One of the Left’s many willful blind spots is this:
Like you and me and the rest of humanity, rich people are self-interested. They want to keep as much of what they have and, if they are singled out for punitive taxes, they will vote with their feet by moving!
Those states — such as New York, California, New Jersey, Maryland, Vermont, and Hawaii — which adopted “millionaire taxes” on high earners (usually those making $250,000 or more a year) to solve their budget shortfall are learning that lesson.
Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson recently admitted that revenues from the income tax increases and other taxes enacted in April are running about 20% less than anticipated. So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing.
Maryland enacted higher tax rates for wealthier residents in 2008 to boost revenues but income from those taxes is down 6.7% so far this year. “Overall, as in most states, revenues are down at the higher income levels,” said Joseph Shapiro, spokesman for the Maryland Comptroller’s Office. In May, the most recent calculation available, Maryland reported that taxes collected from top earners fell by about $100 million. The number of Marylanders with more than $1 million in taxable income who filed by the end of April fell by one-third, to about 2,000.
|Mariko Jesse for Barron’s|
More and more wealthy folks are pulling up stakes. They’re moving from high-tax states by the hundreds of thousands each year, and laying down roots in lower-tax locales like Wyoming, Tennessee, New Hampshire and Texas.
“People are voting with their feet,” says Richard Vedder, a professor of economics at Ohio University who studies U.S. migration. “These are mostly productive and wealthy people who don’t believe the services associated with high taxes are substantial enough to offset their burdens.”
This migration, which Vedder calls one of the most significant in U.S. history, is expected to swell in the coming years as taxes for the wealthy climb at both the state and federal levels, jobs become more mobile, and baby boomers scope out the best places to retire.
The number of folks on the move is staggering:
From 1997 through 2007, more than 1,100 people moved every day out of the nine states with the highest income taxes, including California, New York, New Jersey, and Ohio, according to a March study by Arthur Laffer, founder and chairman of Laffer Associates, an economic research and consulting firm in Nashville, and Stephen Moore, a senior economic writer for The Wall Street Journal.
The levies in high-tax states are likely to grow still heavier. “Even if the economy recovers soon, state revenues tend to lag behind the economy,” says Mark Robyn, economist at the Tax Foundation. “The stimulus money won’t be there anymore, there will be shortfalls, and states may be looking at increasing taxes.”