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May 18, 2009

Go Figure: Tax the Rich and the Ungrateful Bastards Leave

There's a must-read op-ed in today's Wall Street Journal; the gist is that states that tax the rich to make up for their budget mismanagement tend to drive the rich away. The result being the states don't actually get the taxes they want AND they end up economically weaker. A taste:

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

There are a lot of little jewels buried in there so go read the whole thing.

Update: Dave in Texas sends a link that illustrates the problem:

Ending any speculation about another possible run for governor, Rochester businessman and Sabres owner B. Thomas Golisano said Thursday he will be moving his legal residence to Florida to escape New York state taxes.

Golisano told a gathering of Rochester business executives that he will remain as owner of the Buffalo hockey team, but he is fleeing the Empire State to avoid paying $13,000 a day in state income taxes. [...]

The billionaire earlier this year told The Buffalo News that the only thing keeping him in New York was his family. “The only reason I’m staying in this state is I have family here. Economically, it just doesn’t make sense,” he said in February.

Someone mentioned earlier the idea of "exit taxes" like Europe uses. Fortunately, exit taxes within the United States (that is, state-to-state) are unconstitutional.


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posted by Gabriel Malor at 08:53 AM

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