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The rich aren't like you and me

They move around to dodge taxes:

The Stones are famously tax-averse. I broach the subject with Keith [Richards] in Camp X-Ray, as he calls his backstage lair. There is incense in the air and Ronnie Wood drifts in and out -- it is, in other words, a perfect venue for such a discussion. "The whole business thing is predicated a lot on the tax laws," says Keith, Marlboro in one hand, vodka and juice in the other. "It's why we rehearse in Canada and not in the U.S. A lot of our astute moves have been basically keeping up with tax laws, where to go, where not to put it. Whether to sit on it or not. We left England because we'd be paying 98 cents on the dollar. We left, and they lost out. No taxes at all. I don't want to screw anybody out of anything, least of all the governments that I work with. We put 30% in holding until we sort it out." No wonder Keith chooses to live not in London, or even New York City, but in Weston, Conn.

Of course, they don't move around too much. The Stones aren't living in Mexico or Poland*. They're moving from England to the United States, and rehearsing in Canada. When it comes to cities, they're choosing between London and various places near New York. There's a degree to which locations that are fairly comparable can use tax policy to compete with one another, but the importance of other amenities and cultural and technological offerings limits it. Connecticut has attracted a lot of Wall Street wealth by making its tax rates friendly to hedge funders, but that only works because of the presence and proximity of New York -- and even so, New York has kept a lot of that money, and those people.

All of which gets to a bit of a free-rider problem: It's hard to be New York if you can't tax like New York (which is not to say you need to tax exactly like New York, of course). And it's impossible to be New York if you tax like Connecticut. But it's possible to tax like Connecticut and win refugees from New York, so long as New York is still only a short train -- or helicopter -- ride away.


*It's possible Mexico and Poland have very high taxes. You know what I mean, though. Also, hat tip for the link goes to Greg Mankiw.

By Ezra Klein  | October 29, 2010; 10:48 AM ET
 
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Comments

This could also be titled "the case for consumption taxes, rather than income tax" because though someone may not live in NYC they certainly want to eat, drink, sleep and shop there...so rather than worry ourselves with who is working where on what day and how much they should pay in tax we could just repeal the 16th amendment, install a VAT or other system for taxing consumption, and let nature take its course.

Posted by: zeppelin003 | October 29, 2010 11:16 AM | Report abuse

I recall U2 have also moved residencies and/or incorporated outside the UK in an effort to minimize tax obligations.

Posted by: bsimon1 | October 29, 2010 11:19 AM | Report abuse

It is a sort of suburban colonialism: exploitation of the metropole (and the metropole's wealth) for the landed country gentry.

Posted by: CitizenL | October 29, 2010 11:30 AM | Report abuse

"I don't want to screw anybody out of anything, least of all the governments that I work with."

Only, um, yes you do. Because that's exactly what you're doing.

I have more and more respect for JK Rowling every day: http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article7096786.ece

Posted by: theorajones1 | October 29, 2010 11:39 AM | Report abuse

I doubt any particular tax scheme will ever fairly tax the rich because they have the money to evade whatever is dreamed up. For example, big consumption taxes, like Europe's VAT, means that the rich buy and register their yachts in places like the Marshall Islands in order to evade the tax.

Posted by: AuthorEditor | October 29, 2010 11:39 AM | Report abuse

The first Galtian superlord that moves to Somalia to escape taxes and create their own guns and private security paradise will get a personal letter from me apologizing for not taking them seriously.

Posted by: flounder2 | October 29, 2010 11:51 AM | Report abuse

Yep, U2 has been doing this for years. So has John Kerry.

How is this news to anyone?

Posted by: krazen1211 | October 29, 2010 11:51 AM | Report abuse

and most every well known sports figure. Why do you think most all of them want to play in Florida? Tiger Woods lives there along with most golfers. Favorable tax rates. Why do you think LeBron and Chris Bosh this summer chose the Miami Heat? The tax rates that's why.

Posted by: visionbrkr | October 29, 2010 12:39 PM | Report abuse

oh and the way around this is commuter taxation. It already happens in many large cities and has been for some time.

Posted by: visionbrkr | October 29, 2010 12:40 PM | Report abuse

Because of tax "loop holes", wealthy Americans and Corporations pay very little to no taxes at all. That means that everyday, average Americans shoulder and carry the tax burden within our society. Is this fair? In reality, Loop holes are just another way for the wealthy to lie and cheat and get around the law. Should loopholes be legal in America? And, what does that teach us about shouldering our fair share and being responsible or not responsible? And why have we put up with this lying and cheating for so long? What are we going to do about it?

The Republican Party, pretends that they want to lower taxes for the American people but they know full well that the loopholes they created means that Corporations and wealthy Americans will escape from paying their fair share and that every-day Average Americans will Shoulder the tax burden. Is this fair?

The Republicans pretend they want jobs here in America. But because of loop holes thousands of jobs have moved to China and India. Why do they support these loopholes so that companies invest in China and India and not here in the United States? Again, is this fair? And, is this cheating? I know it cheats the American people. Everyone knows that to create jobs, you have to invest in America. America's infrastructure, schools, technology, high-speed rails, cities and towns. You cannot continue to cut and cut, and not put anything back, after awhile you will have nothing left at all but desolation and decay.

One current example of a destroyer is the Republican Governor of New Jersey, currently proud of cutting the budget (education and services) but he will not Fund the tunnel which would have created thousands of jobs for his state. To put something back, just not desolate the state.

The Pretenders, "mission" is to sell to the American people the \"bill of goods\" that we Need less government, after all, government will only get in the way of their fraudulent schemes and try to hold them accountable to people and not to corporations! Less Government, means No Regulations and no one to keep them from their dirty deeds.

