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If you want to know what’s going on in the world, just follow the money. That’s what I do. Take a look at the money exodus from states that treat residents like piggy banks. Remember, money travels to where it’s well treated. Just follow the money.
Art Laffer and Stephen Moore, co-founders of the Committee to Unleash Prosperity, share the numbers in this WSJ piece (abridged):
Lawmakers in California, Illinois, New York and Washington state have proposed new taxes on wealth, and higher income taxes for the rich are on the table in Connecticut, Maryland and Massachusetts.
Residents of these seven blue states are already among the highest-taxed. The states are also in financial trouble. California and New York impose income tax rates that can exceed 13%, but their budget deficits are mounting. Lawmakers in Sacramento and Albany think the answer is to soak the rich even more. Yet Florida, Tennessee and Texas impose no state income tax and all have sturdy surpluses. Their coffers are so full, they are looking to cut taxes. How is that possible?
One reason is that low-tax red states are importing capital and wealth from the high-tax blue states. For more than three decades we have examined state-by-state financial and demographic data collected by the Internal Revenue Service and the Census Bureau. The latest numbers make clear this trend is accelerating.
In the past 10 years, six of the seven high-tax blue states have had a net loss of population to other states, totaling nearly five million residents. (Washington, which has no income tax, has gained over the decade.) They’ve also lost almost a quarter-trillion dollars in cumulative taxable income: California $50 billion, Connecticut $14 billion, Illinois $47 billion, Maryland $14 billion, Massachusetts $13 billion, New Jersey $26 billion and New York $79 billion. That’s only the money on personal income-tax returns. It doesn’t count lost revenue from corporate profits or sales.
Lawmakers desperately are seeking ways to offset the financial effects of flight. California Assemblyman Alex Lee’s proposed wealth tax, perhaps inspired by the Eagles’ “Hotel California,” would apply even after the taxpayer leaves California. But even assuming this is constitutional, if tech entrepreneurs discover California taxes are inescapable, they’ll go to Austin, Salt Lake City, Nashville, Tenn., and other booming high-tech corridors in the first place. West Palm Beach, Fla., advertises itself as Silicon Valley South.
Washington state Sen. Noel Frame, meanwhile, suggests that states can avoid the revenue loss by setting up a high-tax cartel: “Let’s make sure if they move, they have nowhere else to go because we’re all taxing them together.” But people who leave California to escape high taxes go to Florida or Texas, not Washington or New York.
Action Line: What’s most telling is not necessarily the money that’s left, and yes, that’s huge, but where it’s nesting and hatching. It’s not Silicon Valley, in Cali, or the Route 95 corridor in Massachusetts. The winners gathering momentum are New Hampshire, Florida, Utah, Texas, and Tennessee. All are winners in my book. Click here to subscribe to my free monthly Survive & Thrive letter.
E.J. Smith - Your Survival Guy
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