The Telegraph in England reported in shock and horror yesterday that two thirds of UK millionaires have fled the country in the face of a new “millionaire tax” labor party members had passed through parliament. Apparently, the income tax on millionaires in Britain was set to increase from 45% to 50%, and millionaires throughout the country agreed “No More”, and have now left the country in droves according to national data. Parliament has responded by trying to rush a cut back to 45% through the legislature, however the millionaires are not hurrying to come back. Perhaps many of them have gotten comfortable on some conservative Island in the Caribbean by now?
Silly me folks. I have an MBA, and even before I did — I remember taking Econ 101 in this place called college, while working on my bachelors degree. Since I went to a liberal school in California, my professor of Econ tried to glance over the Laffer Curve as best he could, but I heard common sense being discussed in the classroom for once, and made sure that he lingered on the topic long enough for me to truly understand the essence of Supply Side Economics. We’ve proven that supply side economics works now several times throughout our history, and that the laffer curve is a law — but people either have no idea what I’m talking about right now, or they dismiss it.
So basically, Art Laffer is one of the most famous economists currently living, and he came up with the concept of the Laffer curve. The Laffer curve basically illustrates that as you raise tax rates on people, revenue will continue to rise until you hit a sweet spot, and then revenue will start to decline as tax rates continue to rise. The reason behind this is because wealthy people have a lot of flexibility with their money when it comes to paying taxes. Many structure their businesses in ways to lower their overall tax burden, and some will even consider moving assets offshore or leaving the country themselves if things get too bad. Obviously nobody is going to stand for a 90%+ tax, because they might as well quit their jobs and stop working completely rather than pay such a ridiculous rate. You see, when you punish achievement in a country should it be any surprise that the population stops working so hard?
In addition to this, the Laffer Curve also shows that we can raise tax revenue in many cases by cutting taxes, because it creates incentives for wealthy people to bring income back home to the United States, sell assets, or otherwise earn money that they wouldn’t have earned when tax rates were too high. The raising of tax revenue by cutting taxes was demonstrated when Ronald Reagan cut taxes in the 1980′s, and when John F. Kennedy cut taxes in the 1960′s. It’s amazing to see that when you stop spanking people for earning too much money, they suddenly throw their shackles down and work harder than they ever have before to bring in high incomes!
(John F. Kennedy slashed tax rates, and created a boom in revenue)
So obviously I’m showing you this because of the proposed Obama tax increases which are slated to go into effect in the United States in 2013. How can anyone with common sense, and a basic knowledge of economics not understand that if you continue to raise taxes on the achievers of our society, sooner or later they are going to stop achieving or simply leave the country? There are so many warm spots in the islands where people can retreat to and pay less tax these days, and with the Internet and people’s ability to now work remotely from just about anywhere in the world — It begs the questions, “Why stay and put up with this nonsense?”