They can vote with their feet:
We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.
One has to be particularly pig headed not to understand this.
[Thursday morning update]
Adios, New York:
Last week I spent 90 minutes doing a couple of simple things — registering to vote, changing my driver’s license, filling out a domicile certificate and signing a homestead certificate — in Florida. Combined with spending 184 days a year outside New York, these simple procedures will save me over $5 million in New York taxes annually.
By moving to Florida, I can spend that $5 million on worthy causes, like better hospitals, improving education or the Clinton Global Initiative. Or maybe I’ll continue to invest it in fighting the status quo in Albany. One thing’s certain: That money won’t continue to fund Albany’s bloated bureaucracy, corrupt politicians and regular special-interest handouts.
I thought it was stupidly amusing the other week when “Governor” Paterson expressed such glee that he was chasing Rush Limbaugh away with his policies. Well, there are a lot of other people who won’t be any more happy than Rush is to continue to fund these parasites.
[Bumped]
[Evening update]
A disgusting but apt metaphor from Mark Steyn:
As Miss McArdle notes, whether you bail out states “too big to fail” or let them go bankrupt, it will cause pain to taxpayers. But the pain of the latter is relatively short-term. Passing Sacramento’s buck to Washington will accelerate the centralizing pull in American politics and eventually eliminate any advantage to voting with your feet.
Not to be too gloomy, but the country feels like it’s seizing up. It’s as if California and New York have burst their bodices like two corpulent gin-soaked trollops and rolled over the fruited plain to rub bellies at the Mississippi. If you’re underneath, it’s not going to be fun.
I hope that a bailout of California and New York will have huge electoral blowback (including from many Californians, like the ones who voted down the continued state tax and spending on Tuesday, and New Yorkers).
Where I live, politicians have just come up with the perfect solution to this problem at the municipal level: simply force neighbouring municipalities to pitch in. Taxation without representation indeed. I kid you not. It’s only a trial balloon at this point, I hope it gets shot down.
If this was true you would expect the states with low tax rates to be richer than the ones with high tax rates; but that isn’t the case. Maryland, New Jersey, Connecticut, Hawaii, and California all have above-average state tax burdens, and yet they’re among the top 10 states in per-capita income.
How much is the cost of living in those states Jim and how does it compare with the low tax states?
Income only tells part of the story.
“some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place.”
Business people set up businesses where there is either a key resource or a key market. Mines are set up where the minerals are. Processing plants where key inputs are cheap and a decent labor pool is available. Retail/consumer focused firms are where their key markets are at.
NYC has very high taxes and yet more Millionaires lived in Manhattan then any other place except Dade County Florida.
If low taxes were the sole issue, Tennessee and Oklahoma would be beehives of industry.
Mr. Lee,
Actually, Tennessee and Oklahoma ARE beehives of industry. NYC is not. It is a beehive of finance. Er, it was, once, before high cost of business drove it out of the city.
Mike: The quoted article claims that the rich will leave high-tax states. If that happened, high-tax states would have lower-than-average per-capita income. They don’t. In fact, they put up with both higher taxes and higher costs of living to stay in high-tax states.
“In fact, they put up with both higher taxes and higher costs of living to stay in high-tax states.”
How many have not located there because of high taxes? How many have left? Where do companies locate new manufacturing? It isn’t New York or CA. What will be the tipping point for these people to leave? CA, NY, MI and IL all are losing people. Some of those are rich. As taxes go up, more of them will be leaving too. The attitude among liberal politicians is this is an infinite resource and it’s not.
Bill: These high-tax states have been high-tax states for decades. Judging by per-capita income, it hasn’t hurt them.
Maryland, New Jersey, Connecticut, Hawaii, and California all have above-average state tax burdens, and yet they’re among the top 10 states in per-capita income.
And like the many bubbles before, these are about to pop. The only thing preserving them is the transfer of wealth from other states to these states. That’s why other states, mostly Red, will be fighting to keep the federal government from using tax dollars to bail out these states.
It is undeniable that some vote with there feet, but Jim chooses to deny this assertion with…
If this was true you would expect the states with low tax rates to be richer than the ones with high tax rates
Which so totally disregards so many variables that it is just a stupid and illogical statement.
