treaties are being formulated to subordinate national sovereignty on gun control, elections and judicial findings. Supreme Court Justice Ruth Ginsberg is already on record as supporting such precedents as world court findings which supersede the US Constitution.

    The left is engaged in a “full court press” to bring to humanity its utopian ideals, with their elite in charge of course, as they, by their ideological purity, have demonstrated their worthiness.

  7. neo-neocon Says:

    Geoffrey Britain: I always though the very rich were audited very very carefully anyway. Is that not the case?

    But in recent years I also have come to think that what’s happening in the US (the leftward trend) is just part of a worldwide (at least in the western world) change that began at least 100 years ago (approximately), post-WWI. Europe is further along the road than we, but with Obama we’ve finally come along. That has been the goal of the transformation of America he promised. Back in 2008 I thought that, if Americans realized this, he would never have won. I no longer think that was the case, and it’s certainly not true today.

  8. csimon Says:

    “And it’s “interesting” that a lot of people don’t seem to get the difference between tax rates and tax revenues, ”

    No. 1 on that list is President Obama.

    Lisa M- Obama has also repeatedly said — and this has become an oft-repeated Dem talking point throughout the campaign (and continued campaigning post-election) that, despite empirical evidence to contrary (i.e. tax rate reductions by Reagan and Bush #43 and subsequent very significant increase in tax revenues) that the “Math doesn’t work.” Never mind that Obama has freely admitted that he is challenged by the math homework of his 13-yr. old daughter. Many many moons ago, my own father was “challenge” by the “new math” I was being taught in school, however, by that he meant that the methods were different, but his “old math” still always reached the same answer as my “new math.” (That’s something I always thought was so cool about math: it’s all about logic, and there can be different methods of applying logic — but the solution to the numbers problem is always the same.)

    That is not to say that the intentional manipulation of numbers cannot achieve different results. It most definitely can. But that is the result of logic, too: in those cases, the desirable end result (number) is decided upon in advance, and then logic is applied to work backwards and create a logical means of computing that will result in said numbe. This latter method is one that the Democrats have employed regularly to fool the public (obviously successfully, given the results of the most recent Presidential election which polls repeatedly said was based on the economy of our nation). Despite abysmal reality, a lot of voters preferred to believe in the suspension of reality by the Obama Administration — and logic — used to peddle the claim of “clear improvement” indicating Recovery.

    Prime example: the last two jobs numbers (“which cannot be manipulated” according any Dem who was asked) preceding the election, which after 48 months of steady decline, suddenly improved reducing the unemployment rate from over 8% to approx. 7.8%. Jack Welsh got in an awful lot of trouble for tweeting that this was “some … coincidence” — indeed an amazing one with incredible timing. The powers of incumbency (and a very compliant MSM) just waiting to spread the word coming from the White House.

    But the logic and correctness of the math is no longer the point anyway, because as LisaM and Neo note, this President has been able to convince people that his idea of “fairness” overrides all else. No surprise then that a majority of people who stand to benefit cast their votes for his brand of logic. Buying votes is all too easy — until there’s no more money to pay off the voters, because, as in Great Britain, the wealthy will figure out that it is to their advantage to do the kind of math that will reduce their reportable taxable income.

    By then, Obama will be long gone from politics and very busy enriching himself investing with all the bankers he bashed along the way. (Not very logical on the part of the bankers and private capitalists — but not much about Obama and his rise to power has been rational).

  9. Ray Says:

    “Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.”

    Isn’t it interesting that the politicians think not taking your money cost the state. Obviously, they believe your money belongs to them.

  10. parker Says:

    Politicians in general are not particularly intelligent. And most fail to understand the basics of human nature. Of course the wealthy (even wealthy leftists) seek to hang onto their money. Duh.

    “Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich.”

    — William F. Buckley, Jr.

  11. TR Says:


    Maybe the country going off the “fiscal cliff” is something that Obama wants to happen, so that he doesn’t have to do the HARD JOB of trying to fix the economy.

    [And then he also doesn’t have to take his blame for his bad work] on the economy:

    Such as, maybe Obama uses two lame excuses, so that he doesn’t have to work hard on the U.S. economy:

    Lame Excuse # 1)

    From 2008-2012 I “worked on the bad economy”, but I couldn’t get much done, because “the Republicans left me with two expensive wars, and a weak economy”. [ Which, Obama, the GOP never did].

