Because they wrongly assume the economy is a fixed pie, some of my friends on the left think it’s bad for there to be rich people. They actually think that must mean the rest of us have less income.
But that’s not true. At least it’s not accurate if we start with the assumption that wealth is earned honestly and not accumulated thanks to subsidies, bailouts, protectionism, and other forms of cronyism.
So if it’s good to have more honest rich people, what’s the recipe to make that happen?
Here is some of Frans’ accompanying analysis.
I calculated the relative number of billionaires by dividing the population of a country by the number of billionaires, to calculate the number of people per billionaire. So, the lower the number the greater the percentage of billionaires. …What is immediately clear, is that the three top performers in the table are Hong Kong, Switzerland and Singapore, all countries with exceptionally free markets and very low tax burdens. What that makes clear is, if a country is really serious about nurturing billionaires, free markets and low taxes are the way to go.
By the way, Frans focused on major countries.
If he included every jurisdiction, I very much suspect Monaco would be at the top of the list.
But it’s true that the numbers for those small place would distort the rankings, so it makes sense to remove them.
In his analysis, Frans also addresses the fact that Nordic nations do reasonably well and correctly attributes their success to the fact that they are very laissez-faire in areas other than fiscal policy.
What we also see, is that not all the Nordic countries are world-beaters in the billionaire stakes. The social democracy system (high taxes and spending on welfare benefits) has not worked to make Finland and Denmark top performers. …a fair question: Why do Sweden and Norway beat the US in the super-rich game? We now know that the high-equality welfare state of social democracy is not the reason. If that were so, it would have been fair to expect Finland and Denmark to beat the US too. And we would have expected all four these countries to have dynamic, high-growth economies – which they don’t. Having said that, it remains true that both Sweden and Norway are free markets in their own right. …The only criterion that identifies them as statist is size of government (tax, government spending, and so on). According to the other four criteria (trade policy, monetary policy, regulatory policy, and property rights and rule of law), these countries are very free. …What is more, until about 1950, Sweden and Norway had smaller governments than the UK, the US, Japan, Germany and France.
Now that we’ve looked at the policies associated with having more rich people, let’s look at the policies that are needed to retain them.
Bloomberg has a very interesting story on the migration of millionaires around the world.
The world’s wealthy are increasingly on the move. About 108,000 millionaires migrated across borders last year, a 14 percent increase from the prior year, and more than double the level in 2013, according to Johannesburg-based New World Wealth. Australia, U.S. and Canada are the top destinations, according to the research firm, while China and Russia are the biggest losers. …Wealth migration figures…can also be a key future indicator, said Andrew Amoils, head of research at New World Wealth. “It can be a sign of bad things to come as high-net-worth individuals are often the first people to leave — they have the means to leave unlike middle-class citizens,” he said. …Australia tops most “wish lists” for immigrants because of its perceived safety, no inheritance tax and strong business ties to China, Japan and South Korea.
I’ll simply note that if the numbers were adjusted for population, the United States would not rank nearly so high (I’m guessing America’s unfair death tax is a major reason why some rich people choose other countries).
What can we say about the nations losing rich people?
If you peruse the data from Economic Freedom of the World, you’ll notice that they don’t rank very high.
China’s tightening grip on capital outflows in recent years has placed many of the country’s wealthier citizens in the crosshairs of the taxman, leading to a shift of assets and people. …Turkey losing 4,000 millionaires last year, the third straight year that many have left. About 7,000 millionaires left Russia last year.
Another issue is that successful entrepreneurs and investors don’t feel comfortable having their private financial data being promiscuously shared, and one way to minimize government snooping is to move to move.
The desire for privacy is also prompting rich individuals to reconsider their place of residence. Under the Common Reporting Standard, launched by the Organisation for Economic Co-operation & Development in 2017, banks and other financial institutions are disclosing data on foreign account holders to their local tax authority. …”Many wealthy people are looking for opportunities to reduce risks associated with spreading information about their accounts,” said Polina Kuleshova of Henley & Partners. …Citizenship and residency by investment programs are big business: currently, the industry is worth an estimated $2 billion annually… The Organisation for Economic Co-operation & Development is scrutinizing…these schemes. In October 2018, it released a blacklist of 21 jurisdictions, including Malta and Cyprus, that it believes are undermining international efforts to combat tax evasion.
P.S. This analysis of cross-border migration between nations also applies to cross-border migration between states. Unsurprisingly, successful people move from high-tax hellholes (places such as New Jersey, Illinois, and California) to zero-income-tax jurisdictions (places such as Texas, Florida, and Tennessee).