Things I Find Interesting [aka, the stuff rattling around inside the brain of Torr Leonard]

The UK abolished a tax loophole that allowed wealthy foreign residents to only pay taxes on domestic earnings.

It was hoped the move would generate $45B by 2030, but wealthy expats are leaving the country.

Some are moving to places such as Dubai and Italy, which offer tax benefits to foreign residents.

Haidar is one of the estimated 74,000 who used a centuries-old tax loophole, abolished in April, that catered to the global rich.

The nondomiciled—or non-dom status, as it is known—allowed foreigners living in the U.K. to pay tax only on what they earned domestically.

Profits made abroad were ignored unless brought into the U.K.

Beset by high public debt and crumbling infrastructure, the U.K. hoped that eliminating non-doms would bring in about $45 billion by 2030.

But instead of paying up, wealthy expats are rushing for the exits, sparking questions about whether the effort will raise any money at all.

The British experiment has laid bare the difficult politics of taxing the rich.

Taxing high earners has become a rallying cry on the left as a solution to income inequality and fraying social-safety nets.

Low-tax advocates say taxes on the wealthy are counterproductive, driving away job creators and big spenders.

In the U.S., New York City Democratic mayoral nominee Zohran Mamdani has proposed a “millionaires tax” on New Yorkers making more than $1 million a year, prompting vocal rich people to say they will leave for lower-tax jurisdictions such as Florida or Texas.

One challenge of taxing the wealthy is that they are highly mobile, with houses around the world, private jets, and an army of advisers who can sort out visas and bureaucratic paperwork quickly.

Jurisdictions such as Dubai, Italy, and Monaco have rolled out the red carpet, offering no taxation or structures similar to the U.K.’s old non-dom status.

Haidar earns most of his money from businesses he started overseas. He estimates the tax overhaul will increase his U.K. tax bill by five to seven times.

A father of five, he also worries about the U.K.’s 40% inheritance tax, which now would apply to his global assets.

Haidar is selling his U.K. properties and plans to leave this summer.

He’ll split his time between Dubai and Greece.

Nassef Sawiris, an Egyptian billionaire and co-owner of the English soccer team Aston Villa, has relocated from the U.K. to Italy, according to regulatory filings.

German crypto billionaire Christian Angermayer moved to Switzerland last year from London.

The UK has introduced a new tax benefit for foreign income, but it is limited to four years, and many former non-doms don’t qualify.

The government was maybe overconfident that the international wealthy loved London so much…that they wouldn’t go,” said Charlie Sosna, a partner in law firm Mishcon de Reya’s private-wealth division.

Like most countries, the U.K. taxes people who live there on their global income.

That is different from the U.S.’s citizenship-based system, under which all Americans are subject to U.S. taxes no matter where they live.

Wealthy Britons have been trying to escape the U.K.’s high tax rates for decades.

In the 1970s, the Rolling Stones moved to France to avoid taxes, while David Bowie went to Switzerland.

The lucrative non-dom loophole had the opposite effect, drawing rich foreigners to London.

The system dates back to 1799, when the country’s first income tax was imposed to fund the war against Napoleon.

Only income earned in the U.K. was subject to the tax, allowing investments in the empire’s colonies to avoid taxation.

The exemption was restricted over time to largely benefit foreigners who don’t expect to live in the U.K. permanently.

In 1970s, Middle Easterners rich off oil & shipping came to London, buying mansions, hotels & department stores.

That was followed by a wave of Russian oligarchs in the 1990s, earning the capital city the nickname Londongrad.

In recent years, Chinese and Indian nationals have become a bigger force.

The U.K. always knew that some rich residents would leave because of the tax changes and built that into its forecasts.

The U.K.’s independent budget watchdog, the Office for Budget Responsibility, estimated that among a large subset of non-doms, around 12% will move.

But it warned this month that departures could be higher and said the U.K.’s “growing reliance on this small and mobile group of taxpayers therefore represents a fiscal risk.

Campaign groups that back lower taxes paint a gloomier picture.

A report from the Centre for Economics and Business Research, commissioned by the Land of Opportunity campaign, forecast that a higher share of non-doms would leave and suggested the government could lose money if the migration rate tops 25%.

Academic studies of tax systems in the U.K., Switzerland, and the U.S. show a divide among the wealthy.

The superrich and elderly are more likely to move if their tax or estate bill rises. Families with school-age children, or people who work in salaried jobs, such as lawyers, are less likely to leave.

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London’s high-end home market is seeing a drop in sales due to new tax policies that deter wealthy international buyers. Americans now account for 25% of prime purchases in London, a rise from 18% in 2023, becoming the largest group of overseas buyers.

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As for tax rates causing moves within the US:

Study looked at the rate of movement before and after the 2017 federal tax law. That overhaul made it costlier to live in high-tax states such as New York and California because of a new cap it put on deductions for state and local taxes, or SALT.

They found that those with annual incomes of at least $1 million facing higher taxes were no more likely to move in the two years following the 2017 tax change than peers in lower-tax states.

Millionaires who were highly “embedded” in their communities—for example, those owning a local business or having children at home—were less likely to move in general.

They also found that when millionaires did move, they tended to opt for lower-tax states.

Young said ties—and the strength of those ties—matter.

“Money should make mobility happen, but moving your home is not fun,” he said.

“It’s really costly in terms of uprooting yourself.”