http://www.foxnews.com/politics/2012/12/22/new-tax-increase-in-california-stirs-debate-about-adding-to-exodus/
New tax increases in California stir debate about adding to exodus
By Joseph Weber
Published December 22, 2012
FoxNews.com
FILE: April 18, 2009: The skyline of San Francisco and the Golden Gate Bridge appear above the evening fog in Sausalito, Calif. (REUTERS)
A vote last month that makes Californians among the highest-taxed residents in the country is sparking debate about whether the Democrat-back initiative will backfire, by forcing high-earners to join a long exodus from the cash-strapped state.
Democratic Gov. Jerry Brown successfully pushed the tax increase by suggesting that high-earners must shoulder the largest burden in bailing out the state, particularly its debt-ridden public school system.
However, high unemployment and government debt have already sent residents fleeing in large numbers – an estimated 225,000 annually for the past 10 years.
And the recently passed tax increase for families making more than $250,000 each year could further shrink the tax base for California, whose 2012 budget deficit is projected to hit $28 billion.
Much of the debate has raged among California advocacy groups and in the editorial pages of the state’s biggest and most influential newspapers.
“More is never enough for these people,” Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Assoc., said about the Democrat-backed increase. “It’s hard to believe people will not leave.”
Vosburgh said his group is not an advocate for the wealthy and argued the tax increase atop other bad economic factors – including high gas and sales taxes – also have small and large businesses packing.
“With high taxes and heavy regulations, it’s just difficult to produce those widgets at a lower price than somebody in, say, Texas,” he told FoxNews.com on Tuesday.
Syndicated columnist Walter E. Williams wrote in The Orange County Register: “California politicians can fleece people in 2012, but there’s no guarantee they can do the same in 2013 and later years. People can leave.”
Ex-Californians over the past decade have already put roughly $5.67 billion into Nevada’s economy as well as $4.96 billion into Arizona and $4.07 billion in Texas, according to Manhattan Institute study titled “The Great California Exodus: A Closer Look.”
The September 2012 study -- based on data from the state and such federal agencies as the Internal Revenue Service – also argues that “chronic economic adversity,” including powerful unions, has driven away businesses.
The liberal-leaning think thank California Budget Project declined to talk about the issue but points to a study that concluded Hollywood executives, Silicon Valley entrepreneurs or other higher-earning Californians will not leave, based on the aftermath of a 2005 so-called “millionaires tax” increase.
Executive Director Chris Hoene told The Los Angeles Times that the Stanford Center of Poverty and Inequity study “dispels one of the most persistent myths about state tax policy.”
The California tax increases that passed in November, known as Proposition 30, are expected to generate at least an additional $6 billion annually – and lay claim to 2012 income.
The rate hikes range from 9.3 percent to 10.3 percent for families making $250,000 to 10.3 percent to 13.3 percent for families making at least $1 million annually.
In addition, the top state-federal tax rate for Californians in 2013 would climb to 52 percent should Washington fail to resolve the looming fiscal crisis and federal rates return to those from the Clinton-era, according to a recent study from Lynchburg College’s School of Business and Economics, which takes into account tax increases related to ObamaCare.
Among the most likely places of exile would be neighboring Nevada, which has no state income tax.
Such an idea is not that far-fetched, considering California resident and pro golfer Tiger Woods famously took his millions to Florida, another of the seven U.S. states with no state income tax.
The tax increases from Proposition 30, which also included a sales-tax hike, expire after seven years, but it might be too late.
Dan Walthers, a columnist for The Sacramento Bee, said it’s too early to tell but argued California-based Google is using an offshore address to avoid taxes on overseas income so “wouldn’t Google millionaires also avoid state taxes on themselves if they could?”
Read more: http://www.foxnews.com/politics/2012/12/22/new-tax-increase-in-california-stirs-debate-about-adding-to-exodus/#ixzz2FwANuXsK
Not many multimillionaires are going to go through the trouble of moving to find a new job, leaving family behind etc. just because they have to pay an additional $40k for every million they make. It might "spark debate" and partisan think-tanks might argue otherwise, but this is not generally a serious issue even in places where the difference in taxes is much higher. Within the EU, the main reasons for people moving are having a partner abroad and finding a job abroad. Many of the millionaires will actually be happy about the increased economic stability due to California now balancing its budget (although they will obviously not be happy about paying more taxes).
Having said that, if there is an easy way to evade this tax (without moving) then people probably will.
Originally posted by KazetNagorraYou might be underestimating mobility in the states. Moving states in the USA is significantly easier (in all aspects, culturally, language, administratively) than moving between EU member states. That means lesser motivations, such as tax, which aren't enough to trigger a move in the EU might be enough to move out of state in the USA.
Not many multimillionaires are going to go through the trouble of moving to find a new job, leaving family behind etc. just because they have to pay an additional $40k for every million they make. It might "spark debate" and partisan think-tanks might argue otherwise, but this is not generally a serious issue even in places where the difference in taxes ...[text shortened]... id that, if there is an easy way to evade this tax (without moving) then people probably will.
Originally posted by BartsMerely moving does not release you from taxes for income earned in a particular State.