The quoted article claims that the rich will leave high-tax states. If that happened, high-tax states would have lower-than-average per-capita income.
No Jim, your assertion disregards rates of change along with again, other variables.
The main thing being, I only need to show that SOME rich leave high tax states to prove the initial assertion.
The question is not, do rich people vote with their feet. They do and it is undeniable. The question is, what is the impact? The answer is there are a lot of variables, including the fact that much of the workforce the rich employ may not be able to vote with their feet at a rate sufficient to overcome other population dynamics.
That still leaves you denying the undeniable.
Bill: These high-tax states have been high-tax states for decades. Judging by per-capita income, it hasn’t hurt them.
Till now
http://michellemalkin.com/2009/05/20/billionaire-to-new-york-screw-you/
Maryland, New Jersey, Connecticut, Hawaii, and California all have above-average state tax burdens, and yet they’re among the top 10 states in per-capita income.
And like the many bubbles before, these are about to pop. The only thing preserving them is the transfer of wealth from other states to these states. That’s why other states, mostly Red, will be fighting to keep the federal government from using tax dollars to bail out these states.
Except the Red states are net tax recipients of federal largesse.
The biggest recipient Alaska., the next 5 southen states.
The rd states are all moochers
The rd states are all moochers
Whatever you say, Minnie.
Where’s documentation on jack lee’s claim? I hear that a lot.
Oh, and how woudl the states rank in per-capita income if cost of living were factored in? 40K in CA is less than 30K in TX.
If they ever invent the transporter, CA will be down to four electoral votes in a matter of weeks, when people start flocking to the lower-cost-of-living states and use the transporter to commute to the Left Coast. Is it an accident that James Kirk is from Iowa and not Costa Mesa?
Red States receive, on average, $0.29 more net federal benefits than blue states.
Google is a wonderful thing, Alan K. Henderson.
http://www.census.gov/prod/2008pubs/fas-07.pdf
Figure 5 and 7
7 of the top 10 are Red States, and the leads? Wyoming, alaska and MT.
NYC has very high taxes and yet more Millionaires lived in Manhattan then any other place except Dade County Florida.
Ah. In other words, post hoc, ergo propter hoc.
Hospitals have the highest death rates of any locations in the United States. Therefore, the way to lower the national death rate is to close all the hospitals.
Mike G. – The argument was, “higher taxes would cause an exodus of rich people.” If higher taxes were in fact causing an exodus of rich people, one would expect to see lower incomes in high-tax states. (The rich moved out.)
The fact that we don’t see lower incomes in high-tax states suggests that the original hypothesis is flawed.
“The fact that we don’t see lower incomes in high-tax states suggests that the original hypothesis is flawed.”
Ever hear of Michigan and Ohio?
Good job quoting data from 2003. Have anything relevant to today’s economic climate?
Michigan and Ohio? You mean two states wedded to heavy industry during a large and long-term contraction of same? You don’t think other factors play into their problems?
I seem to recall that the argument started with New York and California.
My point here is that there is no one factor that determines where people live. Assuming taxes are that one factor leads to ineffective policy.
Josh – Henderson asked for a source. I provided him one, and (apparently entirely to subtly) suggested that he Google for additional information.
So let me be more clear – Google “red states net tax receipents” and do your own research.
Not having read the article, I cannot be sure, but I might suggest that the difference between net tax inflows and outflows has a lot to do with how many military facilities per capita are in the state in question.
Just a thought…
Michigan and Ohio? You mean two states wedded to heavy industry during a large and long-term contraction of same? You don’t think other factors play into their problems?
You’d like to think so, wouldn’t you? Problem is, Chris, there are plenty of other industries in the United States which suffer from pretty much all the same problems as steel and cars. Take oil, for example, or chemicals, paper, mining, aircraft. Strangely enough, they’re doing just fine. No deadly offshore competition and hideous inefficiencies killing them.
And where do they live? Hmm…strangely enough, mostly in the South. Texas, for example. Uh oh.
Maybe also note that a lot of aircraft industry used to be located in California, but not any more. California and New York used to be net power exporters, but not any more. People used to migrate from the South to New York and California. Not any more.
