For many of the world’s wealthy, paying tax is largely a matter of choice. Disagreeable though this may be for governments, it is nevertheless a fact of life. If you are rich and don’t like the taxes in one place, you can very quickly decamp to another — as nervous Democrats are discovering with California’s billionaire-targeting Proposition 40 up for a vote next month.
On the international stage, there will never be a shortage of countries willing to accept wealthy people seeking a more agreeable tax climate. A textbook example of wealth’s mobility can be found today in Britain. Since taking power in July 2024, the Labour government has sought to tap the country’s billionaires for money to subsidize its ambitious social programs. Above all, the government in April last year abolished “non-dom” tax arrangements whereby residents whose permanent home is in another country (“non-domiciled”) could live in Britain while paying tax only on money they earned there or brought into the country.
Those who had been residents in Britain for at least seven of the previous nine years paid a flat rate of 30,000 pounds ($39,700) on their foreign earnings and asset sales. Those who had been in Britain for at least 12 of the previous 14 years paid 60,000 pounds ($79,400). By paying the flat rate, they avoided needing to pay up to 45 percent tax on investment income and as much as 24 percent capital gains tax on asset sales.
Chasing the chimera of an obedient wealthy class sitting still while forking over whatever taxes the government demands is not a strictly liberal habit; a plan to phase out the non-dom policy originated with the Conservative government in 2024. Labour simply sped up the transition.
When the Tories floated the idea, officials expected to raise 2.7 billion pounds ($3.57 billion) annually in extra revenue. That hope, however, is looking rather forlorn. The Bloomberg Billionaires Index last week exposed the cost of the policy change, as many wealthy individuals have chosen to leave Britain rather than pay full taxes on their worldwide income.
Since 2024, Bloomberg reports, billionaires representing some $160 billion in wealth have severed or loosened their ties with Britain. Critics blame the end of the non-dom policy for many of the exits. One billionaire alone, Lakshmi Mittal, who owns a steel company and has a fortune estimated at roughly $40 billion, has reportedly set up tax residence in Switzerland.
You might assume that the Labour government would, with the dire effect of the policy change already apparent, soon desperately row it back, but that seems unlikely. Prime Minister Andy Burnham has yet to present his tax plans; more will be known on Oct. 28 when Chancellor of the Exchequer John Healey presents the government’s annual budget. All indications are that Burnham intends to pursue the traditional Labour course of higher taxes and higher spending.
In a July speech, Burnham declared that Britain “took a series of wrong turns in the 1980s.” That was the decade when Margaret Thatcher undertook free-market reforms, revitalizing an economy that had been brought low by unproductive state-sector industries and voracious taxation. Britain seems destined to relearn the lessons of the postwar era the hard way. America’s political class, take note.
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