Debunking the Tory idea that Scotland’s progressive taxes will trigger flight of the wealthy

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The Scottish Conservatives Branch’s, Temporary Press Liaison Officer, Murdo Fraser has alerted the Scotsman to a serious problem of imminent tax-flight by Scotland’s better paid individuals:

‘While many people will not have much sympathy for the decrease in higher incomes, further tax increases could push this income bracket to leave and deny Scotland any tax take. However, the SNP tax hikes will also charge middle earners more compared to the rest of the UK, which, after such small wage growth, seems punitive.’

Fraser seems to have been unable to include factors such as free student tuition, care for the elderly or free prescriptions into his overall assessment of the tax burden in Scotland.

The Scotsman has, unusually, failed to undertake any proper background research to establish the basis or lack of basis for Fraser’s claim.

However, a US study of every million-dollar earner, reported in the Guardian in 2017, does not support him:

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‘Only about 2.4% of US-based millionaires change their state of residence in a given year. Interstate migration is actually more common among the US middle [working] class, and almost twice as common among its poorest residents, who have an annual interstate migration rate of 4.5%.’

The greater mobility among the poorer residents, reflects the lack of welfare benefits and worker protections in the US compared to those in Scotland. Even the low-level of mobility of millionaires in the US may be higher than we should expect in Scotland given the additional pull factors here of lower crime, a more efficient health service and more attractive recreational environment than is available in England.

Further evidence undermining Fraser’s notions comes from Forbes, also reported in the Guardian in 2017:

‘Analysis of this list shows most of the world’s billionaires – about 84% – still live in their country of birth. And among those who do live abroad, most moved to their current country of residence long before they became wealthy – either as children with their parents, or as students going abroad to study (and then staying). The world’s billionaires largely live where they were born or where they began their careers. Only about 5% of world billionaires moved abroad after they became successful. These individuals readily fit the stereotype of a “transnational capitalist class” – unplugged from their nation state, travelling the world for some combination of tax avoidance and cosmopolitan lifestyle.’

https://www.theguardian.com/inequality/2017/nov/20/if-you-tax-the-rich-they-wont-leave-us-data-contradicts-millionaires-threats

So, just the word of one partisan member of a party dedicated to low-taxation is all you need for a report, ‘Scotsman.?’

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7 thoughts on “Debunking the Tory idea that Scotland’s progressive taxes will trigger flight of the wealthy

  1. Willie Hogg January 6, 2019 / 10:59 am

    The real story is that the tax increase was not in the original budget and was only added to attract the support of the Greens. The Conservatives could have supported the original budget and stopped it dead. So the Conservatives’ refusal to support the original budget has resulted in this tax increase. So it is entirely due to their insistence of practicing Westminster opposition politics rather than the consensual Holyrood democracy.

    Liked by 2 people

  2. Alasdair Macdonald January 6, 2019 / 1:18 pm

    As someone, who, for most of my working life, has paid tax at the higher rate, and, although retired, would still be liable but for the fact that my wife and i make substantial regular donations to charity and the allowance for this usually brings us below the threshhold, I like to use this fact (with a degree of moral smugness, admittedly!) in conversation with people like Mr Fraser, who thinks, arrogantly, that we all think as he does about such matters. Many of us believe sincerely, that a fair society benefits all of us.

    As John Donne wrote many centuries ago, ‘No man is an iland (sic) ….”; a social species. We depend on each other, there is a social contract amongst us, which has been set out, for example in all religions, by things like the Ten Commandments. Most of us – even Mr Murdo Fraser, I am certain – will help spontaneously when we see someone fall or suffer injury or other distress. Most people, in my experience, are pretty humane and act with respect towards others. At times, we falter, but, mainly, we do the right thing.

    There is a potent moral argument for paying higher taxes and I think we should not flinch from making it.

    You are right, of course, to point out the other benefits of living in Scotland, as these are part of an individual’s whole economy.

    Sir Ian Wood, for example, continues to live in Scotland and has never shown any inclination to leave. Undoubtedly, he will have smart accountants to deal with his finances, but he pays his Scottish taxes. Like many wealthy people in history, he makes significant, often fairly discreet, contributions to the common good (tax deductible, of course, as are those my wife and I make.) He probably has residences overseas. Nevertheless, it is clear that he sees himself as part of Scotland, and if we were to become an independent country, despite his often expressed strong opposition in the debate, I suspect he would continue to be resident here, not least because, his business would continue to thrive. There would be fluctuations, but the UK economy has not been free of those. People mainly choose to continue to live where they do, because there are many social ties which bind them.

    Like

  3. gavin January 6, 2019 / 2:19 pm

    A little time after the Scottish budget I saw a headline in the Telegraph to the effect of avoiding the tax rates for higher earners in Scotland. I don’t pay their paywall price so don’t know what the content of the story entailed. However, I have felt for some time that holding Scottish assets (like land) should be dependent to some extent on a commitment to this country as in actually living here for a set time during the year. Same with tax. If you earn money here, you should pay your taxes here—that same argument as is used in London with the big US tech giants tax avoidance.
    The biggest landowner in Scotland is Danish, lives in Denmark and while HE might be a “good guy”(?), he could be run down by a bus tomorrow and his Scottish land holding could be sold on to anyone, anywhere in the world in absolute secrecy. Few countries in the world would allow this to happen. Scotland should NOT be one of them.

    Liked by 1 person

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