Jim observation is, of course, as others have noted, complete horseshit. The relevant statistic is per capita income divided by the cost of living. I can tell you from personal experience that getting a 100% raise and moving from, say, the rural Midwest to urban California is taking a substantial hit on your actual living style. It’s what you can buy with your wages that matters.
Otherwise, you know, Zimbabwe with 1000% inflation would be rapidly becoming the wealthiest place on Earth.
@ChrisGerrib
“So let me be more clear – Google “red states net tax receipents” and do your own research.”
Then, why didn’t you site some relevant material from your extensive google research?
The fact of the matter is I have seen people quoting this line of logic on a number of sites. With site after site it leads back to this particular peice of research from 2003. The fact of the matter is, that in 2009, we have a situation where several (*cough* blue) states are petitioning for Mr. Bailout to come to the rescue.
Now how about you go and Google “How do you like them apples”.
I live in Texas. I cannot tell you how many people I have worked with that have moved from California or the New England area because they just couldn’t afford it any more.
One guy sold the couple of dry cleaning business he owned and his house and made off with about 2 million. He worked at the helpdesk I used to work at just to basically give himselve something to do and to cover daily expenses. Two million in California was chump change, in Texas, early retirement.
Another lady came from Connecticut because she just couldn’t keep up with the standard of living. She came down to Texas and picked up a Mercedes.
I am amazed at the lack of common sense from those defending tax and spend like a drunken sailor states. CA has a lot going for it. The high cost of living and the tax burden will eventually overcome the positives as they are now. The state is shedding jobs and people. New York metro area is up to 8+% unemployment and climbing.
Momentum keeps things going and the bad decisions take awhile to be seen.
CA was once a reasonable state to do business in.
I was in CA when it still had a high wage aerospace business.
It doesn’t have much of one anymore.
The Jobs all left.
Josh – I get paid to do things other than argue on blogs. Somebody asked for facts – I gave them a set of facts. If you think these facts are incorrect, please feel free to cite alternative facts.
Chris
I cited the 2007 census bureau report, Josh refuses to read it because it
undecuts his position.
Then please, by all means, stick with your day job.
jack lee Says:
May 21st, 2009 at 5:43 pm
“Chris
I cited the 2007 census bureau report, Josh refuses to read it because it
undecuts his position.”
*looks at watch*
Your gettin’ closer Jack. I think my calendar says 2009. Not certain what decade your living in.
You know. I think I see the light. The gov’t is a competent business investor. They know how to sink good money into good investments. So, giving more money to the red states than the blue states represents a good investment. I applaud their business sense.
Wyoming’s anomalous score is due to the “other programs” category. (I’m looking at Figure 5 – MT is not in the top three, it’s behind Maine.) That extra ain’t all going to Yellowstone and the regional Indian reservation. What’s the unique expenditure(s) in WY?
Louisiana ranks 3rd. It has been for ages a blue state run by Democrats. New Orleans is a wholly-owned Democrat subsidiary. LA was freebasing on Health and Human Services spending in 2007.
Surprise – the transportation costs in AK, the largest, snowiest and most mountainous state, is pricey.
Surprise – Mississippi still has lots of poor folks, as HHS expenditures reflect. Thos riverboat casinos aren’t bringing in scads of wealth.
WV (ranked 9) has more monuments named after Byrd than Iraq has named after Saddam.
This report factors in direct govt expenditures and not indirect forms of favoriti$m – like the state income tax deduction.
It reminds me of a story a friend told me recently. He’s helping set up a new business, to build and market a new invention with a lot of potential in the health care industries. Lot of enthusiasm for the product, likely to get huge sales and the companies likely to grow to thousands of employees. Since the founders are all from the Detroit area, they thought they’d set up the new company there.
You’d expect the Michigan government near Detroit to be pulling out all the stops to help them. Maybe tax incentives, looking for unused factory space, bureaucrats helping fast track applications – etc. Nope, they acted put upon, pointed out where they could get application forms for permission to start a busness, etc. If anything they gave the strong impression they not only resented the newcomers making work for the buracrats, but were looking forward to getting even by soaking them with crippling taxes.
