Lefty Has A Friend

More on California taxes.

I posted on Monday that Phil Mickelson has had enough of the confiscatory powers of the state:

 And now California is about to.  When you tax the living snot out of people they are going to react.  They’ll either move or quit.

And that results in $0.00 tax revenue.

It’s really not rocket surgery.

Perhaps the only thing more frustrating than a government that confiscates so much wealth is the fact that it is so predictable:

…but when pressed during his interview Tuesday, here’s how Woods responded:

“I moved out of here back in ’96 for that reason. I enjoy Florida but it was also…I understand what he was I think trying to say. I think he’ll probably explain it better in a little bit more detail.”

When California takes 13.3% and Florida takes zilch the calculus is pretty simple.

10 responses to “Lefty Has A Friend

  1. Well, let’s see what happens to revenue over time. All the studies I’ve seen suggest that while a few big name folk who have the capacity to live anywhere may move, taxes rarely cause people to move away from their state or country. The reason is that the costs of moving are immense – usually much more than a marginal tax increase. Moreover, there are social factors (friends, family), personal (people love California, the coast, the redwoods in this case) and financial (businesses can’t uproot and relocate without serious expenses, jobs are often hard to replicate elsewhere.) So while I can see an argument that tax increases could harm economic growth, I don’t see one where it actually will lead enough people to leave to offset increased revenues.

    • Well, let’s see what happens to revenue over time.

      Indeed.

      All the studies I’ve seen suggest that while a few big name folk who have the capacity to live anywhere may move, taxes rarely cause people to move away from their state or country.

      Perhaps, but there are a couple of things to remember:

      1. The wealthy can control their revenues to a greater extent than us normal people.
      2. A high tax policy aimed at individuals usually correlates to a high tax policy on businesses too.

      And those businesses will just leave.

    • Some businesses may leave but an increase in marginal taxes is not the only factor. Businesses have to think about supplies where their customs are, the training of people for their work, the cost of re-locating, quality of life issues, will their top employees move. Then of course there is the costs associated with a move – selling property, moving equipment, getting new property, having everything set up, how to handle the transition, etc. So the idea that “those businesses will just leave” is more likely than not to be untrue. Note they are there despite current tax levels anyway. Moreover, to get a significant savings they’re limited to states with significantly lower rates — and those states may not be suited for the business. So it sounds straight forward if you were to assume that tax rates are the only or most important variable. Usually they are way down the list. California has a huge economy, well educated citizens, high quality of life and lots of customers right there. Those are big advantages!

  2. Relocation is not the only option over taxed people can deploy . A person like Mickelson who obviously has enough money to last the rest of his life can just decide to retire . He may conclude that what he makes after taxes is simply not worth continuing to earn income . In that case and similar cases both the State of California and the US Treasury will get far less in revenue . Not just from the rich guy, but any employees he no longer needs . He also most likely will cut his spending, since his income is down and whoever sells services and products to him will take a hit .

    I still believe that Obama and Brown are not as stupid as they are acting . They both know that raising taxes on the rich is a net revenue loser . This is about raising taxes on everyone. Which is much easier for the masses to accept once they see the rich get their’s . In Europe the middle class pays dearly for the nanny state . That is where Obama and Brown are taking us .

    • Seriously – a small increase in a marginal tax rate will get a high wage earner to decide to retire? You can probably count those people on one hand!

      Historically raising taxes on the rich has very often increased revenue. It only decreases it under certain economic circumstances. So I’m not sure why you say it’s a “net revenue loser.” How can you support such an odd claim?

      Europe has a great quality of life, people in Germany, Scandinavia (which is very wealthy and the most social democratic region) live well, have health care, good jobs, paid vacations and a quality of life often above ours. That’s nothing to fear, Alan, that’s something to aspire to! 😉

      • Seriously – a small increase in a marginal tax rate will get a high wage earner to decide to retire? You can probably count those people on one hand!

        The day after Obama was elected I took an email from my financial adviser. On the conference call there was the usual reallocation of investments. But then came the hammer.

        He suggested that my wife, myself or both decide to retire. Failing that, he suggested that we negotiate a demotion – trade income for quality of life. And failing THAT, he simply advised that we give our money away.

        This conversation is or has been had, the country over.

        Europe has a great quality of life, people in Germany, Scandinavia (which is very wealthy and the most social democratic region) live well, have health care, good jobs, paid vacations and a quality of life often above ours.

        Germany has a quality of life below Idaho. More closely aligned with Alabama. There is no way in which their quality of life is comparable.

  3. Scott,

    I know you have traveled to Germany, so perhaps your vision is more informed than mine . I only know what I read . I simply do not believe that Germans can buy what we buy with out being gauged by the value added penalties that fund their nanny state . That has to lower their living standards . Nothing in life is free .

    I could cite the Laffer curve to prove my point about taxes . And this slight tax increase you bring up is on top of already high taxes . You have tipping points and slippery sloaps. Particularly in Democrat States like New York and California people change their behavior to lower their taxes . In my State of Pa. we have always had a large immigrant community ( kidding ) of New Yorkers and Jerseyites escaping confiscatory taxes , particularly when they retire . They spend pensions, earned in high tax States, in low tax Pa in the summer and low tax Florida in the winter .

  4. The Laffer curve is controversial and misunderstood. Germans live very well and are satisfied. Life there is in many ways better than here – everyone has health insurance so they don’t have the risk of bankruptcy due to medical costs (most of our bankruptcies come from that). They’re guaranteed five weeks paid vacation and Germans are known for loving to travel all over. Their houses are smaller, but that’s because of population density.

    To claim Germany’s quality of life is low is absurd. I’d say overall it’s better than that of the United States. They also don’t have as much debt, they produce more than they consume, and frankly, the US quality of life looks pretty meager compared to most of northern Europe. People here buy the myth that somehow things are better here – no, they are not. For the middle class and lower middle class we’re more like third world states than like the northern European ones. Go travel there, experience it!

    • People here buy the myth that somehow things are better here – no, they are not. For the middle class and lower middle class we’re more like third world states than like the northern European ones. Go travel there, experience it!

      The world does not immigrate to Germany.

  5. Scott ,

    I am still recovering from putting two kids through college. I would love to travel to Germany and see if what you say is true . Unfortunately I will no doubt be physically unable to travel by the time I can swing it financially . I have met Germans visiting here . I did not trouble them with questions that might have settled our argument . The impression I got though was they were amazed at what they could buy here, and not get socked by VATs . That tells me something .

Leave a Reply

Your email address will not be published. Required fields are marked *