While President Obama campaigns hard for Congress to raise taxes on America’s highest earners — insisting on no deal to resolve the looming fiscal crisis without it — there is little evidence to back up his sales pitch that it will go a long way to reducing the nation’s runaway deficit.
In fact, history shows that similar tax hikes resulted in less additional revenue than expected, and other unintended consequences.
Economists point to then-British Prime Minister Gordon Brown’s proposal in April 2010 to increase the marginal tax rate by 10 percent — to 50 percent — on residents earning more than $1 million. As a consequence, the number of people declaring that amount of income or more dropped from 16,000 to 6,000 in the 2010-2011 tax year, according to Her Majesty’s Revenue and Customs, the United Kingdom’s tax collection agency.
Before Brown’s proposal, Britain’s wealthiest composed roughly 9 percent of the country’s tax pool. That percentage dropped by half — to roughly 4.4 percent — after the proposal.
It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes, according to a report in the London Telegraph.