The American Spectator

This article ran as the “Capitol Ideas” column in the May 2008 issue of The American Spectator. To subscribe to our monthly print edition, click here.

p> “Sir, let me tell you, the noblest prospect which a Scotchman ever sees is the high road that leads him to England.” br> — Doctor Johnson to Boswell, 1763 /p>

I would update that by saying that there is nothing that an American in England looks forward to so much as the motorway that leads him to Heathrow. That would be the M25. But you have to worry whenever you take it because the traffic can be so bad that you may miss your flight. If you think freeway traffic is bad here, try the M25 on a bad day.

I go to England fairly often as I have family there — a brother, two sisters, and my 95-year-old mother. Otherwise I doubt if I would go back. The first thing an American will notice is how expensive it is. Most things are double the U.S. price. Gasoline is three times higher — now $10 a gallon. And still the roads are clogged. (All prices in this article have been converted to dollars at $2 to the pound.)

The country is far richer than it used to be, London is booming and one of the most expensive cities in the world. One reason is that Tony Blair, prime minister for ten years, knew better than to reverse Margaret Thatcher’s key reform — the reduction of tax rates on capital and income. The new (and still unelected) prime minister, Gordon Brown, seems to have less sense.

The March budget decreed that non-domiciled residents — who are not taxed on their world-wide income (as they are in the U.S.) — will be required to pay an annual tax or fee of $60,000 for that privilege. The Sunday Times raised the alarm. The new tax could be high enough to make the “non-doms” pack their bags and leave. It didn’t take long. On the day I returned to the U.S. the Financial Times reported that the head of a London “buy-out firm” called Terra Firma was considering whether to “flee the country.”

Another tax change: Under the Blair regime, tax rate on capital gains started at 40 percent but went down to 10 percent for assets held for four years. Now, that rate has been increased to 18 percent.

p>The London newspapers seem much improved. The Internet threatens the hacks’ livelihood, so they are working harder. The Financial Times is no longer hostile to markets and is actually worth reading (if you don’t mind forking over $3 for a copy). On non-doms, the associate editor of the Times , Anatole Kaletsky, relayed some much needed wisdom: