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The rich will simply move their money into tax free bonds to avoid losing more of their money to taxes or hide it in good quality stocks and never sell it. The first thing will happen is Wall Street will slowdown (cities like Chicago, San Francisco and New York will feel its effect) because less stocks will be sold for profit and less money will flow as all of it is hidden in tax free bonds. Only the bond businesss will do well, everyone else will slowdown. Ironicly the cities affected are in blue states (IL, CA, NY). The key thing to government finances (lesson learned in NJ) is not tax increase or tax reduction, but curbing government spending. NJ did both (increase and reduction) and she is really in a financial hole. NJ may be the first state in the union to go bankrupt within ten years. She has a $ 5 billion annual deficit plus a $ 58 billion shortfall in her health insurance fund for state workers and teachers. If NJ fired all their state workers they could not close the annual budget gap. The health fund shortage was caused by the state when they stop funding the fund in 1994 due to other pressing spending needs. Result is the fund is short and by law this is a contract between the state and the state workers that cannot be brokened (unlike federal social security which is not a contract but a legislative entitlement). If the state cannot raise the taxes it can declare bankruptcy to avoid the contract obligations. My town tax assessor told me that my property tax could rise 12 percent just to cover the initial payments for the state worker/teacher health fund shortfalls.