When the Rolling Stones Hit the Laffer Curve

Michelle V. Agins/The New York Time

An interview with the Rolling Stones reveals some of their business and wealth-protection strategies. “The whole business thing is predicated a lot on the tax laws,” said Keith Richards. “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. [This may sound like an exaggeration, but likely isn’t.] 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.”

The story of the Stones’ flight from Britain because of taxes is told a bit more fully in the recent documentary Stones in Exile, which was quite good. (Shine a Light, meanwhile, was a disappointment.)

As much as I love Keith Richards – am reading his memoir Life, and loving it as much as the critics – the likelihood is that his bandmate Mick Jagger is more responsible for the band’s business strategies. He is, as we put it earlier here, a true profit maximizer.

(HT: Greg Mankiw) [%comments]

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  1. Under their thumbs... says:

    A lot of Canadian women thought it was because of them.

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  2. Mr Eugenides says:

    98% is, indeed, not an exaggeration. The Labour government of the 1970s had a 98% tax on very high earners (not sure of the threshold). It was abolished by Margaret Thatcher’s government and remained at 40% for a couple of decades.

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  3. DaveyNC says:

    But, but, but…governments can raise taxes and people will just pay them! Everybody knows that!

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  4. Nikki says:

    Shine a Light is excellent. A short appearance of Christina Aguilera is not sufficient to make a film disappointing any more than a one-time post by an irrelevant TV actor is enough to make an economics blog disappointing.

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  5. Mike B says:

    So it looks like the Republicans were right…assuming that the majority of taxpayers take up a nomadic lifestyle with no ties to any particular country. It’s ironic that the party that coined the term “America: Love it or Leave it” would be most likely to leave it due to tax considerations. ::rolls eyes::

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  6. DaveyNC says:

    Mike @5: Isn’t it worth considering why a nomadic lifestyle has such advantages now? Maybe, just maybe, something is broken in our economic system.

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  7. Jon Martinez says:

    Bill Flanagan’s new novel “Evening’s Empire” covers the british tax situation in the sixties pretty well. Basically they taxed the income of the up and coming individuals that could challenge the status quo with their new wealth. Those individuals left the country to avoid taxation and the threat was eliminated. The landed gentry’s capital gains were never taxed at high rate thus protecting their wealth and control of the government.

    The same thing is happening here. Different levels of taxation, but the result seems to be quite similar.

    If you don’t believe me just look at the division of wealth trends in the last 30 years or so. It’s not whether taxes are high or low, it’s what is taxed and right now it is highly inequitable and our society is poorer for it.

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  8. econobiker says:

    Capitalist money knows no patriotic causes.

    The Rolling Stone’s tax avoidance issues pale beside instances of global multi-national corporations manipulating profit taking, taking tax credits, and hopping around to different countries for corporate registrations/hq’s etc in order to avoid tax responsibilities.

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  9. Tim says:

    @Mike B –

    So the super rich represent the “majority of taxpayers” now?
    And corporations don’t need to take up a “nomadic lifestyle” to lose ties with one countries tax rate (see Google and their 2% tax rate).

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  10. Penny says:

    Mike, I fear you’re hallucinating. I don’t know of any Republicans talking of leaving the country. Some Hollywood Liberals talked about that, but unfortunately stayed here.

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  11. Clancy says:

    I could believe that a 98% marginal tax rate is past the peak of the Laffer curve. What I don’t believe is people who think 35% is past the Laffer peak.

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  12. Bobby G says:

    Actually Penny (#10), a lot of our tax policy makes me want to leave the country. I’m not even kidding.

    Every time a rich person leaves the US, the burden of our crazy spending weighs even more heavily on those who stay, since they now have to pick up the same tab but with less help. This additional burden encourages those who are still around to leave even more… it’s a vicious cycle, and it’s pretty rational.

    Shouldn’t our tax policy try to *bring in* the best and brightest, not make them want to leave? Instead we’re all about protecting the unfortunate at the expense of the successful. Sorry if this sounds cold but that’s not a way to cause economic growth. Sure some of the people receiving aid can get back on their feet and help the economy, but that’s always costing taxpayers the same if not more $ to get them back on track… and most of the time the aid money doesn’t produce anything of economic value. It’s either a tie or a loss.

    Rant over. I am going to go order Stones in Exile now.

