Why the “If you Tax the Wealthy, they'll leave" Argument is Largely Bullshit

Backed By Research: Debunking the myth that Taxing Wealth, Not Work, doesn't lead to Capital Flight!

Prime Minister, Sir Kier Starmer, has recently refused to rule out taxing wealth in the Autumn 2025 Budget, reiterating that "those with the broadest shoulders should bear the greater responsibility of tax revenue". For context, this speculation has started after rolling back plans to cut Personal Independence Payments and Universal Credit for disabled people due to backlash from backbench Labour MP's.

1. Introduction

It has been a long-term objective of Patriotic Millionaires UK which includes figureheads like Dale Vince and Gary Stevenson, as well as the Green Party and some Labour voices, to introduce a 2% Wealth Tax on assets above £10 million which economists estimate would generate around £22-24 billion per year, impacting roughly 20,000 people (o.04% of the population).

The political landscape remains heavily polarised on this issue; Conservatives, Reform UK, legacy media outlets– funded and influenced by billionaires– have drawn from a report by Henley and Partners, a company that provides 'Golden Passports' to billionaires who seek to pay lower tax rates, which claims that an "Exodus" of over 10,000 millionaires left the UK in 2024.

As expected, this claim has largely been debunked by Tax Justice Network UK, funded by Patriotic Millionaires. Their analysis contextualises the Henley figures, noting that 10,000 millionaires represents only around 0.3% of the global millionaire population, and a far smaller fraction of UK millionaires specifically. TJN UK also found that despite Henley & Partners' clear conflict of interest and a lack of coherence in research, they received widespread news coverage from legacy media outlets in the UK. Around 30 articles a day mentioned this "exodus” and often framed tax as the primary driver, despite empirical evidence to the contrary and Henley making no such claim.

My Argument

This is not simply a debate between Patriotic Millionaires and Henley & Partners, nor is it a binary choice between wealth tax or no wealth tax; rather, it is a question of whether successful tax reform can be achieved through effective policymaking and what conditions make it politically and economically viable.

2. Support for Wealth Taxation and Data Caveats

2.1 Evidence of Public and Elite Support

Public support for taxing extreme wealth is strong. A YouGov poll found 74% of UK adults back a wealth tax on multimillionaires. Strikingly, even among the wealthy themselves, support is notable. Research from Patriotic Millionaires UK suggests around 60% of respondents with wealth exceeding £5 million said they would accept a progressive wealth tax if framed as a fair contribution to society. A 2025 Survation survey of 511 UK millionaires found 80% support for a 2% annual wealth tax on assets exceeding £10 million, rising to 85% support among those with wealth above £50 million.

Internationally, similar sentiments are echoed. An OECD report in 2023 noted growing recognition among affluent citizens in member countries that wealth taxation can help address structural inequality without necessarily deterring entrepreneurship or investment.

Also, U.S. states (Massachusetts and Washington) introduced millionaire and capital gains taxes. Over the following two years, the millionaire populations grew by 38.6% and 46.9% respectively, while generating revenues of US$2.2 billion (MA) and US$1.2 billion (WA).

2.2 Sampling Limitations in Elite Surveys

However, it is important to approach such findings critically. Surveying billionaires and ultra-high-net-worth individuals (UHNWIs) is notoriously difficult due to their small population size, privacy concerns, and low response rates. As a result, these studies likely reflect the views of millionaires and centi-millionaires (with wealth between $100m–$500m) rather than billionaires. This potential sampling bias means support among the ultra-wealthy might be overstated in available polling data as the participants tend to be those who agree with the proposals. That said, because the poll received some downvotes, this does highlight some diversity in the polling.

3. Capital Flight: Myth and Reality

3.1 Debunking Capital Flight Fears

The idea that millionaires would flee en -masse in response to a wealth tax is not strongly supported by empirical evidence. According to Tax Justice UK, most elite wealth is tied up in illiquid, location-bound assets such as property, land, and private businesses that are difficult or impossible to relocate. Even liquid assets are now harder to hide offshore thanks to the OECD’s Common Reporting Standard.

Historical precedents also undermine the fear of capital flight. France’s solidarity wealth tax (ISF) did lead to some high-profile departures, but the actual outflow of wealth was negligible relative to the size of its millionaire population. Likewise, Norway and Switzerland have successfully maintained a wealth tax for decades without significant elite emigration.

3.2 Learning from Policy Failures

Still, there are lessons from countries that have repealed wealth taxes. Sweden, Denmark, and Germany abandoned theirs largely due to administrative complexity, valuation difficulties, and relatively low revenue relative to enforcement costs. These examples highlight the importance of designing any future UK wealth tax with robust valuation mechanisms and enforcement infrastructure from the outset.

The Institute for Fiscal Studies (IFS, 2021) estimates that a UK wealth tax could raise between £10–15 billion annually, a modest amount relative to total public spending. However it must be noted that the IFS tend to dislike any new taxes due to implementation costs.

4. Alternative Policy Options

As tax economist Richard Murphy argues, wealth taxation should not take a single form. Alternative approaches include:

Land Value Tax (LVT): Taxing unimproved land value is harder to avoid and would capture a large portion of elite wealth tied to UK real estate.
Reformed Inheritance Tax: Closing loopholes and raising rates on very large estates could address intergenerational wealth accumulation.
Capital Gains Reform: Aligning capital gains tax rates with income tax rates to prevent avoidance.
Luxury and Environmental Levies: Targeting high-consumption goods and activities disproportionately associated with the ultra-wealthy.

These options may offer simpler implementation paths and could complement a wealth tax or serve as politically feasible alternatives.

5. Policy Recommendations

To maximise the chances of success, a UK wealth tax must:

Develop Rigorous Valuation Frameworks: Establish reliable systems for assessing complex assets like private businesses, art collections, and trusts.
Focus on Immobile Wealth: Prioritise assets such as land and property, which are less susceptible to avoidance.
Complement with Wider Reforms: Pair with inheritance and capital gains reforms to ensure comprehensive wealth taxation.
Invest in Enforcement: Significantly strengthen HMRC’s capacity to monitor compliance and pursue evasion.
Phase in Gradually: Start with ultra-high thresholds (e.g. £50m+) to minimise resistance and test administrative systems before expanding.

Conclusion

For any wealth tax or alternative reforms to succeed, we must also confront a deeper cultural challenge: the West’s prevailing attitudes towards capital. Decades of political and economic individualism have normalised the idea that private wealth exists in isolation from society. But this mindset is unsustainable in an era of mounting inequality and public service crises.