Politicians on both sides of the House of Commons must regret trying to gouge tax out of non-domiciled residents. Edmund Burke said: “To tax and to please, no more than to love and be wise, is not given to men.” But Alistair Darling, and to a lesser extent George Osborne, have accomplished none of these things. It would be bad enough for the politicians to be unwise, unloved and displeasing for the sake of extra tax revenue. Under current proposals, Exchequer coffers stand to lose more tax than they gain as well.

Politically, it is easier for Labour to revise its non-dom plans because the levy was originally a Tory idea. Brickbats and accusations of U-turns will be hurled. But Conservative guns will be muffled. The trick will be to retain the reform of inheritance tax that put non-dom tax at centre stage. This is achievable since the concession to give married couples a joint inheritance tax allowance is only a slight change in the status quo.

Taxing non-doms is bad policy because it endangers the trading status of City of London, and the UK. It is damaging in reality and may be more damaging in perception because of the anti-trade, anti-wealth message it broadcasts. The world's business elite do not flock to London for the weather, or because the transport infrastructure makes the journey easy. They come to meet, and do business with, other like-minded individuals. They come to create jobs within their immediate circle, and indirectly across the economy. They come with valuable services, ingenuity and enterprising energy. Non-doms may enjoy London society at the same time. The art galleries, fine dining tables, and world-class football teams are a big secondary attraction. But these things will wither with the UK's status as a financial and commercial hub if wealthy foreigners are obliged to pay through the nose for the privilege of visiting our shores.

The Treasury reckons a £30,000-a-year fee on non-doms will add £650 million to annual revenues. This is 0.12 per cent of the total revenue the Exchequer expects this year. The sum may shrink as non-doms avoid the levy. The ultimate contribution may be no more than a rounding error in the national accounts. Set against the income lost elsewhere, however, it would be a huge mistake. It is hard to put a figure on how much is raised because non-doms' business dealings, and leisure pursuits, are varied. But the CBI estimates that non-doms sent £7 billion to the Exchequer in the past year.

The mechanics of the non-dom tax proposals are misguided. Both parties propose an annual levy that is a poll-tax-style charge, not a justifiable tax. It is regressive because it does not vary in line with an individual's ability to pay. It may be tempting to soak the rich in tax because, one supposes, they can afford it. But on this point of principle the wealth of the individual is irrelevant.

The Tories' plan is less bad because the levy is smaller and more palatable: unlike Mr Darling, Mr Osborne does not want to know about non-doms' worldwide earnings. This scares non-doms because they cannot trust governments with such data. It compounds their incentive to steer clear of Britain. Unlike Labour, the Tories have no plans to tighten other aspects of non-dom taxation such as residency definitions. Labour's plans are worse, but fixed tax charges are counter-productive in practice and regressive in principle. Non-doms are innocent. We should welcome them with open arms, not pick at their pockets.