Raising Taxes on the "Rich"...

The Anointed One has spent the last year insisting on a tax hike for higher income earners in the US, casting it as an issue of “fairness” and of deficit reduction.

The UK did exactly what the AO and the Democrats propose to do here — pass a surtax on high-income earners. The new tax rate of 50%, which took effect at the beginning of the year, was expected to raise a billion pounds in extra revenue each month.

So how did that work out? Tax revenues dropped by 500,000,000 GBP!

It turns out that the wealthy can find ways to shelter income when government drives the cost of taxes high enough to make it worthwhile. If that means taking their money and going where the tax laws are more welcoming to investment, then this particular population has fewer barriers to making that solution work than most of the middle class.

Instead of gaining more revenue, the UK will end up losing revenue, and not just from the sheltering — but also in lost economic growth as the wealthy have to put that capital to sleep rather than make it work in the economy.

The Anointed One’s plan to hike capital-gains taxes to 20% and push a surtax on higher earnings will produce the same result here. The capital that might have gone to work in the US will go to work somewhere else or not at all, which will not just kill the direct revenues expected in static tax analysis from the hike, but also discard the revenues that would have occurred had the capital been put to work here.

That’s the lesson from the British face-plant on surtaxes, and hopefully the US learns that lesson the easy way.