The affluent are blessed in their champions. They have a myriad of commentators fighting their corner. In the Sunday Independent Colm McCarthy, discussing the benefits or otherwise of a third tax rate on high incomes, stated:
‘In order to raise meaningful amounts, it (the threshold to enter the third rate of tax) cannot be pitched at a level much higher than the €100,000 indicated, but that pulls into the high-tax bracket many people who do not consider themselves exceptionally well-off.’
€100,000 not exceptionally well-off? Ok, maybe, but they certainly are ‘well-off’; very well-off. In fact, they are in the top 3 percent of income earners in the state. If these high-earners don’t consider themselves exceptionally well-off, what would they think if they were part of the 50 percent of income taxpayers who earn below €29,000 a year? Or the 25 percent of the population who live in official deprivation.
These kinds of comments are part of the don’t-tax-high-earners-too-much-because-then-they-will-leave-in-a-tax-huff argument. Thomas Molly, writing in the same newspaper, puts it this way when discussing the wealth tax:
‘Any other sort of wealth tax is likely to bring in very little money as the cash moves overseas at warp speed but is guaranteed to scare away many of the people who create wealth and jobs in our society.’
Ah, tax flight – the phenomenon whereby high taxation causes people to leave the jurisdiction. How valid is this? Not very. The US is a good place to study. Individual states can set their own income and wealth taxes in addition to Federal taxes. And moving from one state to the next is not nearly as challenging as moving from one EU country to the next. So what happens when states like Maryland or New Jersey or Oregon raised taxes on the highest income groups? This study – ‘Tax Flight is a Myth’– found:
‘Attacks on sorely-needed increases in state tax revenues often include the unproven claim that tax hikes will drive large numbers of households — particularly the most affluent — to other states. The same claim also is used to justify new tax cuts. Compelling evidence shows that this claim is false. The effects of tax increases on migration are, at most, small — so small that states that raise income taxes on the most affluent households can be assured of a substantial net gain in revenue.’