I noted from the Daily Telegraph this morning that Michael Caine will be leaving the UK as a result of the 50% tax rate.
The Sunday Times meanwhile highlights that the semi-retired Peter Hargreaves and High Osmond might go.
And both highlight the loss of entrepreneurial ‘talent'. But that's not true. These people are leaving to protect what they perceive of as wealth already accumulated.
Caine is at the end of his career. I admit that with the exception of Educating Rita I'm not sure what he ever did that was much good (but then, I'm no film buff).
Hargreaves has sold financial services products. Heard anyone who's been singing the praises of their private pension, endowment or ISA of late? No? Well let's not mourn Hargreaves leaving then.
And Hugh Osmond has done pizzas (which he got right, I admit) and since then pubs and insurance on the back of debt — and both are now stellar sections of the economy as a result of the entrepreneurial reforms of the last decade, you'll note.
So let's get real: these people were entrepreneurs. They're not now. Now they're the rich seeking to preserve their wealth. That does not mean they are the basis for building economies now. They've done that. And like all those who leave they do so because they've become risk averse — not because they're risk takers. Their behaviour indicates a desire to preserve, not to risk.
It's time we learned something I appreciated a very long time ago from working day in, day out, with real entrepreneurs who ran real businesses — that not one who was any good at it did it for the money. They do it because they're driven to do something they believe in well. Tax makes almost no difference to that. And a 50% top tax rate will certainly have no impact at all on real entrepreneurs. Not least because their money will all be made in companies — and you might notice they don't pay 50% tax.
So let's stop the nonsense on this issue and face reality. Reality is entrepreneurs need safety nets to cover their risk. The state provides that for them. Most are happy to pay for it. It's only the wealthy who aren't. And very, very few of them are entrepreneurial any more.
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…and where will these wealthy people take their money? Will it be to some poor Country where they can put their wealth to work by investing in people to enable them to achieve a better standard of living & quality of life?
No! It will be to some warmer clime – possibly a tax haven – where they can further selfishly indulge themselves with total disregard to the larger good that they could do if they had any concern for those infinitely less well off than themselves. They act like parasites; we have enough of them already in our midst so they will not be missed.
As far as I’m aware accumulation of wealth still remains a major incentive for entrepreneurs. I know for a fact (becuase its been in every newspaper) that Branson thinks the 50% tax rate was a major mistake and will discourage entrepreneurial spirit.
Tom
I don’t believe in Papal infallibility
Or Branson infallibility either come to that
You honestly think that’s an argument?
Richard
Most of the so-called “wealth creators” have simply been good at getting their hands on that stream of wealth known as “economic rent of land” or by otherwise getting themselves into a monopoly situation, for example by exploiting the laws relating to intellectual property.
Anyone that does this is then able to suck out wealth by doing nothing. Little real wealth has been created as a result of their activities. In fact, they have in many instances been detrimental to the creation of real wealth.
Who cares what Branson thinks?
As Richard’s post suggests – hope I’m not distorting it – entrepreneurs will make their money within companies. If/when they exit the company, they will likely pay tax on capital gains at between 10 and 18%, not 50%. How’s that tax rate that a disincentive to entrepreneurialism? It isn’t.
Those I have seen quit the UK for sunnier climes (or not so sunny in the case of the Isle of Man), have already exited businesses or else inherited their wealth in the first place. They were not wealth creators when they left.
TaxTwit
I wonder just how much tax Branson pays personally anyway, given that his Virgin empire is based in ….
If this new rate of tax won’t make a difference, perhaps you could direct us to an entrepreneur who supports this measure? Obviously we have seen people stand up against it, but if your contention that real entrepreneurs aren’t bothered about tax, where are those people applauding 50%?
I still do not believe the case has been made for how this particular policy helps the economic recovery and the country’s long-term competitiveness. Because, however much you might dislike this, it is entrepreneurs who are going to pull us out of this and who we desperately need. I’m not bothered about the so-called City whizz-kids going abroad. I am concerned about the real risk-takers: those who risk their own capital, unlike bankers.
Richard
Two points: higher tax rates in the 70s generated less revenue from the wealthiest 5% of the population, than when it is a 40%. Therefore making the UK more attractive from a tax perspective would attract foreign wealth, retain UK wealth and increase revenue.
Even if the wealth has already been created, tax on the income and profits from that wealth is currently paid to UK exchequer. Send these wealthy people over the tipping point and the UK loses the lot forcing higher tax on the lower and middle earners.
This is bad news for everyone.
Danny
I think the 70s a wholly different era – as were the tax rates – which were way above those now proposed
You also have to understand the tax of the period – which had a narrower base
And you have to appreciate the interactions with other taxes before such conclusions can be drawn. I think your analysis simplistic.
The point you ignore is that extremes of wealth are bad for society – people are all better off – including, perhaps surprisingly the wealthy. Again I simply suggest that to ‘count it up’ as you’re suggesting as a proxy for well-being is wrong – the evidence is that this produces poor outcomes.
See http://www.amazon.co.uk/gp/product/product-description/1846140390/ref=dp_proddesc_0?ie=UTF8&n=266239&s=books from which I quote this:
Large inequalities of income in a society have often been regarded as divisive and corrosive, and it is common knowledge that in rich societies the poor have shorter lives and suffer more from almost every social problem. This groundbreaking book, based on thirty years’ research, demonstrates that more unequal societies are bad for almost everyone within them – the well-off as well as the poor. The remarkable data the book lays out and the measures it uses are like a spirit level which we can hold up to compare the conditions of different societies. The differences revealed, even between rich market democracies, are striking.Almost every modern social and environmental problem – ill-health, lack of community life, violence, drugs, obesity, mental illness, long working hours, big prison populations – is more likely to occur in a less equal society. The book goes to the heart of the apparent contrast between the material success and social failings of many modern societies. “The Spirit Level” does not simply provide a key to diagnosing our ills. It tells us how to shift the balance from self-interested ‘consumerism’ to a friendlier and more collaborative society. It shows a way out of the social and environmental problems which beset us and opens up a major new approach to improving the real quality of life, not just for the poor but for everyone. It is, in its conclusion, an optimistic book, which should revitalise politics and provide a new way of thinking about how we organise human communities.
Progressive taxation makes sense – even for entrepreneurs – in my opinion.
Richard
Richard
Agreed my arguements are simplistic, not sure how getting rid of the extremes of wealth happens in practise.
For example, Russia has gone from elements of equal wealth to the haves and have nots, oligarths etc. These billionaires then site themselevs in the tax relm that suits them.
Surely unless there is equal taxation accross the world, there will always be those who can afford to move their affairs to pay the least tax. So why fight it – drop taxation in the UK to lower than the so called tax havens and wait at Heathrow for the migration of the brain gain.
Danny
You forget the UK has no reason to do this
It already has the domicile rule
Richard