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  13. Joris says:

    What is interesting to point out is that a lot of big artists, like the Rolling Stones and U2, have their holding companies based in Amsterdam (I believe the Rolling Stones are based there since 1971), because the Dutch government doesn’t charge a tax on royalties. So in effect, they only have to pay 1.6 % of their revenue in taxes.

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  14. bob says:

    This discussion is hilarious. Do conservatives really believe that the rich should be taxed at a lower rate just to keep them in the country?

    Listen, we’ve seen what happens when you cut taxes. Massive jumps in debt (both in aggregate and as a percentage of GDP). That is not a sustainable solution. Supply side economics simply transfer public wealth to the wealthy.

    We are currently feeling the results of tax breaks. As the wealth of the rich went up, there simply weren’t enough safe places to extend credit. The result is riskier loans. With cheaper credit, everyone started borrowing and buying houses. With everyone buying the prices went up. It turns out, not everyone could afford the loans.

    It turns out you can only squeeze so much out of the bottom 95%.

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  15. Alex says:

    Two corrections:

    1. This is not a “recent” article – it was from 2002. (The article talks about the 40 Licks album “coming soon”).

    2.. It isn’t from Rolling Stone magazine, it is from Fortune.com (see the very bottom of the article).

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  16. Sbard says:

    @#6: It’s probably more that it’s much easier to live a nomadic life in this day and age when air travel is cheaper and the internet makes it much easier to keep connected with the people you’ve left behind. That having been said, you can’t really live that kind of life easily unless you’re pretty rich and successful.

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  17. StandardsAreSkewed says:

    98% was and is ridiculous. That’s not an argument for abolishing taxes. It’s a give and take process that we need to constantly renegotiate. Smart, progressive taxation. Not “ridiculous overburdensome taxation” or “zero taxation.”

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  18. PT says:

    British taxes used to make a distinction between “earned” and “unearned” income, with the latter taxed at a higher rate. This included such things as rents, interest, dividends, and the royalty income of rock stars. It certainly went as high as 95%, as memorialized by the Beatles in “Taxman” – “..there’s one for you, nineteen for me..”. The tax on earned income, however, only briefly reached a high of 82%.

    One might reflect that the preferential taxation of unearned income in the US lately, which drove the explosive growth of unproductive financial speculation, contributed substantially to the economic situation in which we now find ourselves.

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  19. RifRafRob says:

    @PT #18,

    As a conservative I’m a bit ashamed to admit that I buy it. That’s the most effective indictment of Bush’s tax policy that I’ve yet heard.

    I’m no fan of the income tax but it seems to me like it’s a little bit odd to distinguish types of income. If we’re going to tax income shouldn’t we keep it simple and just tax it all the same? Why make extra work for accountants and tax lawyers?

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  20. DaveyNC says:

    Bob @ 14: See, here’s the thing. It’s not necessarily that we think the evil “rich” should be taxed less it’s that we realize that they have the means to leave and take their businesses with them. Especially in a time when capital can move across borders with the push of a few buttons and a good accountant. You and many others on the left seem to want to tax the “rich” simply because they have more $$. I’d rather keep them here, encourage them to build their businesses and give the rest of us decent jobs that help them to get richer. Because I’ll be better off for it.

    I met a man a year ago who was selling off all of his small businesses that he had accumulated over the course of his life. He had a DIY car wash, a couple of convenience stores, a self-storage facility and half a dozen rental homes in an upscale community. Altogether, he probably had $4-5 million in assets, that I knew of. He was liquidating everything to go to New Zealand.

    He wasn’t exactly a big employer, but he sure as heck paid a lot of property taxes here and clearly had the ability to accumulate assets and make them productive. New Zealand is the better for it, now.

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  21. DaveyNC says:

    Sbard@16: “pretty rich and successful” fairly describes the Stones, does it not?

    And these days, you really don’t have to be so wealthy to live on the move: http://www.vagabonding.net/

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  22. cavantim says:

    Heard The Stones might get back together in 2011. Remember when they were on The Ed Sullivan Show back in the 60s? – http://goo.gl/j25P

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  23. Eric M. Jones says:

    Two percent of the people own 50% of the wealth. Fifty percent of the people own 2% of the wealth. Get real.

    The Stones actually considered buying their own tiny country. But then they found they would have to pay for transportation infrastructure, government, postal services, public health, fire protection, security, insect control, etc., etc………..

