It’s an old adage but I think it’s important to point out how often people tend to overlook it:
If you tax it, you’ll get less of it.
Politicians forget this all the time.
A case can be made that raising income tax rates at the state level won’t force people, en mass, to move. Or, that if you reduce state income tax rates, people will move in. I agree with this; people fundamentally chase jobs, not tax rates. This is for people however, not corporations.
When you tax corporations at a rate that is so high that businesses begin to move to avoid those taxes, people will move too. Further, the higher the “income” chain you go, the more able that individual is free to move.
Own your own internet widget company and live in CA. Pay too much in taxes? Move to Nevada, or Texas. Are ya a gazzilionaire and just live off dividends? Pay too much taxes? Move to Florida.
The point is, the higher the income stream, the greater the desire to tax it. And the greater the ability to avoid it. These people did not amass great wealth because they are careless or foolish. And they certainly didn’t amass that wealth in order to have it stolen from them.
They’ll move. And when they do, the revenue expected from them will be less:
LOS ANGELES — California’s budget problems show no signs of abating.
A report released by state budget analysts on Wednesday forecasts a sharp decline in revenue for this fiscal year, which could set off more than $2 billion in new cuts in state spending in January, including a seven-day reduction in the school year for public school students.
The report by the Legislative Analyst’s Office projected that the state would fall $3.7 billion short of the $88.5 billion in revenues and transfers that was anticipated in the 2011-12 state budget approved in June. Under the terms of that budget, automatic reductions — known as trigger cuts, and specified in some detail in the budget — go into effect if revenues fall $1 billion or more short of projections.
California is a state blessed by weather and geography. And people are fleeing the place.
I’m a bit confused. Your post claims people are fleeing, but what you post shows only a revenue shortfall, something many states are experiencing due to the recession. Moreover, later in the post it notes that taxes that Governor Brown wanted to extend as part of his effort to deal with the budget problem were not extended, meaning that taxes were cut and all the efforts to deal with the budget were through spending cuts. That would seem to work against your thesis; if taxes were cut and yet revenue went below expectations, then perhaps tax increases of some sort are in order.
Don’t get me wrong — in an era of globalization there is a limit on what states can tax before it becomes more profitable to move. What that limit is varies depending on the industry and the state. So your main claim is correct, but the article doesn’t seem to indicate that’s the reason for the California short fall.
Your post claims people are fleeing, but what you post shows only a revenue shortfall, something many states are experiencing due to the recession.
Indeed, revenues are slowing for a number of reasons. In NY, for example, as a result of lower salaries for those on Wall Street, revenues are down. It is my contention that California is experiencing this reduction due to businesses leaving the state.
later in the post it notes that taxes that Governor Brown wanted to extend as part of his effort to deal with the budget problem were not extended, meaning that taxes were cut and all the efforts to deal with the budget were through spending cuts.
Indeed, one of the tools the governor wanted to use to address the problem was the continuation of the high taxes. Those same high taxes that have resulted in businesses leaving California.
So your main claim is correct, but the article doesn’t seem to indicate that’s the reason for the California short fall.
Yeah, I should have included the back story data on businesses leaving California.
There is only one animal in the known universe that is more moronic than a Congressional Democrat. That animal is a Sacramento Democrat . Taxpayer money is pure crack cocaine to them . The more you give them , the more they spend . They tell themselves that State spending on infrastructure and green projects will pay for themselves by magically producing jobs and economic growth . They are in a tax and spend death spiral. Spend more, raise taxes, wealth leaves the State, revenues go down, tax more, more wealth leaves.
But wait, it gets better. The latest magic is high speed rail between San Diego and Sacramento . The cost estimates jumped from $43 billion to $98.5 billion . This in a State with a budget deficit of $8 billion . The lesson from California is, when in a budget hole, bring in a backhoe and dig faster.