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Soak the Rich, Lose the Rich ~ WSJ.com

Soak the Rich, Lose the Rich

Americans know how to use the moving van to escape high taxes.
By ARTHUR LAFFER and STEPHEN MOORE | WSJ.com

With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

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.
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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.
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...They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation-- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores...

Read whole article:

http://online.wsj.com/article/SB124260067214828295.html

Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).




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photoshopwiz's picture

Reason TV: Are the rich paying their fair share of taxes?

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This week, Hillary Clinton stated that the wealthy in America aren’t paying their fair share in taxes — claiming that she wasn’t speaking for the Obama administration in making that public claim. Whether that was an official policy position or not, it certainly fits well within the class warfare offered by the Obama administration and Democratic Party leadership, who have repeatedly attempted to add “surtaxes” and fees on Americans earning higher incomes, both as part of the ObamaCare bill and in attempts to penalize Wall Street. Reason TV looks at whether Hillary was right, and it doesn’t take long to reach a conclusion:

Is Hillary Clinton Right That The Rich Don't Pay Their "Fair Share" of Taxes?
http://hotair.com/archives/2010/05/29/reason-tv-are-the-rich...

Tax the "rich"

This might be the way to go after all, since the only high incomes left will be government employees and contractors.

Excellent Post

These studies showing Texas created more new jobs in 2008 than all 49 other states is pretty much the nail in the coffin for the argument that more taxes increases our prosperity. I will share this article with any remaining naysayers in my circle.

Register as Republican and Vote for Ron Paul

reedr3v's picture

Insightful post; and another reason to

support strong state's rights: we get to see the real-life results of different approaches. With people roughly similar in cultural advantages, population emigration/immigration tells a clear story, as well as other markers Laffer and Moore mentioned in this article.

Very interesting & good

Very interesting & good info. Thanks for posting this.

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photoshopwiz's picture

Revenge of the Laffer Curve ~

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CATO @ LIBERTY:

Revenge of the Laffer Curve
Posted by | Daniel J. Mitchell

Steve Moore and Art Laffer have an excellent column in today’s Wall Street Journal. They explain that high-tax states drive repel entrepreneurs and investors, leading to a pronounced Laffer Curve effect. Productive people either leave the state or choose to earn and report less taxable income. And because growth is weaker than in low-tax states, there also is a negative impact on lower-income and middle-class people:

http://www.cato-at-liberty.org/2009/05/18/revenge-of-the-laf...
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Check out the great explanatory videos at Cato!