    …And if the congress’ talks fail, and the U.S. goes over the fiscal cliff, then he can wimp out and use-

    Lame Excuse #2)

    I, Obama, tried as hard as I could to stop the fiscal cliff from happening…(which Obama never did try to do), [so that now that we have gone over the cliff + have a bad economy, it’s not because I never worked to stop the fiscal cliff from happening, but that the Republicans didn’t care about the bad economy…and they alone took everyone over the fiscal cliff].

    Obama will probably say: It’s not the job of the Republicans in congress, and the whole congress, and me/President Obama to work on the economy…JUST THE GOP has the job of fixing the bad economy…And if the economy goes bad when it goes over the cliff, ONLY THE GOP gets the blame for working on the economy and failing to improve it, AND NOT ME!

    Or he’ll use words similar to those, so that he can “weasel out of it” and not take responsibility for his poor job of fixing our bad economy.

  12. George w. Says:

    This discussion gives me a chance to propose something a little different:

    Raising the income tax rate protects the “wealthy”!

    I put “wealthy” in quotes because I am using the old definition: “large assets” instead of the new: “large income.” A person becomes wealthy by having a large income over time. The relative position of someone who is currently wealthy is protected by heavily taxing the large (ordinary) incomes of those who want to become wealthy.

    Another factor that helps the currently wealthy is that they can more readily invest other types of income which are taxed at a lower rate, e.g. long term (> 1 year) capital gains (15% rate) or tax free bonds.

  13. thomass Says:

    If anyone figures out where they are moving to please let me know.

  14. Kyndyll Says:

    If anyone figures out where they are moving to please let me know.

    I think a lot of us are waiting to hear where the sane people are moving.

  15. parker Says:

    “If anyone figures out where they are moving to please let me know.”

    Singapore, Thailand, Brazil, India, Panama, Costa Rica, Australian, and New Zealand are good places to start looking for shelter. Personally, I ain’t going nowhere. I prefer to strap myself to a tree with roots.

  16. Jamie Says:

    Didn’t the same thing happen in Britain before Thatcher? I remember reading about it as a kid: almost every millionaire in Britain moved to tax havens like the Isle of Man and so forth, for the same reason: ridiculously high marginal tax rates. And think how much easier, logistically, it’d be now than it was then: you really can run a lot of your business in your pajamas from your bedroom.

  17. billm99uk Says:

    Didn’t the same thing happen in Britain before Thatcher

    Pretty much. The top rate of income tax in the UK when she came to power was 83%.

  18. holmes Says:

    I really think they lose the distinction because they believe the rich are like the rest of us- get a paycheck at a job, which takes out taxes, and hopefully you don’t owe too much at the end of the year. Not so. The rich are better able to avoid taxes (and more power to them) because they are rich, as this example demonstrated.

    People really have difficulty seeing other people’s point of view these days. They continually project their own limited view of things onto everyone else. See: Washington, DC.

  19. Sangiovese Says:

    On the night of the election, as I bemoaned the results, I predicted that my wife and I would Go Galt with one of our two businesses. That plan is now in the final stages. The business will be gone by the end of the year. Result: The Messiah Barack Obama will receive many tens of thousands of dollars less tax revenue from us in 2013 and beyond than he received in each of the past few years. Tax rates go up and tax revenues go down. It’s a fact.

    Oh, and those employees who could not be absorbed into our much-smaller remaining business will be without jobs. This is the sad part. But we made sure the Obama supporters understood exactly why they will be unemployed by the end of the year. Elections have consequences.

    As for us, we will enjoy being part of the middle class that Obama loves so much. I look forward to a 15% tax rate instead of 35% or more.

  20. holmes Says:

    Belize is another place Americans are moving. English tradition, speaking, and law. It’s very easy to become a citizen there too.

  21. JEB Says:

    We don’t even have to go across the pond to find proof.

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Previously a lifelong Democrat, born in New York and living in New England, surrounded by liberals on all sides, I've found myself slowly but surely leaving the fold and becoming that dread thing: a neocon.

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