Government can't always get what it wants
Economist Mick Jagger, rock star and former student of finance and accounting at the London School of Economics, moved to the south of France in 1971 to escape the 90-percent-plus income tax rates in Britain.
“Imagine the plight of many popular British bands in the 1960s,” explained Frank Mastropolo at ultimateclassicrock.com. “In the U.K., the new millionaires had to pay a whopping 95 percent of their income in taxes. Beatle George Harrison wrote ‘Taxman' to protest the unfair split.”
Harrison said he wrote “Taxman” when he “first realized that even though we had started earning money, we were actually giving most of it away in taxes.”
“Many rock stars at this time became ‘tax exiles' whereby they established residence in a country with considerably lower tax rates,” wrote Mastropolo. “The Rolling Stones were one of the first to employ the practice when they moved to France.”
The trip led to the title to their classic “Exile on Main St.” album.
The Stones weren't alone in migrating in order to keep the government from taking their money, explained Mastropolo: “In the '70s and '80s, many rockers, at least temporarily, encamped to tax havens around the world. David Bowie moved to Switzerland; Cat Stevens to Brazil; Rod Stewart to California and Ringo Starr to Monte Carlo in 1975.”
Mastropolo quotes Stewart from a 1974 interview:
“The government thinks it'll tax us … right up to the hilt because we won't leave, but that's wrong because I will if I want to. With a 90 percent tax ceiling, it's just not worth living in England anymore.”
In an interview with Rolling Stone magazine, Stewart explained why he was moving: “They don't seem to understand. You only get one bite of the apple. I can't be doing this for the rest of my life. You do an apprenticeship for seven or eight years and then you earn a lot of money in one year and they want to take 90 percent away — 98 percent!”
The Rolling Stones were “almost broke by 1971,” reports Mastropolo.
As Jagger explained in a 2002 interview with Fortune: “In the early days, you got paid absolutely nothing. You say, ‘Oh, I'm a creative person, I won't worry about this.' But that just doesn't work. Because everyone would just steal every penny you've got.”
In 1971, each of the Stones “owed the British government a quarter of a million dollars in taxes, a huge sum at the time,” reports Mastropolo. “They decided to move the band to France to avoid taxes and shelter their earnings in a Netherlands holding company.”
As Jagger told CNN: “You made 100 pounds, they took 90. So it was very difficult to pay any debts back.
“So when we left the country, we would get more than the 10 pounds out of 100. You know, we might get 50 or something.”
Keith Richards, in an interview with The New Yorker, concisely summed up the bottom-line impact on Britain of the band's move: “We left, and they lost out. No taxes at all.”
Ralph R. Reiland is an associate professor of economics at Robert Morris University (firstname.lastname@example.org).