They pretend they did not "bail" out Wall Street. But because of no regulations and policing, they already bailed out Wall Street! Thank God for those sensible government officials who realized that in order to save our economy the bail out was necessary or the whole economy would have collapsed, because Bush & Co. waited until the last minute, when they were ready to get out of dodge and the collapse was imminent, to tell the American people just how badly they had squandered our economy with phony and fraudulent real-estate deals and in funding the phony and unnecessary Iraq War!

If you vote Republican or if you do not vote at all on November 2nd, and in the future you still continue to carry the tax burden while the wealthy get tax breaks, again while paying no taxes, its no ones fault but yours.

Posted by: wdsoulplane | October 29, 2010 12:57 PM | Report abuse

The UK got 98% of NOTHING. Typical lib logic.

Says ALL you need to know about the regressive income tax system libs push for.

If, one REALLY wanted to increase tax rev you'd institute consumption tax & import duties with a premium on high cost luxury items. NO loop holes. VERY difficult to for the rich to get around.

But, libs being what they are (wanting 98% of nothing rather than 20% of an enormous amount) this won't happen.

Posted by: illogicbuster | October 29, 2010 1:12 PM | Report abuse

"The Republicans pretend they want jobs here in America. But because of loop holes thousands of jobs have moved to China and India. Why do they support these loopholes so that companies invest in China and India and not here in the United States? Again, is this fair? And, is this cheating? I know it cheats the American people. Everyone knows that to create jobs, you have to invest in America. America's infrastructure, schools, technology, high-speed rails, cities and towns. You cannot continue to cut and cut, and not put anything back, after awhile you will have nothing left at all but desolation and decay."

Pure and utter lies.

A lot of these loopholes were put in by regulators during the Clinton administration. He, for instance, offered oil companies tax free leases. He also created the check the box regulation detailed here.

http://pace4jobs.org/files/Check-the-Box%20Briefing%20Paper.pdf

"One current example of a destroyer is the Republican Governor of New Jersey, currently proud of cutting the budget (education and services) but he will not Fund the tunnel which would have created thousands of jobs for his state. To put something back, just not desolate the state."

That's because we spend $1.5 billion a year on useless retiree benefits.

Posted by: krazen1211 | October 29, 2010 1:47 PM | Report abuse

One current example of a destroyer is the Republican Governor of New Jersey, currently proud of cutting the budget (education and services) but he will not Fund the tunnel which would have created thousands of jobs for his state. To put something back, just not desolate the state.


AND spent billions of dollars we don't have. Maybe this will get those that conceive of these projects to actually come in at budget occasionally knowing that if they don't they'll be some reprocussions. Thank GOD for Chris Christie.


And as far as the jobs going overseas the reason is that the cost of labor there is so much cheaper. If China and India had our labor costs these jobs would stay right here. You can blame "the rich" all you want and ignore the facts right in front of your face but until you either bring the cost of living down here of the cost of living UP there then we'll continue to have this.

Posted by: visionbrkr | October 29, 2010 1:52 PM | Report abuse

That's because we spend $1.5 billion a year on useless retiree benefits.

Posted by: krazen1211 | October 29, 2010 1:47 PM | Report abuse

i wonder how much of this is for medical benefits for retirees that are medicare eligible? Do you know how much we'd save by forcing them onto medicare (which most liberals want anyways) and give them a supplement to make up Medicare's shortcomings? We'd save a TON. Medicare's fantastic until you have to have it yourself. The only ones happy with this are the doctors. They get private insurance rates for these people instead of medicare rates.

Posted by: visionbrkr | October 29, 2010 2:26 PM | Report abuse

AuthorEditor above says "big consumption taxes, like Europe's VAT, means that the rich buy and register their yachts in places like the Marshall Islands in order to evade the tax."

Why, yes, they do. Speaking of John Kerry...

Posted by: rmgregory | October 29, 2010 6:05 PM | Report abuse

some people hate to part with money for any reason and many resent having to give up some of their money to the government in taxes

tax complaining is a staple of politics

but i never wondered how financially successful entertainers felt about paying taxes

now i do

so the rolling stones dislike paying taxes

i don't care

it is hard to imagine a tax scheme that would not be resented by some

Posted by: jamesoneill | October 29, 2010 6:20 PM | Report abuse

"And it's impossible to be New York if you tax like Connecticut."

Definitely not true.

Posted by: staticvars | October 30, 2010 12:26 AM | Report abuse

it's called elasticity ezra. maybe next time when thinking about taxing "the rich," you apply these lessons to excess burden issues! (right...)

Posted by: stantheman21 | October 30, 2010 2:33 AM | Report abuse

Hate to state the obvious, but a rock band like the Stones is quite different from the typical business.
It has incredibly high revenues on a quite small employee base. That means that it has the cash flow to move operations from country to country.
And the sales of their product - music - doesn't depend on their location.
And their fame and wealth minimize the hits to the utility curve. They can practice anywhere a private jet will land and be to one of their glitzy homes in a couple of hours.
The typical small business's strategy doesn't have the cash flow to up and move on short notice.
And that business' core competency is often tied to its location, a law firm serving Pocatello, Idaho, for example, or Chicago's best diner.
And moving would damage the owner's utility curve. Move your business from Sandusky to Nashville and your family suffers as it tries to integrate into the new community.
Larger businesses that want to move have to grapple with the logistics of relocating plant and equipment, hiring and training new workers, etc.
All of which should tell you that low taxes won't attract businesses to move. That's why the 10 'least favorable' tax climates in the U.S. house about the same number of Fortune 500 companies as the 10 'most favorable.'

Posted by: RZ100 | October 30, 2010 6:03 AM | Report abuse

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