Many states have decided the financial relief they need to make up for their profligate spending sprees of the recent past and their present budget short-falls is to be found in raising the taxes of their “rich” citizens.
With states facing nearly $100 billion in combined budget deficits this year, we’re seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the “fair” way to close his state’s gaping deficit.
But there’s a problem with the plan. As the WSJ points out, these citizens and their money are mobile and while they may prefer to live in the states listed above, they simply don’t have too. And with the plan to significantly increase taxation for them, now there’s a good reason not too:
The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
Notice that the exodus from the high-tax states to low-tax states with more opportunity has been significant since 1998. But now with the plan to increase taxes again on the “richer”, high-tax states are providing even more of a financial incentive for those in higher income brackets to leave them and move to low or no-income tax states. While such a relocation might have had marginally positive financial results for those leaving in the past, high-tax states are about to make relocation for financial reasons a no-brainer. And states like California and New York can hardly afford to run off the class of tax payer that presently pays the largest percentage of state taxes. But, with alternatives available, that’s precisely what they’re getting ready to do.
And when that happens, who ends up making up for the state’s shortfall?
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.
Heh … what a surprise.
In this podcast, Bruce and Dale discuss the Nancy Peolosi’s beclownment, and the state of the economy
The direct link to the podcast can be found at BlogTalkRadio, since I inadvertently failed to record a local copy of the podcast.
The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.
Dictated by the 5 of 9 Chrysler board members (appointed by the US and Canadian governments) and the UAW board member, Chrysler is pleased to present the 2010 Obamamobile:
Note the standard dual teleprompters. Since this model is run by hot air and not much else, all you have to do to boost power is read the prepared statements on the ‘prompter and zoom, you’re off to the races!
Bruce Bartlett gives you a different way of looking at the mess your political leaders, over a number of generations, have gotten us into and what it will cost, at a minimum, to fulfill the promises they’ve made over the decades.
To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.
Since many taxpayers have just paid their income taxes for 2008 they may have their federal returns close at hand. They all should look up the total amount they paid and multiply that figure by 1.81 to find out what they should be paying right now to finance Social Security and Medicare.
To put it another way, the total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. That is how much larger the nation’s capital stock would have to be today, all of it owned by the Social Security and Medicare trust funds, to generate enough income to pay all the benefits that have been promised over and above future payroll taxes. But the nation’s total private net worth is only $51.5 trillion, according to the Federal Reserve. In effect, we have promised the elderly benefits equal to more than twice the nation’s total wealth on top of the payroll tax.
We again have a new crop of political leaders making similar promises about a range of things, from energy to the environment to health care. Look at what they’ve done with the portion of health care they were given previously?
Someone – anyone – tell me how, given the performance of government to this point with Medicare and Medicaid, it is going to provide lower cost health care when it is obvious that it has been instrumental in doing just the opposite?
For some reason, I just can’t get past that negative and inconvenient truth enough to suspend disbelief and decide that once government is running the whole show, everything will fall in line and we’ll have world-class health care at a much lower price – all managed by government.
And one other point Bartlett makes – this mess was made by politicians and, as our laws are written, can only be fixed by politicians. But politicians rarely, if ever like to make decisions which will be unpopular and cause them to have to find new employment. No one likes to be the bad guy. So don’t expect much in the way of “fixing” this mess. You’re more likely to see the whole house of cards collapse because it is unsustainable and the administration in charge at the time blame the previous one (kind of like what you’re seeing now on just about everything else) than to see any political leader actually make the hard decisions necessary (and then win over the Congress) to actually take care of these looming problems.
Enjoy your Sunday.
Apparently Al Gore, not content with the environmental dissembling and misrepresentations he’s been peddling for the past few years, has decided to expand his mendacious horizons. He’s decided to lecture Dick Cheney on when it is appropriate to criticize the current administration.
“I waited two years after I left office to make statements that were critical,” Gore said during an interview on CNN, pointing out that his critiques were focused on “policy.”