Then my friend and his fellow company founders went to Florida. Do you need tax incentives sirs? Out standard taxes on employees and busness is already low but if… We’ll help with all your fillings.. Heres areas of the state we think would be a best fit for your needs.
Yeah, they decided they could live away from high crime Detroit and deal with warm winters.
[ I think of this story every time I see or hear one of those commercials with Jeff Daniels when he talks about how pro business Michigan is.]
I’m sure President O and the Party will take steps to prevent those awful rich people from relocating. Fences on the borders of high-tax states to keep them in, perhaps.
Of course, in five years when the Zimbabwe-level inflation kicks in, we’ll all be “rich” and thus eligible for heavy taxation. In the interest of fairness, after all.
I get paid to do things other than argue on blogs.
I’m tearing up in laughter, because I know Gerrib tries to make a living writing fantasy.
Leland – writing is a hobby, not an attempt to make a living. Also, I write science fiction, not fantasy.
Since most military bases are in red states, the whole “red states mooch money” canard the moron left likes to play is false on it’s face. The majority of the money they are referring to goes to Federal programs, not state.
osh the census only does annual data.
you want 2009 data wait until 2010.
Since most military bases are in red states, the whole “red states mooch money” canard the moron left likes to play is false on it’s face. The majority of the money they are referring to goes to Federal programs, not state.
And your point is? Money is money. Overall, money goes from blue states, to D.C., and out to red states. And then the red states complain that there is too much federal spending (while fighting tooth and nail to keep those federal projects).
Military spending is for everyone’s benefit. Alaska roads are for the benefit of Alaskans and visitors. MS welfare checks are for MS welfare recipients. Not apples and oranges.
I wonder what the stats would look like if the District of Columbia were a state…
There are two things to remember here with the red state “moochers”. First, the red states have to be bribed to pass any spending and they have a slightly higher per capita voting power in the House and a much higher voting power per capita in the Senate. So naturally the current phenomena would be observed. I see no problem with any unfairness that may come as a result. Political pork isn’t meant to be fair.
Second, the numbers by state ignore that that money can be intercepted by businesses from other states. If we looked at the actual business that receives the money eventually, we’d probably find that Delaware receives by far the most per capita, just because it’s a popular state for registering corporations. New York and California probably do better than the by state figures allow. All these government recipients need financial services and computers. Alaska doesn’t supply those.
My view is that since the red states claim to want less spending. Then either call their bluff, ie, reduce the spending as they desire, or shut up. If you want more government spending, then buying off the red states is part of the package.
We moved out of California primarily because we could no longer afford to live there, something only partly due to the cost of housing. In selecting new home state, we developed a list of criteria on which tax rates were second — the quality of school systems was first, since we have a son with two years of high school to go.
If I had to move again, California would be off the list just on the basis of its tax rates. People here in Maryland complain about their taxes (and their government responds), but are aghast when they realize what is Californians.
“Military spending is for everyone’s benefit.”
“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”- DDE
I know it’s hard for simpletons like you to understand, “jack lee,” but a concern about the military-industrial complex is not incompatible with the belief that military spending (properly done) benefits all. So your comment (as is often, if not mostly the case) is a non sequitur.
I note that Jack Lee didn’t bother to quote other things that Eisenhower said in the same speech, such as “Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific technological elite.”
Oops, that should be “not apples and apples.” You probably guessed that.
I can identify at least three Democrat-controlled red states: WV, LA and Arkansas. Furthermore, AR and WV have two Democratic US Senators (as do ND and MT). Democrats are the ones pulling federal largesse into those states.
The red-blue largesse gap analysis is simplistic on multiple points. Aside from identifying red and blue solely on presidential elections, it treats each state as a politically homogeneous entity (using the red/blue county map would ameliorate this statistical error), and it treats all Federal expenditures as moral equivalents.
I don’t know about New York, but California has been losing skilled people for a long time, at least since the 90s. Immigration from outside the US has been necessary to maintain a workforce in the state.
“My view is that since the red states claim to want less spending. Then either call their bluff, ie, reduce the spending as they desire, or shut up. If you want more government spending, then buying off the red states is part of the package”
We did, the GOP larded on tthe spending during Reagan and Bush.