You might be underestimating mobility in the states. Moving states in the USA is significantly easier (in all aspects, culturally, language, administratively) than moving between EU member states. That means lesser motivations, such as tax, which aren't enough to trigger a move in the EU might be enough to move out of state in the USA.
Originally posted by no1marauderYou pay state income tax in the state you live when you earn the income. If you work in a city that borders another state many people exercise the option to live in a lower tax state. Furthermore, when seeking jobs people consider tax rates. Populatiions in the US have been shifting from high tax areas (like New York) to places with lower/ no income tax (Texas). Furthermore, businesses consider things like tax rate (a relatively large expense) when deciding where to conduct business/ set up offices.
Merely moving does not release you from taxes for income earned in a particular State.
Originally posted by no1marauderNo, but if you control the means of production, it's not that difficult to move the means of production to a new state. If you're manufacturing, you can move the plant. If you produce services or are in sales, it's even easier to move.
Merely moving does not release you from taxes for income earned in a particular State.
Originally posted by quackquackCould I see those population shift figures related to tax reasons?
You pay state income tax in the state you live when you earn the income. If you work in a city that borders another state many people exercise the option to live in a lower tax state. Furthermore, when seeking jobs people consider tax rates. Populatiions in the US have been shifting from high tax areas (like New York) to places with lower/ no income ...[text shortened]... e tax rate (a relatively large expense) when deciding where to conduct business/ set up offices.
Originally posted by sh76Yeah, it's easy as pie to move a plant.🙄
No, but if you control the means of production, it's not that difficult to move the means of production to a new state. If you're manufacturing, you can move the plant. If you produce services or are in sales, it's even easier to move.
If you produce services or are in sales, the idea that you can just up and move and retain your customer base is rather fanciful. Study after study has shown that tax rates have very little effect on population movements. Of course, it's in the interest of those with high incomes to spread the myth that they do for obvious reasons.
Originally posted by KazetNagorraThe is a strong correlation between growth in population and rate of tax. For example in the states without an income tax there has been a large increase in population. Here are the states with the percent population change from the last cesnsus Alaska (5th), Florida (6th), Nevada (15th), South Dakota (10th), Texas (2nd) and Washington (7th).
Could I see those population shift figures related to tax reasons?
While correlation certainly does not prove causation, it does give evidence that the expectation that people would chose to live in a lower taxed area does actually occur.
Originally posted by no1marauderWhile plant which have high fixed costs are difficult to move, it is a hige factor when deciding where to build a plant. Service busineses, customer service departments and parts of businesses which need just a phone and or a computer terminal can easily change where they operate.
Yeah, it's easy as pie to move a plant.🙄
If you produce services or are in sales, the idea that you can just up and move and retain your customer base is rather fanciful. Study after study has shown that tax rates have very little effect on population movements. Of course, it's in the interest of those with high incomes to spread the myth that they do for obvious reasons.
Originally posted by quackquack😴😴
The is a strong correlation between growth in population and rate of tax. For example in the states without an income tax there has been a large increase in population. Here are the states with the percent population change from the last cesnsus Alaska (5th), Florida (6th), Nevada (15th), South Dakota (10th), Texas (2nd) and Washington (7th).
While ...[text shortened]... that the expectation that people would chose to live in a lower taxed area does actually occur.
All those States except Alaska (a special case due to oil income and low population) and Washington rank below the median in median household income.http://en.wikipedia.org/wiki/List_of_U.S._states_by_income
Guess all those high income people wind up losing money by moving.
Alaska has, by far, the largest State taxes per capita.http://en.wikipedia.org/wiki/State_tax_levels_in_the_United_States
Originally posted by quackquackI think you'd have to be a bit more careful here, since population growth is obviously connected to many different factors. For one, you'd have to correct for natural population growth due to people being born. But even then it would require more careful analysis.
The is a strong correlation between growth in population and rate of tax. For example in the states without an income tax there has been a large increase in population. Here are the states with the percent population change from the last cesnsus Alaska (5th), Florida (6th), Nevada (15th), South Dakota (10th), Texas (2nd) and Washington (7th).
While ...[text shortened]... that the expectation that people would chose to live in a lower taxed area does actually occur.
Originally posted by KazetNagorraIt is definitely diffcult to measure person by person why they move. Nevertheless, the intuitive view that people will move to areas that tax less certainly occurs. People on Wall Street for example commute to NYC to avoid the outrageous city tax. I am sure it happens on state border (like the CA/ Nevada) border and countless other places through out the country.
I think you'd have to be a bit more careful here, since population growth is obviously connected to many different factors. For one, you'd have to correct for natural population growth due to people being born. But even then it would require more careful analysis.
Originally posted by quackquackIt certainly happens, although its impact is often overstated by partisan think-tanks such as the one cited in the OP. Having said that, having smaller differences in taxation between states and nations would be beneficial.
It is definitely diffcult to measure person by person why they move. Nevertheless, the intuitive view that people will move to areas that tax less certainly occurs. People on Wall Street for example commute to NYC to avoid the outrageous city tax. I am sure it happens on state border (like the CA/ Nevada) border and countless other places through out the country.