"If we tax the rich they will all leave the country."

As I said in another thread, this has happened before in France - http://en.wikipedia.org/wiki/Cartel_des_Gauches

Although lots of money is stored in tax havens anyway.

It is also possible to over state the risk of capital flight as people do like living in a country where they speak their language.

I get this argument from families and the truth is that capital flight is a real threat (albeit an exaggerated one). I use the discussion as an opportunity to let them prove that capitalism is a system where the vast majority of society is held at ransom by a small, powerful group at the top.

I think capital flight shows good reason why an extreme social democratic program (ie. the AWL's "workers government", CPB's "people's charter" etc) won't work unless a degree of effectively stalinist authoritarianism is introduced to prevent capital flight. (Allende in Chile failed to introduce enough authoritarianism, as a consequence the Chilean economy completely fucked up)

Nations with valuable natural resources can circumvent it to an extent, ie. venezuela, because they generally just do more social redistribution of wealth produced from the sale of those resources, (still, other sectors of the economy tend to stagnate, unless the state constantly pumps a portion of the wealth produced by nationalised industries extracting natural resources, into the other sectors)

Personally, i find that rather than trying to disprove that taxing the rich will invoke capital flight, its more fun to be disingenuous and agree with and usurp the right's hyperbolic arguments that overstate the danger of capital flight, and to draw something like the conclusion 'if we are to establish social justice, we need communism'.

You can argue that if you want to establish social justice and want to avoid
a) Capital flight and economic bankruptcy (leading to a drastic decline in living standards)
b) Establishing effectively stalinist mutations of democracy, and restrictions on personal freedom (in order to prevent capital flight)

... you can say that the only solution is workers self-management and communism. I find its a neat way to convince someone who is 'anti-neo-liberal' or fetishises old social democracy of the need for libertarian communism.

This article is somewhat relevant IIRC: http://libcom.org/library/capital-moves-john-holloway

if we tax the rich - they'll leave! Good! We don't fucking need them!

Ok ok ok - we're talking about a capitalistic economic system, but even then i don't think that capital flight (like atlas shrugged - the temper tantrum of the rich at the prospect of having to pay taxes) is even a problem. Capitalist ideologues go on and on and on about creative destruction, perhaps there's room for creative destruction with capital flight. If there is a good or service that is in demand by a population, they have money to pay for this good or service, then someone will come along to make money to pay for such a good or service. Regardless of the taxes. As Warren Buffet said, he never knew of anyone who wouldn't invest in the economy simply because of a slight increase in taxes. The income tax for the top 1% in the 1950's was at 90% and that was considered to be the golden age of capitalism. Why? Because if there is demand, someone will try to fulfill that demand. To make money (which is what capitalism's about I thought). And if taxes were indeed higher - but used to pay for social welfare programs that would help the poor, then the poor would have even more demand, the money would stimulate and it would circulate. This is basic keynes.

Really this talk about capital flight is all fear mongering - a way for the rich to stop paying taxes and get rid of social welfare institutions the people need - and also trying to get people to think that we even need the rich more than they need us - when in fact it is the reverse. A randroid once asked me how would jobs be provided in a socialist economic system without private property in the means of production? The answer is simple: if there's demand, if there's resources, and there are people who are wanting to work, voi la! You got jobs! It's really not more complicated than that: capitalists are middlemen, standing between us and the resources we need to survive, who don't do anything besides highway robbery. That is all.

One can prevent being negatively affected by Capital Flight. The UK had fairly rebut controls on the movement of Capital in and out of the country in the immediate postwar period. Predictably Thatcher abandoned Capital controls in the 1980s as part of her free-market-reforms. The UK Labour Party in the 1980s was still keen on Capital Controls as a way of underpinning its economic program:

[1983 Manifesto)

One does not have to be a Stalinist state to have affective Capital Controls. Iceland introduced them (as far as I know successfully) after the banking collapse of 2008. Although there is a body of opinion which against capital controls http://tppwatch.org/news-video-audio/media/economists-condemn-restriction-of-capital-controls/ (guess why!) members of the IMF are not prohibited from using Capital Control regimes (including exchange controls).

Not entirely relevant to the fundamentals of this discussion, but -- while what you say is probably true to an extent, you should be careful about making this claim. The intervention of the USA through the CIA and other agencies was highly significant in the Chilean economy "fucking up". For example paying the truck drivers -- very important to Chile's economy -- to go on strike. And while there may have been some capital flight due to a lack of authoritarianism from Allende, the Chilean economy, one could argue, was already "fucked up" before Allende took power given that the profits from the primary resource of the country -- copper -- were being channelled into US corporations (since they owned Chile's copper). So even with capital flight out of the country (which you allege) Allende's nationalisation of the copper industry had a hugely beneficial impact of the economy. There is a reason why the USA took such a strong -- albeit underhanded -- interest in intervening in Allende's Chile and that is precisely that the economy was not on the path to self-destruction.

Some people have made some good points here.

I just thought I should point out that "capital flight" is much more significant when it comes to taxes and costs for business, as opposed to income taxes on rich individuals which are much less important in the big scheme of things.

For example, we have had mass manufacturing capital flight over the past 30 years chasing cheaper labour costs from the UK and US to South America, South Korea and now China and India. (Although this is part of a much slower process than the kind of rapid capital flight being mentioned here, but still)

thanks, appreciate the response, that point must have come across a bit crude.

my understanding of Allende & Chile is derived from this text, which i forget generally downplays the importance of US intervention and predominantly blames the Chilean state's policies in order to promote the idea that a greater roll out of cybernetic management technology (which Allende did partially implement) would have solved the Chile's economic crisis.

You say that like it's a bad thing.

I wish they wouldn't come here if they do leave France (or anywhere else). London's economy is completely skewed by all these parasites putting their assets into the EU's pet tax haven.

TBH taxation of the rich varies everywhere. I get the impression they pay a lot more in most other developed countries, Australia taxes its citizens and residents on worldwide income, for example. The UK even allows people to live here and pretend they don't for tax reasons. The super-rich and finance sectors are always threatening to move to Frankfurt or Zurich or Dubai. The reality is that they generally don't, because none of those places are geared up for the sort of lifestyle that they want.

Regards,

Martin

Serge beat me to it.

It's better than having to shot em- English people hate blood on the carpet.

If I was rich and you tried to tax me I would move to some little island and keep all my wedge, while trying to push privatization of the NHS and flood the dark continent with gats in exchange for some of them sweet sweet diamonds..

Problem with communists is, none of you are Ballin.

It would be great if the rich were to flee, the toilers should then expropriate "their" property in their absence.