"Lesson From UK: Tax Hike on Wealthy Lowers Revenue," Dec. 9; http://news.newsmax.com/?Z6I6Xbn7ufFfjQOO9bvHKDu1vQyztLU1Z
One side wants to rein in entitlements to deal with the budget deficit. The other side insists that any such moves be accompanied by higher taxes on the wealthy. That may sound like the ongoing fiscal battle in Washington, but actually describes the situation in Britain.
The difference is that Britain has already raised taxes on the wealthy, with a telling result: The government actually lost revenue.
In the 2009-2010 tax year in Britain, more than 16,000 people reported annual income of more than 1 million pounds (equal to about $1.6 million today). Then in 2010, Prime Minister Gordon Brown, a member of the Labour Party, introduced a new 50 percent top income tax rate for high-income earners. After that, the number of people reporting income of at least 1 million pounds fell to 6,000. “It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes,” The Telegraph reported.
Harriet Baldwin, a Conservative member of Parliament, said: “Labour’s ideological tax hike led to a tax cull of millionaires.” Instead of raising revenue, the tax hike cost the U.K. 7 billion pounds ($11.2 billion) in lost revenue — and that in an economy one-quarter the size of America’s.
Now the government of Conservative Party Prime Minister David Cameron has announced that it will lower the top rate from 50 percent to 45 percent, a move the Labour Party officials have called a “tax cut for millionaires.” [Sound familiar?] In ongoing budget talks, Conservatives want to freeze out-of-work benefits [unemployment benefits], which are set to rise with inflation, while liberals in the government “will only allow the benefits freeze if taxes on the rich are increased,” according to The Telegraph.
Democrats in the United States might note that since Cameron’s government announced the lower top rate, the number of Britons reporting income of at least 1 million pounds has risen to 10,000.
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"Myths of Tax Cuts for Rich, Spending Cuts for Poor" - By Brian M. Riedl, May 3, 2011, http://www.heritage.org/research/commentary/2011/05/myths-of-tax-cuts-for-rich-spending-cuts-for-poor
"...The nonpartisan Congressional Budget Office reports that the richest 20 percent of taxpayers now shoulder a record 86 percent of the federal income tax burden. This is substantially higher than when Ronald Reagan took office (64 percent) and even higher than when George W. Bush took office (81 percent)...
The flip side of the “tax cuts for the rich” mantra has been “spending cuts for the poor.” Again, the official government data flatly contradict the conventional wisdom. According to the White House’s Office of Management and Budget, federal anti-poverty spending has soared from $190 billion in 1990 to $348 billion in 2000, and to a staggering $638 billion this year [2011] (all adjusted for inflation). The growth since 2000 has been particularly remarkable in the Children’s Health Insurance Program (470 percent), food stamps (229 percent), energy assistance (163 percent), child care assistance (89 percent) and Medicaid (80 percent).
These expansions have been bipartisan: Mr. Bush — unfairly derided as bad for poor people — became the first president to spend more than 3 percent of the nation’s income on anti-poverty programs. President Obama then pushed it above 4 percent. In fact, since 1990, anti-poverty spending as a share of national income has expanded as fast as Social Security, Medicare, defense and education — combined.
So why the perceived “spending cuts for the poor”? Because anti-poverty spending increases (as large as $60 billion annually) occur automatically, and therefore go largely unnoticed. Yet any lawmaker proposing to shave even $1 billion off that growth is loudly attacked for “declaring war” on the safety net. Missing is any broader context. Also missing is serious engagement with Robert Rector’s research displaying the ineffectiveness of much of this spending.
Washington faces enormous budgetary problems, including trillion-dollar deficits and the exploding costs of Social Security and Medicare. A lack of redistribution of wealth from the rich to the poor is not one of those problems.
[bold and italics emphasis mine]
Brian Riedl is the Grover M. Hermann fellow in federal budgetary affairs at the Heritage Foundation.
[Note: I found the link to the above article in Glenn Beck's latest book, "Cowards" which I highly recommend.(It should be available in your public library as it was in mine.]
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