By Susan Duclos
Studies have shown that individual states that have passed "millionaires" taxes and continue to put onerous taxation on the so called rich are seeing the rich and businesses in those states, leave.
A study by Change Maryland, in July, showed that the "millionaire's tax" cost the state 31,000 residents between 2007 and 2010, when it expired. The "millionaires tax" imposed a rate of 6.25 percent on incomes of more than $1 million a year.
The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.
In total, Maryland has added 24 new taxes or fees in recent years, Change Maryland says. Florida, which has no income-tax, has been a large recipient of Maryland's exiled wealthy.
“Maryland has reached the point of diminishing returns. We're taxing people too much and people are voting with their feet," said Change Maryland Chairman Larry Hogan. “Until we change our focus from tax increases to increasing the tax base, more people are simply going to leave, leading to a downward spiral of raising revenues on fewer citizens."
The plan to gain revenue by taxing the rich backfired because the so-called rich, left.
Another study done in Setember 2012, by the Manhattan Institute found the same outflow occurring in another state that has one of the highest tax rates, federal and state on it's citizens... California.
Since 1990, the state has lost nearly 3.4 million residents through this migration.
What has caused California’s transformation from a “pull in” to a “push out” state? The data have revealed several crucial drivers. One is chronic economic adversity (in most years, California unemployment is above the national average). Another is density: the Los Angeles and Orange County region now has a population density of 6,999.3 per square mile—well ahead of New York or Chicago. Dense coastal areas are a source of internal migration, as people seek more space in California’s interior, as well as migration to other states. A third factor is state and local governments’ constant fiscal instability, which sends at least two discouraging messages to businesses and individuals. One is that they cannot count on state and local governments to provide essential services—much less, tax breaks or other incentives. Second, chronically out-of-balance budgets can be seen as tax hikes waiting to happen.
The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. States with low unemployment rates, such as Texas, are drawing people from California, whose rate is above the national average. Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.
This is what the study found on California's high taxation:
2. TaxesIf you click over to read the entire study, with charts, you see people move to more tax friendly states and businesses move to states that are more business friendly, less regulation and offer more pro-growth incentives.
Most of the destination states favored by Californians have lower taxes. Even Oregon, with income-tax rate like those of California, has a more business-friendly tax code. On the other side of the migration ledger, the states that are still net senders of people to California range from near the middle of the tax scale to the very top. As a general rule, Californians have tended to flee high taxes for low ones.
Whether this is why they move is a matter of debate. With so many factors possibly influencing the decision to migrate, it’s impossible to tease out how much the tax burden matters in each individual’s case. But, as we have noted, individual decisions in the aggregate add up to suggestive patterns. California remains a destination for people moving from high-tax states even as it loses thousands of people every year to low tax states. This is a highly suggestive pattern.
Even as individual motives are varied and idiosyncratic, we must also note that not all migration is driven by such household choices. Businesses affect migration patterns by their choice of where to relocate or expand. Theirs is largely an economic decision, based on costs as well as access to suppliers and customers. We can say with some confidence that business decisions to leave California are sensitive to its tax code because taxes are a large component of business costs, and no competent business owner will ignore them. Taxes are a significant factor in business migration along with the cost of labor, the skills of the workforce, utility costs, and the time and expense of getting permits.
To explore the tax-migration link, we looked at two types of tax ratings in the destination states for Californian out-migration and the states from which new migrants came to California in 2000– 10. One rating is based on the overall state and local tax burden, computed by the Tax Foundation as a percentage of personal income. The other is the Tax Foundation’s State Business Tax Climate Index. This is given as a score for which the U.S. average is 5.00. The higher the index score, the better the climate. To match these data sets as much as possible to the full-decade migration totals, we averaged tax-burden figures and state ranks for 2000–09 (the latest available), and we chose the State Business Tax Climate Index at mid-decade, for the fiscal year ending in 2006. The top ten target states attracted a net total—the difference between total inflows and outflows—of 1,085,818 Californians over the decade. Texas attracted the most, at 225,111. The top ten source states sent a net total of 152,324 to California, with New York sending the most, at 31,434.
One pattern stands out in these data. With few exceptions, the states that have gained the most at California’s expense (in income as well as people) have decidedly lower tax burdens and better business-tax climates. California’s ranking on both scales is near the high-tax, poor business-climate end, and it scores near the average of the sender states, most of which share its poor marks. The major destination states, on average, do better than California in the rankings, with lower tax burdens and higher business-climate scores.
We have also found another clue suggesting that taxes make a difference in migration: California’s net out-migration to the top destination states was far larger than what it received from the sender states. In other words, with its higher-than-average tax burden, California is competitive only with a few other high-tax states, such as New York and New Jersey. And its burden is too close to the top to leave it any real advantage. The much greater advantage lies with low-tax states such as Texas, which can offer more substantial savings.
Last month, California again raised taxes on the rich:
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.Sound familiar? It should, it is the same exact plan Barack Obama has spent the past four years pitching to Americans.
“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.
Another published study from the Empire Center for New York State Policy shows that 1.5 million NY state residents have migrated out of NY from 2000 to 2008.
Why? High taxes.
The average Manhattan taxpayer who left the state earned $93,264 a year. The average newcomer to Manhattan earned only $72,726.
That's a difference of $20,538, the highest for any county in the state. Staten Island was second, with a $20,066 difference.
It all adds up to staggering loss in taxable income. During 2006-2007, the "migration flow" out of New York to other states amounted to a loss of $4.3 billion.
Another study finds that the more Washington taxes Americans, the more they spend, none of the increased revenue gets applied to the deficit.
We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.
We also looked at different time periods (e.g., 1947-2009 vs. 1959-2009), different financial data (fiscal year federal budget data, as well as calendar year National Income and Product Account data from the Bureau of Economic Analysis), different lag structures (e.g., relating taxes one year to spending change the following year to allow for the time it takes bureaucracies to spend money), different control variables, etc. The alternative models produce different estimates of the tax-spend relationship—between $1.05 and $1.81. But no matter how we configured the data and no matter what variables we examined, higher tax collections never resulted in less spending.
Inevitably, Democrats and liberals say the wealthy won't leave America... but in May 2012, Bloomberg reported "Wealthy Americans Queue to Give Up Their Passports."
About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva’s Overseas American Academy, citing figures from the government’s Federal Register.To be clear here that is over 7 times the amount of people renouncing U.S. citizenship in 2011 than did in 2008 before Barack Obama took office.
Those are individuals, but we also have businesses who need to make profits in order to invest, expand and hire. If they cannot do so here in America, does anyone doubt they will pick up, move and base themselves somewhere where regulatory practices won't strangle them and they can continue to make profits?
According to Gallup, here, here and here, U.S. Small-Business Owners' Hiring Intentions Plunge, U.S. Small-Business Owners Pessimistic Post-Election and U.S. Small-Business Owners Pull Back Capital Spending Plans.
Why? Higher taxes, worries about future regulations, etc... Pretty much all of Obama's economic policies.
Speaking of, this weekend the Obama administration just released a slew of new regulations.