They might threaten to head for Monaco, the Bahamas, or even Dubai if the missiles stop flying overhead. But in the end they will always stay. Steve Rotheram, the Mayor of Liverpool and a key ally of the Prime Minister-in-waiting Andy Burnham, this week dismissed the threat of people fleeing from wealth taxes. He also dropped heavy hints that some kind of extra levy is planned by the new administration.
This is the kind of delusional blue-sky thinking you’d expect from a new administration on the cusp of power. But there is just one snag: there is plenty of evidence from around the world that wealth taxes drive out the rich, and more significantly, investment. Team Andy are likely to have a big shock if they try it.
We have already seen plenty of the mega-rich leaving after the non-dom loophole was closed
From his perch in Liverpool, Rotherham has turned into a cheerleader for a wealth tax. While Burnham himself has only said that people ‘will have to pay a little bit more’, and key members of his team such as Louise Haigh have argued for increases in Capital Gains Tax to tap the rich, he is arguing for a full-scale wealth tax. ‘We get this all the time,’ he argued, dismissing claims that the better off might leave the country. For all the huffing and puffing, Rotherham thinks it will be the same this time around.
The trouble is, we have already seen plenty of the mega-rich leaving after the non-dom loophole was closed last year, meaning they were subject to British taxes on their global income. This included the steel tycoon Lakshmi Mittal and the co-founder of the banking app Revolut Nik Storonsky. By some counts, an estimated 42,000 millionaires left France after the former Socialist President Francoise Hollande imposed a ‘supertax’ on the rich in 2012. After Norway increased its wealth tax in 2022, an estimated 30 billionaires and multi-millionaires left the country, and that is with a relatively minor 1.1 per cent levy. Meanwhile, countries such as Ireland, Germany, France, Sweden and Finland have all tried wealth taxes and then scrapped them. Presumably that was not because they were a huge success.
Perhaps more importantly, especially for a very open economy such as Britain, wealth taxes stop rich people from ever moving to the country in the first place. It is hard to measure that, but that does not mean it doesn’t matter. True, the impact varies according to how high the tax is, how many people have to pay it, and whether there are any penalties for leaving. But there is plenty of evidence that wealth taxes lead to an exodus of the rich, raise little or no revenue and end up being repealed.
Sure, the vibes might be good. But Team Andy will be taking a huge risk if it tries to introduce a wealth tax – and will quickly find it backfires on them.
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