¡No Pasarán!: It doesn't take much

It doesn't take much

posted by Georges @ 17:17

As noted previously as it relates to the very small number of individuals who actually tote the note via taxation in New York City, it does not take an unusually large number of these productive individuals fleeing a tax jurisdiction to really put a crimp in a government's high-spending lifestyle. "Fleeing" of course takes form in many ways: physically leaving, retiring early, not working as many hours, being sacked, various use of still available deductions, etc.

So what might be the toll to the UK of even higher rates of taxation on those very very rich individuals? A Times article points to some generally interesting admissions:

Treasury officials admitted last night that the Government would lose out on billions of pounds of revenue as they expected high earners to sidestep the 50 per cent tax rate.

Speaking to the Treasury Select Committee, Mike Williams, the director of personal tax at the Treasury, said that the Government expected to receive only 31 per cent of the possible total income from the tax increase announced in the Budget.

The Chancellor said last week that the 50p income tax rate for those earning more than £150,000 would raise £1.1 billion, but figures revealed yesterday suggest that he expects to lose £2.5 billion as many of the 350,000 higher earners take action to avoid, through legal means, paying the rate by working fewer hours or moving abroad.

A look at the numbers show that, just like NYC, a relatively tiny number of individuals in the UK are actually toting the governmental note in terms of income tax. Those individuals making over £100,000 make up 1.8 percent of all tax-payers yet pay 29.4 percent of all income taxes. Some may see this ratio as fair (the modern definition of "fair" being "the other guy paying more than me = fair"). But what happens if a small number of the already small number toting the governmental note were to "flee" that tax jurisdiction known as the UK:

- If only 1 percent of those individuals making over £100,000 chose to flee, the "cost" to the Treasury would be £195,000,000 per year.
- If only 5 percent of those individuals making over £100,000 chose to flee, the "cost" to the Treasury would be £975,000,000 per year.
- If only 10 percent of those individuals making over £100,000 chose to flee, the "cost" to the Treasury would be £1,950,000,000 per year.
- If only 25 percent of those individuals making over £100,000 chose to flee, the "cost" to the Treasury would be £4,875,000,000 per year.

As FYI for the above,

- 1 percent represents: 5,760 individuals
- 5 percent represents: 28,800 individuals
- 10 percent represents: 57,600 individuals
- 25 percent represents: 144,000 individuals

If more than 10 percent of that already small number of individuals who tote the governmental note decide to flee in some form or fashion, it will certainly give new meaning (and in this case actual real meaning) to the term, Missing Billions.

It doesn't take much.

Previous Posts...

Wednesday, April 29, 2009

It doesn't take much