Tax Me Enough and I’m Going Mobile

Posted by on May 19 2009 | Capitol Crazies, Government Largess, PPC

The Wall Street Journal had a fantastic op-ed yesterday from two of the most distinguished economists of our day.  Soak the Rich, Lose the Rich written by the famous Arthur Laffer and Stephen Moore, told of the unfortunate situation high tax states find themselves in, relative to low tax states.  At present, high tax states like California, New York, and New Jersey find themselves with huge budget deficits and no way to plug the holes.  What’s their solution?  Soak the rich!  But the irony is, soaking the rich with high taxes was what gave them such huge deficits to begin with.  It’s like any other government “solution:” do something stupid, and when it doesn’t work out, continue to do more of the same stupid things.  The proof is in the numbers.  Low tax states, and states with no income tax at all, do not find themselves in the gigantic debt hole that CA, NY, NJ, and the like find themselves.  So what do two of the most successful, famous economists of our time do when they need answers and data to back up their newly inked op-ed?  They go to Independence Institute senior fellow Barry Poulson, that’s what they do!  Here’s Barry in all his glory,

More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found “a significant negative impact of higher marginal tax rates on state economic growth.” In other words, soaking the rich doesn’t work. To the contrary, middle-class workers end up taking the hit.

See it’s quite simple.  High marginal tax rates do three things:  1. Encourage high income residents to leave the state (along with their businesses), 2. Discourage high income earners and business owners from ever moving into the state, and 3. Encourage high income earners that choose to stay in the state to shield as much of their income as they possibly can, and believe me, they are the ones savvy enough to do so.  In other words, the rich and business owners have the capacity for what the great Roger Daltrey once put it -  “Going Mobile.”

And there you have it. Barry gets references in The Wall Street Journal, while I can’t even get a call from the National Enquirer.

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