August 28, 2009 - Phil Hodgen

Spain is a tax haven? Go figure!

moronathonThis one falls into the “Entirely Predictable” category.

Here’s the question:

U.K. raises income tax rates while Spain lowers income tax rates.  You’re rich and mobile.  Where do you live?

We have some anecdotal evidence.  In a recent article from The Weekly Standard, (cited at the NCPA site and brought to my attention by my subscription to The Tax Foundation‘s RSS feed) Jonathan Last tracks the impact of the U.K. government’s decision to increase the top marginal tax rate on incomes above £150,000 from 40% to 50%.  At the same time, Spain dropped its top tax bracket on certain taxpayers to 24%.

Result?  Top football players snub the Premier League and sign with Spanish clubs.

As this is a “bread and circuses” issue in the U.K. I would expect in due course that Gordon Brown et al. will adjust tax policies to attract players back to Britain.

Leaving aside the “pander to the average voter” reaction, here are some other things we can predict:

  • Massive whinging from the left about the evil Spanish government and How Dare The Spanish Cut Their Tax Rates.
  • Unexpected (by government statisticians only) lower-than-expected tax collections in the U.K. from the “above £150,000” group.

The Spanish government is doing its own “pander to the average voter” game by selectively providing tax benefits to a small category of people (i.e., the David Beckham set), so let’s not be so smug here, shall we?  🙂

Memo to all personnel:

  • Water flows downhill.
  • Capital — and people — move away from bad places and toward good places.
  • When it comes to money, “good” usually includes lower tax rates.  (Caution, anti-tax fiends!  Lower tax rates are a necessary but not “sufficient” cause).
  • The Law of Unintended Consequences works everywhere.  Even, to the shock of politicians, in tax policy.
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