Monday, May 18, 2009


A twit (tweat?) by TAX GIRL Kelly Phillips Erb led me to a great piece from the Wall Street Journal - “Soak the Rich, Lose the Rich: Americans know how to use the moving van to escape high taxes” by Arthur Laffer and Stephen Moore.

The commentary reports that - “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.”

But soaking the rich is not the answer. As Laffer and Moore put it, “It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.”

Not surprisingly, the guys 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.”

They are right on in their discussion of my home state of New Jersey (The highlights below are mine) -

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation {FYI the biggest and most influential political contributor in the state is probably the NJEA – rdf} -- much worse than those in New Hampshire {No state income or sales tax and less spending per child - rdf}. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.”

I will be one of those fleeing the Garden State when my father goes to his final audit – not only because it is one of the highest taxed states (I do not consider myself among the rich that is being primed for soaking) but also because it is probably the most politically corrupt. Despite protestations at election time that they have the best interests of the people at heart, NJ state and local politicians in reality are only looking for more ways to fatten themselves and their “peeps”.

While a popular proposal among the “great unwashed masses”, soaking the rich is not the answer to all our financial problems – whether on the state or federal level.


No comments: