PrintMay 18, 2009
The futility of soaking the rich
A host of states -- California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon -- are planning to raise taxes on their richest inhabitants in order to overcome the consequences of overspending. Arthur Laffer and Stephen Moore demonstrate the futility of this plan in today's Wall Street Journal:
It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states. ...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. ...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.Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
I am not optimistic that the California Legislature will read and understand the many studies which confirm these findings. Already, one of my best friends here in the Bay Area is decamping for Texas. I am sure he will have plenty of company. Maybe me, sooner or later.
Hat tip: Susan L.
Update -- Rosslyn Smith writes:
Hat tip: Susan L.
Update -- Rosslyn Smith writes:
It is happening elsewhere. Cook County Illinois has some of the highest sales and property taxes around. According to this story it has lost population while the population of some of the collar counties has boomed.
