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Another WSJ Truth Twister on those Millionaires

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May 29, 2009 – Comments (10)

Despite the fact that they admit they've got no evidence that higher taxes have caused a flight of millionaires (It's the economy, stupid), the journal ignored its own reality and repeats its bogus claims in a video and titled it "Maryland millionaires moving out."

Nice.

10 Comments – Post Your Own

#1) On May 30, 2009 at 4:34 AM, Donnernv (< 20) wrote:

Not so hasty, weedhopper.  CA lost me to NV in 2003.  It's only a sample of one, but the incentive is obvious to all who are free to move to another jurisdiction.

Since a lot of the higher incomes and assets are retired folks, their mobility is there.  The numbers may not be large, but the dollars are.

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#2) On May 30, 2009 at 6:52 AM, rd80 (98.26) wrote:

a) It's an opinion piece. 

b) Very valid points in the video about states with the highest tax rates being the ones with the biggest budget problems.

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#3) On May 30, 2009 at 11:23 AM, garyc27 (< 20) wrote:

I beg to differ. 

Both New Jersey and New York are considering increasing taxes by use of the so called millionaire tax.  However the tax is not just for those earning over $1 million, in New York the uplift starts at $200,000 and the proposed increase in New Jersey is at $250,000.  New Jersey is also one of the first states to implement such a tax.

Mayor Bloomberg has repeatedly publicly discussed his concern while Governor Paterson is begining to get a clue.

CBS news cited both high property taxes and income tax as primary reaons people were leaving New Jersey: from 2002 to 2006, 231,565 people fled New Jersey and another 72,547 bailed in 2007.  Not only are the people voting with their feet, so is business. 

New Jersey added 65,000 local, state and county government jobs from 2000 through 2005.  In the mean time the state is carrying a $56 billion pension deficit and the current pension funding has decreased in value to $57.8 Billion, half of what it was, $118 Billion.  In addition, Governor Corzine has offered the municipalities the ability to "defer" current payments until a later date.

Who is going to pickup this tab?  Can you imagine the taxes that residents are going to have to pay to cover this debt?

The residents of these states have had it with legislatures that continue to borrow, spend and tax and tax and tax.

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#4) On May 31, 2009 at 8:54 AM, TMFBent (99.81) wrote:

No one's feelings on taxes excuse the misuse of data and the presentation of opinion as fact (especially when such pains are taken in the previous article to point out that there's no proof of the conclusions being drawn).

There's enough shoddy thinking in the U.S.

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#5) On May 31, 2009 at 9:10 AM, Strnj1 (69.29) wrote:

...look up Laffer's Curve.

 or

http://2.bp.blogspot.com/_3QqO8EXd-II/SiEGrAa-rqI/AAAAAAAApeE/8ZwFAmBiV_M/s1600-h/increase+taxes-decrease+revenue.jpg

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#6) On May 31, 2009 at 9:21 AM, Strnj1 (69.29) wrote:

...or better:

 

http://www.heritage.org/Research/Taxes/bg1765.cfm

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#7) On May 31, 2009 at 11:45 AM, NeedaClue7 (66.59) wrote:

Funny, I read the same article before seeing this blog and thought it was a good piece. The frequent problem with economic analysis is that there are always a number of variables so you seldom see economic "truths" supported by the rigor that TMFBent would like to see in this article.

What the article does accomplish is an educational piece that conceptually  explains the Laffer Curve. In simple terms, the Laffer Curve posits that increases in the marginal tax rate result in declining increases in overall tax revenue, until the rates reach a point that actually starts to reduce overall tax revenue. This simply introduces the common sense principle that as the government takes a bigger and bigger share of earnings, people have less incentive to work and they start to reduce their productive effort, retire earlier, take a sabbatical, etc. There is an interesting example from a time when one of the Nordic coutries (Sweden, I think) had a marginal tax rate of 97%. In a story published at the time, a brain surgeon took 3-weeks off to paint his house because it was cheaper to do it himself than to earn enough after-tax money to pay a painter.

This principal will become important to understand. The government is clearly going to need a lot more money (see, National Debt level, Healthcare reform, stimulus spending, etc.) and there will be a lot of debate regarding where that money will come from. The fact is that today almost 50% of Americans pay no income taxes (and the poorest Americans actually get money back from the tax system). So that effectively means that the wealthiest 50% pay the frieght (and actually, the wealthiest 5% of Americans pay half of all income taxes). If the government decides to increase tax rates on upper-income individuals, sooner or later it will find that increasing marginal tax rates lead to decreasing tax revenues.

We can all disagree on what marginal rate will trigger declining tax revenues (and as TMFBent's blog points out, it is not clear whether Maryland's small percent increase did that or not), but the effect will hit at some point. My bet is that the Laffer Curve will take effect long before the government has enough revenue to pay for current deficits plus the $70-trillion of government debt (counting all unfunded obligations). So the bottom line is that we are going to need a broad-based tax of some kind that will directly affect all Americans. This is a huge political issue, probably moreso for the Democrats, so it should be interesting. As Winston Churchill said, "The Americans always do the right thing, after they've tried everything else" (sic).

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#8) On May 31, 2009 at 3:21 PM, TMFBent (99.81) wrote:

Ah, the heritage foundation. Aren't these the same guys who, when something doesn't meet the usual standard for statistical significance, just lower the bar?

I'm thinking of research on virginity pledges or something like that.

Sj

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#9) On May 31, 2009 at 3:24 PM, TMFBent (99.81) wrote:

Ah yes, here it is.

Exactly the kind of rigor I've come to expect from the Heritage Foundation.

Sj

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#10) On June 02, 2009 at 2:59 PM, NeedaClue7 (66.59) wrote:

Perhaps this analysis will help:

http://www.taxfoundation.org/blog/show/24618.html concludes that recent NJ marginal tax increases didn't reduce overall revenue to the state (but does support declining marginal revenue collected from the increase).

 http://www.taxfoundation.org/publications/show/24693.html supports the economic premise that raising tax rates on the upper income earners becomes counterproductive at some point. Key conclusion:

"This is the tradeoff that proponents of taxes on high-income earners usually fail to acknowledge. Yes, such taxes will generally raise revenue in the short term without a sudden exodus of wealthy people fleeing to the state next door, especially in Hawaii. But over the medium term, the taxes will negatively impact location decisions. People expanding old businesses or creating new ones will incorporate the higher cost of doing business into their decision-making, and steer clear of the state. California currently faces an enormous brain drain of dynamic individuals after five years of double-digit income taxes, and it seems that New Jersey may now be seeing the evidence of a brain drain from its millionaires' tax. Hawaii has long been accused of chasing out its best and brightest, and it can only be exacerbating that problem with these new tax rates.8"

 There are a number of other corraborative pieces mentioned. Is this sufficient rigor to convince you there is an unalterable law of economics at work?

BTW, this does not come from The Heritage Foundation...

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