Why Tax Migration and Federalism Mean Doom for Left-Wing States such as New York,

Townhall.com ^ | August 23, 2013 | Daniel J. Mitchell

[Kaslin]

Maybe this means I’m not a nice person (notwithstanding my high score for tenderness in a recent test), but I can’t help but be happy when I read bad news about fiscal policy in high-tax welfare states.

And because I’m a huge fan of tax competition, I get even happier when I find out that bloated governments are in trouble because people are escaping to places where government isn’t quite so greedy.

With that in mind, I smiled when I read what the Washington Examiner just wrote about tax competition and tax migration inside the United States.

States like California…can’t afford to be hospitable to business while also funding massive public employee entitlements. …job-creating businesses flee big-government Blue States for limited-government Red States. In short order, Blue States find themselves in financial straits. …between 2000 and 2010, the big Blue States of New York, California, and Illinois chased off hundreds of thousands of residents taking billions in income with them ($45.6 billion, $29.4 billion, and $20.4 billion respectively). Each of these states have highly progressive, high-marginal rate tax codes. California, for example, has 10 income tax brackets and a top rate of 13.3 percent. New York has eight brackets and an 8.82 percent top rate. Where did all those formerly Blue State income go? To low-tax, Red State jurisdictions, including Florida (no income tax), Texas (no income tax), and Arizona (4.54 percent top rate). Those three alone raked in $67.3 billion, $17.7 billion, and $17.6 billion, respectively.

Indeed, there have been studies looking at how specific states are driving high-income taxpayers to emigrate. And that means big Laffer-Curve effects.

Which is good news because even politicians are probably capable of learning – sooner or later – that high tax rates won’t raise much revenue if the geese that lay the golden eggs decide to fly away.

And since a picture tells a thousand words, here’s the map of taxable income migration put together by the Tax Foundation using IRS data.

Before closing, I want to highlight one other passage from the Examiner column that touches on a very critical point.

Thanks to the few federalist principles that are still protected in the Constitution, Americans remain free to vote with their feet and escape economically suffocating places like California in order to move to the vastly more hospital economic climates found in Red States like Texas.

Amen. Federalism is a very valuable way of protecting people from statism. We see it when people move from New York. We see it when they escape from California. We see it from a big-picture perspective in the Tax Foundation map.

Federalism enables to producers to escape the looters and moochers.

But federalism has been weakened over the years by the expansion of federal government. If we want to bolster competition among the states – and therefore constrain the greed of the political class, we need to devolve programs from Washington.

This is why welfare reform during the Clinton years was such a good idea. And it’s why block-granting Medicaid is so desirable (above and beyond the fiscal need to implement good entitlement reform).

P.S. It’s rather appropriate that I’m writing about federalism since I’m now in Lausanne, Switzerland, for the 2013 Liberty Conference and Switzerland is probably the world’s best example of genuine federalism.

P.P.S. One small correction to the Examiner’s piece. Illinois is a high-tax state. Illinois is a big-government state. Illinois is a state heading toward fiscal collapse. There are many things wrong with the Land of Lincoln, but it hasn’t compounded those other mistakes with a “progressive” tax that discriminates against those who add more to economic output. Indeed, the fact that Illinois has a flat tax helps to explain why politicians had such a hard time pushing through a tax hike a couple of  years ago. They eventually succeeded, but the politicians faced an uphill battle because they couldn’t play the divide-and-conquer game of raising taxes on a limited segments of the population.

[Kaslin]

The rest of the article is: California, and Illinois

[Publius]

In Ayn Rand's Atlas Shrugged, the federal government reacted to this by forbidding companies to move out of their current states.

[BenLurkin]

Why Tax Migration and Left-Wing States such as New York, means doom for Federalism.

[rushmom]

The only problem with this is that the very liberals that voted for these welfare states are a large part of the migration, hypocrites that they are. They move to conservative states like New Hampshire (from Mass.) or to Virginia (from Maryland). They CONTINUE to vote liberal and they turn red states purple or blue.

[Henry Hnyellar]

Nailed it!

[Henry Hnyellar]

You mean like the recent NLRB decision not to allow Boeing to open a factory in South Carolina?

[bfct1]

It’s the same when the federal government makes it equally bad in all 50 states.

[bfct1]

So sadly true!

[rushmom]

Thank you. I’m honored.

[Jim Noble]

They move to conservative states like New Hampshire (from Mass.)

The counties bordering MA are quite red, in part because of the refugees.

The commies are ex-NYers coming in from Vermont. Grafton County is deep blue.

[RKBA Democrat]

Interesting, but it misses the bigger picture. State taxes are a pittance compared to those levied by the Federal government. There is no real ability to avoid Federal taxes absent not working and not generating income, or going off the books.

And that ladies and gentlemen is why “immigration reform” and amnesty are pretty much sure bets.

You see, the problem that the uniparty has with illegal immigration is not that illegal aliens are coming here and starving. Quite the contrary. They’re coming here and surviving and in some cases thriving. And they’re doing that by working off-the-books jobs, and not coincidentally, they’re avoiding paying taxes. These folks didn’t decide to go Galt, they’ve ALWAYS BEEN Galt. And when you have 14 million plus of them all over the place, other people are going to notice.

So amnesty is less about being humane, or bringing in more voters, or even cheap labor. It’s about retaining control. The fear is not that 14 million new citizens will overwhelm the welfare state, it’s that if they don’t bring them into compliance a whole lot of other people are going to get the idea that they too can survive and perhaps thrive by doing what the illegals have been doing all along.

[Standing Wolf]

In Ayn Rand's Atlas Shrugged, the federal government reacted to this by forbidding companies to move out of their current states.

When the big enough crisis shows up, I won't be at all surprise if that turns out to be an element of the feral government's "emergency economic rescue legislation," or whatever exactly it will be called.

[School of Rational Thought]

The only problem with this is that the very liberals that voted for these welfare states are a large part of the migration, hypocrites that they are. They move to conservative states like New Hampshire (from Mass.) or to Virginia (from Maryland). They CONTINUE to vote liberal and they turn red states purple or blue.

This

[Publius]

In Atlas Shrugged. it was called Directive 10-289.

1. All workers are bound to their jobs and can neither leave nor be fired under penalty of one year in prison. The Unification Board, reporting to the Bureau of Economic Planning and National Resources, possesses judicial authority. All citizens upon turning 21 must register with the Unification Board which will assign them jobs in the best interests of the nation.
2. All businesses must remain in operation and cannot close under penalty of nationalization and confiscation of property.
3. All patents and copyrights are to be turned over to the government by the use of “voluntary” Gift Certificates. The Unification Board will license those processes to all applicants to eliminate monopolies. All brand names and private trademarks are abolished.
4. No new inventions shall be produced or invented. The Patent Office is suspended.
5. All business establishments will produce the same amount every year as they did in the baseline known as the Yardstick Year, to be enforced by the Unification Board.
6. All citizens must purchase the same amount of goods every year as they did in the Yardstick Year, to be enforced by the Unification Board.
7. All wages and prices are frozen.
8. All cases arising from this directive are to be decided by the Unification Board.

[Cincinnatus.45-70]

100% agreement here. (Texas)

[Smokin' Joe]

I don’t think North Dakota’s losses are due to high taxes so much as freshly minted oil millionaires heading for warmer climates.

[CPT Clay]

I don’t blame them. #Sun and Sand and Surf!!!