The Morning Rant: When Capital Is Mobile, Socialism Will Fail

The Soviet Union had a captive audience...nobody could leave with their money or their infrastructure unless the party allowed it. Communist China is the same way, as is Cuba, and North Korea, and Venezuela, and...

And leaving Krasnoyarsk for Tomsk, in the hope of more opportunity didn't work either...the laws under which the subjects of a socialist country operate made that change a triviality, even if one could get a permit to move.

But in free market economies, capital is mobile! And even more important; people are mobile. No permits required! No permission from the local People's Committee is needed...just a moving company and a funds transfer to the new city. So if you want to move your widget company to another city, have at it! And if you can convince your employees to go with you? All the better!

Why is this important? Because in the United States Of America, the deeply deluded flirtation with the out-and-proud socialism of the Democratic Socialists of America (DSA) has exploded in the last few years. Whether it is organic growth of socialist principles, or a careful manipulation of the news cycle combined with excellent grassroots planning remains to be seen.

But one thing is certain; socialism has arrived in a few of our cities, including the biggest one! NYC is firmly in the grip of a socialist/Islamist mayor, and he is gleefully implementing public programs, increasing the tax rates wherever possible. and in all other respects bringing the soul-crushing policies of socialism to the people and businesses of New York City.

But this ain't the Soviet Union, and people and companies are leaving. And that is a very big problem for a city that has as its tax base a large number of highly paid people in finance and the employees in corporate offices whose presence in NYC is a business imperative...or at least it used to be!

And how do they do it? It's easy! Just leave. Our Constitutional Republic is specifically designed to give the states broad discretion over their governance, and that includes the business climate. So the draw of Texas and Tennessee and Florida -- all states with no income tax and a business friendly regulatory structure -- is easy to understand.

JP Morgan Chase has reduced head count by 6,000 people, and has expanded operations in Florida and Texas. Goldman Sachs has unveiled an explicit program (Project Voyage) of relocation to Dallas and Salt Lake City. Citadel's global headquarters is now in Miami. Apollo Global Management is expanding in Austin. Blackstone is expanding in Dallas, and Miami. AllianceBernstein is moving several thousand employees to Nashville. And these are peole whose salaries are not $50k/year for clerical work or running a cash register. These are in many cases highly compensated employees who make $250k...or many multiples of that. The decrease in tax revenue from just a few of these people leaving is substantial, and it is not going to end anytime soon. The top 1% of earners in NYC pays 40% of the personal income tax! That is huge and unsustainable.

And that's just finance. Other large corporations whose executives can see the never-ending increases in corporate and personal taxes, coupled with the vast improvement in data movement no longer have to be in NYC. The internet may very well be the death knell of NYC! Walmart, Amazon, even tiny little Foot Locker are relocating employees or flat out getting the hell out of NYC.

And lest one assume that the state of NY is more sane... it isn't. New York State taxes are among the highest in the country, and the state is losing corporations and highly compensated people at an outrageous rate too!

And all of this is because of the wisdom and genius of the founders of our great country. Each state is largely free to experiment. And the flow of capital from the socialist experiment in New York City to the free states is huge, and growing. California and Illinois and Minnesota and New Jersey are also suffering from the same disease, and the low tax states are very happy to cultivate an atmosphere of freedom from regulation and taxation that makes them an attractive alternative to the sclerotic blue states.

[Crossposted at CutJibNewsletter and X/Twitter]. If you folks who are on X/Twitter would follow us it would be much appreciated!

posted by CBD at 11:00 AM

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