As usual, he’s wrong on both counts (you’d think these boobs would check things before they blurt them out). From a September 2002 speech:
AL GORE: Vice President Cheney said after the war against terrorism began, “This war may last for the rest of our lives.” I kind of think I know what he meant by that, but the apprehensions in the world that I spoke of earlier are not calmed down any by this doctrine of preemption that they are now asserting. By now the Bush Administration may now be beginning realizing that national and international cohesion are indeed strategic assets. But it is a lesson long delayed and clearly not uniformly and consistently accepted by senior members of the cabinet. From the outset, the administration has operated in a manner calculated to please the portion of its base that occupies the far right, at the expense of solidarity among all of us as Americans and solidarity between our country and our allies. On the domestic front, the administration, having delayed for many months before conceding the need to pass Joe Lieberman’s bill and create an institution outside the White House to manage homeland defense, has actually been willing to see this legislation held up for the sake of an effort to coerce the Congress into stripping civil service protections from tens of thousands of federal employees. Now which is more important: passing the Homeland Security Act, or satisfying a relatively small yet powerful member of the right-wing coalition that has as its number-one priority dismantling labor unions? If that’s the most important priority in that legislation, that explains why they’re refusing to let the bipartisan consensus in favor of it go forward.
Far more damaging is the administration’s attack on fundamental constitutional rights that we ought to have and do have as American citizens. The very idea that an American citizen can be imprisoned without recourse to judicial process or remedies, and that this can be done on the sole say-so of the president of the United States or those acting in his name, is beyond the pale and un-American and it ought to be stopped.
September 2002 is not “2 years” from inauguration and the highlighted passages are not “policy” critiques. And if that one transcript isn’t enough, check these out. Most are earlier than the above speech excerpt.
This is pure political analysis, but I found it to be hilarious. It’s from today’s “Mike Allen Playbook” at Politico (Allen does this daily) in which he is discussing the appointment of Republican Gov Jon M. Huntsman Jr as ambassador to China by the Obama administration. His concludes it is a brilliant political move (and it may be) since it has been said that Huntsman has 2012 aspirations. And, of course, this effectively removes him from the spotlight.
But that’s not what I found hilarious. It was this:
The appointment is freighted with intrigue, and looks like political genius by the White House: It’s like John Edwards or John Kerry joining the Bush administration in 2001. And the GOP is left with no leading moderate voice. Huntsman was talking about immigration, the environment and gay rights in ways that would have gotten him endless elite media coverage in the run-up to 2012. Some Huntsman advisers realized that GOP primary voters might be more prepared to accept his views in 2016, after a 1964-like cataclysm in 2012. But at the White House Correspondents’ Association Dinner, it was clear he was interested in running this time.
“Endless elite media coverage”? Anyone remember what happened to the GOP darling of the elite media this last election? Mr. Moderate was savaged by the elite media after he put away the other Republican contenders.
And you have to love the Allen implication that a candidate can enjoy “endless elite media coverage” if he happens to talk about wedge issues in a certain ‘way’. What does that say about the ‘elite media’ and journalism in general?
The 2012 presidential campaign has already begun, and like he did in his IL Senatorial race, Mr. Obama is finding ways to remove potential opponents from the ballot. That’s politics .
More disturbing, but certainly not at all surprising, is the Allen admission that the “elite media” will give a candidate “endless” coverage if he or she discusses the issues in a way that conforms with the media’s ideas of how they should be discussed.
By the way did you know that “hate crime” legislation passed the US House of Representatives on April 29th?
My latest Examiner column talking about and denouncing it.
Wow … just that thought should make you cringe and wish both Obama and Biden a long life (or at least a “long enough life”).
Jennifer Rubin, as usual, has an excellent update on the disasterous Pelosi presser yesterday. I’ve got to tell you, watching this woman at work almost makes you pine for good old incompetent and inept Denny Hastert.
UPDATE: CIA Director Leon Panetta, in a memo to members of the CIA, implies Ms. Pelosi is being less than honest about what she knew about waterboarding:
Panetta, President Obama’s pick to run the clandestine agency and President Clinton’s former chief of staff, wrote in a memo to CIA employees Friday that “CIA officers briefed truthfully on the interrogation of Abu Zubaydah, describing ‘the enhanced techniques that had been employed,'” according to CIA records.
“We are an agency of high integrity, professionalism and dedication,” Panetta said in the memo. “Our task is to tell it like it is — even if that’s not what people always want to hear. Keep it up. Our national security depends on it.”