As taxes assume a leading role in U.S. policy debate–with both President Barack Obama and GOP frontrunner Mitt Romney staking out positions on tax policy–the first receipts on a new wealth tax in the U.K. have brought disappointing results to British Treasury officials.
Romney on Wednesday announced his intention to cut personal income tax rates for all taxpayers by 20%, saying the move would boost economic growth, jobs and wages. In contrast, the same day, White House press secretary Jay Carney reiterated the president’s commitment to the so-called Buffett rule ensuring that “millionaires and billionaires don’t pay a lower effective rate than average Americans.”
Now some observers, political conservatives among them, are taking the recent experience in the U.K., which last year raised its top rate on high income earners from 40% to 50%, as a demonstration of the ineffectiveness of a tax-the-rich policy.
Britain’s Telegraph newspaper reported that the U.K. Treasury–in the first test of the wealth tax policy introduced last year–received 509 million pounds less for January than the same month in 2011. The Treasury had projected that monthly revenues would actually increase by more than 1 billion pounds.
The Telegraph quotes Grant Thornon tax chief Francesca Lagerberg offering a possible explanation: “My guess is that because the 50 per cent rate was flagged up in advance many taxpayers, particularly those with their own businesses, decided to extract dividends ahead of the change. It highlights the fact that high tax rates don’t always deliver high tax revenues.”