Escaping High Taxes

May 18, 2009 by  
Filed under Taxes

No long ago I wrote about how the states receiving the most stimulus money were not changing their tax and spend ways and were generally not doing their citizens any favors with the new federal money. I compared a few of these tax and spend states – New York and California – with states having lower tax burdens, like North Carolina. Some of the comments were critical of my views, including mentioning all of the wonderful high paying jobs that could be found in the high tax states compared to other states.

I was pleased to read that the Wall Street Journal has come to my defense (unintentionally, of course) in an opinion piece entitled “Soak the Rich, Lose the Rich.” It’s not so much that the writers agree with me. Rather, it’s the compelling statistics that the authors cite from their own research, showing that the more states tax the wealthy, the more the wealthy tend to get the heck out of Dodge. 

Here are some of the most interesting conclusions from the authors’ study:

  • The tax differential between low-tax states (e.g., Texas and Tennessee) and high-tax states (e,g. California and Ohio) is widening. This makes a move from one state to the other financially profitable both in lower tax bills and more job opportunities.
  • For every day from 1998 through 2007, at least 1,100 people moved from the nine highest income-tax states to the nine no-income tax states. 
  • During the 1998-2007 period, the no-income tax states created 89% more jobs and had a 32% faster growth in personal income compared to the high-income tax states.
  • During the period 2002-2005, states that invoked a “soak the rich” tax hike experienced a significant reduction in the number of rich people paying taxes in these states relative to the national average.

Anticipating a “more taxes =better schools, etc.” counter-argument, the authors compared New Hampshire to New York and California:

The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation — even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Finally, no opinion piece like this can forget taking a well-deserved shot at New Jersey:

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation — much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

I have to admit that we didn’t move to Tennessee 29 years ago for tax reasons. However, I sure am glad to be here now. Increasingly, it seems, so are many others, including refugees from tax and spend states.

I think a lot of the data reported by Laffer and Moore fits nicely with expert analysis of states with high and low job growth.

Now – about the recent fires and earthquake in California – do you think Mother Nature is trying to tell you something? Like get out while the gettin’ is good?

And for my friends still hanging on in New York (you know who you are), come on down!

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2 Responses to “Escaping High Taxes”
  1. cjbr549 says:

    I live in California, so I can attest to the high taxes. It looks like the state spending is going to be allot less in the near future, as we are looking at cutting 21.5 Billion out of this years remaining budget to make up for the projected revenue shortfall. I am originally from Missouri, which has lower taxes and living expenses. But I tell my friends when they ask about me moving back, I would take a 20% reduction in cost of living and an 80% pay cut. It may be worthwhile for the truly wealthy (i.e., wealthy enough that they don’t have to worry about making a living anymore) or retired to move to low tax states, but for me, I will just keep coughing it up for Sacramento and the teachers unions and stay here. We have a special election on a spending limits amendment tomorrow, so we will see how that goes. I have been reading about how these have been failures in other states, but what I am seeing is that the politicians will produce a crisis to scare people into repealing it. When I retire I will move to a more tax friendly state, but there may not be any by that time.

  2. TStrump says:

    I live in British Columbia, Canada and the taxes here are fairly high.
    I frequently think of escaping, but the lifestyle and climate still keep me here.
    People still keep moving here.

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