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  24. Carl says:

    #2: You’re quick — but wrong — to blame this on the “Labour government of the 70s”. The 98% top marginal rate dates from the (at least) the 1960s and persisted through alternating Labour and Conservative governments.

    The 1966 Beatles song “Taxman” recorded [sic] this tax rate for posterity with the lines “Let me tell you how it will be;
    There’s one for you, nineteen for me” and the responsibility of both parties with the lines “Taxman, Mr. Wilson, Taxman, Mr. Heath”.

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  25. Gregg says:

    The fairest income tax is a flat tax with no exemptions, deductions, or credits. The rate is the same on all income, and everyone who earns even one dollar must pay. The top earners will still pay the bulk of the bill, but at least it will be in proportion to their incomes, and there will be fewer freeloaders (right now about half pay no income taxes and have no interest in restraining spending). Such a system also encourages and does not punish people who choose to work more and earn more. We need it now.

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  26. Gregg says:

    As to the comments on top 1% having so much of the “national wealth,” there is no such thing. It is not a zero sum game. Many of the current billionaires did not start out as billionaires. Instead, they created wealth. I am not poorer because Bill Gates is a billionaire. In fact, working at MS has made many rich, not just the founder. Listening to some it seems that they would personally like to be poorer, if it means their “rich neighbor” could be worse off. That’s just a race to the bottom. Lifestyles in this country today for avg Americans are better than that of Rockefeller in his hey day (flat screen TVs, iPods. iPhones, medicine, life expectancy, etc, etc.).

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  27. Joe Falco says:

    to Nikki

    Christina Aguilara singing with Mick on “Live with Me” was an unexpected high point in “Shining a Light”. That girl can sing!

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  28. Amanda says:

    It’s not an exaggeration – the Beatles were hit with the same tax rate during the same period.

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  29. Nylund says:

    Of course, Keith Richards has also talked about the insane amounts of money he makes from royalties when he sleeps. The substitution effect kinda breaks down when you’re making millions even when you’re not working.

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  30. Nylund says:

    “The fairest income tax is a flat tax with no exemptions, deductions, or credits. The rate is the same on all income, and everyone who earns even one dollar must pay.”

    I disagree. As a Ph.D. student, I make less than $15k a year from my stipend and am forbidden from holding any other jobs by my department. Take away any of that and I can’t pay for rent and food much less replace my shoes that have holes in them, no matter how stingy I live (at least in the city I live in).

    I’ve always thought that one of the reasons there is a liberal bias amongst academics is because many academics had to spend quite a few years living at or below the poverty line for many years. I remember my undergrad years at NYU and a TA getting her bike stolen. She sat in the hallway crying for an hour because she lost her sole form of transportation and had no money to replace it as she was living off $11,000 a year in NYC. At the time, I thought it was sad, but since then, I’ve come to tears many times wondering how I’ll stretch $30 into a month’s worth of food. You don’t forget those moments.

    That TA and I are both lucky because we’re pretty confident that eventually we’ll do pretty well, but we become much more sympathetic to those who won’t have our eventual opportunities.

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  31. TRad says:


    So you think the society should pay for your chosen way of life? Why?

    But I agree flat tax is unjust. Why people earningmore should pay more? They aren’t using more public services, probably they use less of them (f.e. private schools for children).

    The _fairest_ solution is a poll tax. Of course it’s unrealistic from political point of view and has exactly 0% chances – but it is the fairest possible solution.

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  32. smoof says:

    There have been 100s of books written about this. We tax based on our society’s value system. In the 50s, we valued collectively everyone in America, and top rate was 92%. As a whole we were richer, our infrastructure was top notch, but on average poorer, where the top earners made only 50 times the average worker.

    We have reversed that because now we value wealth. It drips from every article, TV program, and attitude of most Americans. Oddly, we are collectively poorer, and most individuals are as well, with only the top earners making 100s or 1000s of times as much as the average worker. Our infrastructure is absolutely horrible, and is disintegrating under our feet.

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  33. TRad says:

    I don’t believe that “at the whole you were richer”. The way to wealth, collective or individual, is by work, not by taxation. High tax rates are poor incentives.

    And I don’t believe now you are “collectively poorer”. I think today people on welfare live better than working people in the 50s.

    And your infrastructure disintegrates for sure not because of too low taxes. I believe the public spending (as a % of GNP) is higher now than ever (not counting WWI and WWII). You decided to eat taxes instead of funding infrastructure, that’s all.

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