Which is about 7% of the total currently managed from the Uk, I’d note. I’d also note that the 50% tax rate has been known about only since April, so the reference to ‘past 15 months’ suggests quite a fair bit of deliberate spin is being put on the statistic. Would be interested to know how that compares with the normal flow of capital, both into and out of the UK. One-way levels of the flow are meaningless.
£15bn in assets, BTW <> £15bn of profits taxable in the UK. Let’s say that the funds make a 10% return, and charges a 20% management fee. Virtually all of the investors in the fund won’t be UK taxpayers (and even if they were, moving the management isn’t going to affect their tax position). It’s not tricky to structure this as a capital gain (taxed at 18%) - that’s a UK tax loss of, from the back of a fag packet, £54m. Chunky, but to put it into perspective, it’s about the amount of taxes I have oversight over in my current job.
To put this into perspective, a vastly more serious problem for the UK Treasury right now is the issue of what are known as Condé Nast claims. These were caused by a drafting cockup which basically reopened the statutory time limits for VAT reclaims from 3 years to all the way back to 1973. Claims totalling £4bn have been made. Now that’s serious.
The burn is still applicable, but I fixed the link.
What you’ll find is that tax(price) increases are sticky in the short run. In the long run, people adjust their behavior and even place of residence in response to them. You can argue that 54m is a small sum and nothing to worry about, but talk to California, New York, and New Jersey about what happens over time as people and companies migrate.
Saying “good riddance” when rich people and their capital producing ways depart seems like a fail policy.
On top of all those points I’d add that its not necessarily a bad thing socially if the super rich do leave taking their tax revenue with them. As counter intuitive as it may seem their leaving will help reduce inequality in the UK and thereby likely improve the rest of the populations well-being. For those not exposed to the arguments about how wellbeing of the population is correlated with income & wealth equality in a population after a cetain level I reccommend The Spirit Level.
Finally, of course the super rich eventually run out of places to run to, especially nice places where they aren’t at risk of sudden military coups. I shed not a single tear for them being potentially being brought down from ‘super rich’ to merely ‘very rich’.
Ender, oh, two years ago, I’d have probably agreed with you, y’know. However, recent events have caused me to seriously reconsider the worth of the current bloated finance industry, and what real value it adds to the world. Given that it currently exists only through massive government intervention…
It can be argued that all of the massive government intervention was the result of prior intervention that distorted and corrupted the system. Then intervention was required because at the point when government was expected to hold things up, they let Lehman fail. That terrified the market, and terror means no one will loan anyone money.
It is more complex then to say, “Finance people caused this mess and should reap their just desserts.” Bankers are the convenient scapegoat of those that played a starring role in setting the rules and incentives, the politicians.
Increasing economic growth leads to more medicine, more food, healthier people, more choices, more episodes of House and Lost, more computer games, and faster gaming machines. I’ll take a double helping of economic growth please.
Like I said above, economic growth stops improving wellbeing significantly after a certain point (a point which america and most developed countries have already reached) on a whole range of measures. Its not such a positive force on humanity that we should abandon all reason in pursuit of it.
The idea that a perfect capitalist system, that somehow with a little more purity in our markets, we would have prevented the banking collapse sounds like a faith based theory to me. In any case Capitalism doesn’t map completely accurately to the world, with or without government, so the purely theoretical case cannot exist.
Wait a minute, so because a book was written to say that economic growth isn’t good then it must be true? Case closed I suppose. Authors with radical biases never produce questionable studies or analysis…
I didn’t say it was impurity that caused the collapse, just that pointing to the bankers that were playing by the rules established by the government as the root cause is misleading. They were told to give loans to risky people, they were told it was safe to take on increasing risk, they were subsidized to behave this way, and they were purchasing things rated by government sponsored ratings agencies as safe.
That is a simplification, but you can see where there was more than ‘impurity’ in the system.
Were they told by the government to treat mortgage-backed securities as self-replicating cash machines? Were they told by the government to give mortgages to people with no income and no assets? Were they told by the government to only keep a small fraction of the cash they’d need to cover their debts on-hand? I doubt it.
You can look at the evidence yourself and draw your own conclusions on policy, which is in fact what the book advocates. Its not really a matter of opinion unless you think the data itself is suspect (mainly drawn from bodies like the UN). The people who wrote it don’t really fit the image of far left radicals, more professorial academics.
I’d say that your implication that the evil government led on the innocent and clueless banking industry is a difficult to swallow proposition. Yes, government holds some culpability for loosening regulation, but it wasn’t done for the fun of it, it was done at the behest of the banking sector. The government agencies that regulated CDOs were deliberately picked by the banking industry. The bankers are supposed to be the experts in this scenario, that the government had too much ‘trust in their expertise’ was probably the governments failing. Big banking and government financial policy became effectively the same thing for a while and I suspect the financial crisis is the result.
There’s no bright line, beyond which tax rates (marginal or effective) become confiscatory, immoral or wrong. I suppose every person balances their view of what is fair against what is best for the economy and society as a whole. For me, I’d draw the line around 75% marginal rate, and only for income in excess of $1m.
Comparisons to tax rates in the past may not be apt, as the Alternative Minimum Tax has really changed the game. The top marginal rates may have been very high pre-Reagan, but they don’t reflect what people actually paid. With the AMT, it’s much harder for even moderately well-off folks to shelter their income.
Brad, I realize you’re just trying to get us to either agree with your “taxation = tyranny!!1! (in certain extreme cases)” stance or reveal what a bunch of damn dirty pinko socialists we are, but your setup is largely meaningless without knowing at least:
In the D.C. area I know Virginia is seen as more business-friendly than Maryland, at least in part due to lower business taxes. Northern VA has seen a lot of growth in recent decades. And I know Marriott threatened to move its HQ from MD to VA to force some concessions out of MD a decade ago, though who knows if they were bluffing.
OTOH, based solely on rush-hour traffic patterns, a lot of people who work in VA apparently prefer to live in MD. Make of that what you will.
