Incentives Matter: Britain Is Raising Taxes, and the Productive Are Fleeing

One unshakable law of economics is this: What you reward, you get more of, and what you tax, you get less of. 

The government of the formerly Great Britain doesn’t seem to understand this fundamental law. They are proposing to hike taxes and fees, and high-income and wealthy (which are not always the same thing) Brits are looking to the exits.

We can hardly blame them.

An exodus is being reported by bankers, financial advisers and business chiefs with experts warning that the Chancellor risks ruining hopes of faster economic growth with a widely expected increase in capital gains tax (CGT).

It comes after Sir Keir Starmer warned last week that those with the “broadest shoulders” would carry the burden of fixing Britain’s ailing public finances.

She added: “People with hundreds of millions of pounds [are leaving] because changes can be more impactful for them.”

Those packing their bags and moving overseas are typically entrepreneurs and private equity executives in the top income bracket, she said. Italy, the United Arab Emirates (UAE) and Switzerland are among the most popular destinations.

This should surprise any of us on this side of the Atlantic, and there is a similar exodus happening here, from blue states to red states .

Incentives matter, and the United Kingdom and a lot of our blue states are getting those incentives all wrong. That’s why the productive are fleeing.

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As one Brit points out, the very people being targeted in these tax hikes and new levies are the people who are most able to pack up and split.

Brent Hoberman, the founder of Lastminute.com and Founders Forum, said: “Entrepreneurs are very mobile. Many of them will leave or, maybe even worse, not come to the UK if they aren’t creating entrepreneur-friendly policies.

“The combination of a potential move on non-doms, inheritance tax, CGT and VAT on private schools as a lesser issue, all those things when not married with any figurehead supporting entrepreneurship, valuing entrepreneurship, so far from this Labour Government I don’t think we have had anything backing the country’s entrepreneurs.”

Two-Tier Keir claims that the British subjects “with the broadest shoulders” should carry the burden, much the same kind of stupidity as an American politician claiming the “rich must pay their fair share.” The problem is that high-income earners in the United States are already paying far more than their fair share. But that doesn’t matter; not to liberal pols in Britain or the United States. For all of the left’s prattle about “making the rich pay their fair share,” these politicians don’t mean it, and they know they don’t mean it. They can’t mean it. The rich are the most capable, after all, of making use of tax shelters. They have off-shore accounts, batteries of tax attorneys, and every other possible means of shielding income from taxation. The middle class, especially independent business owners, have no such resources, and it is always – always the middle class on whom the burden of this taxation-which-is-theft always falls.

Incentives matter. Britain and the blue states here don’t understand that, and their economic woes will only grow worse until they figure it out.