insomnomaniac

Meathead Economics

I love this piece in the WSJ.

It takes hard work to drive anyone away from California's sunshine and scenic vistas, but politicians in Sacramento have been up to the task.

The latest Census Bureau data indicate that, in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho, is $2,090 -- or some eight times more than the cost of moving in the opposite direction.

What's gone wrong? A big part of the story is a tax and regulatory culture that treats the most productive businesses and workers as if they were ATM machines. The cost to businesses of complying with California's rules, regulations and paperwork is more than twice as high as in other Western states.

But the worst growth killer may well be California's tax system. The business tax rate of 8.8% is the highest in the West, and its steeply "progressive" personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state's taxpayer advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small business owners, i.e., the people who create jobs.

And who's behind the latest push to increase CA state taxes even MORE?

You guessed it! Meathead himself!

And things may soon get worse, thanks to Rob Reiner, who played the liberal "Meathead" on the "All in the Family" sitcom in the 1970s and now plays the same part in real life. He and his rich Hollywood friends have put an initiative on the state's June ballot that would add a 1.7-percentage-point income-tax surcharge on "millionaires" with income over $400,000, with the proceeds earmarked for universal pre-school.

[Deb Rolls Her Eyes]
So let me get this straight...Reiner wants to tax "rich" people to fund a universal preschool, but he thinks $1M and $400K are equivalent? Sounds like he needs some remedial math himself--perhaps he ought to sponsor a bill to tax himself to pay for the course?

But I digress...

This isn't Mr. Reiner's first foray into confiscatory tax politics. Last year he sponsored a ballot initiative narrowly approved by voters that imposed a percentage-point income-tax surcharge (to the current 10.3%) to pay for government mental-health subsidies. And in the late 1990s he helped to pass an initiative to raise the state's tobacco tax by 50 cents a pack to pay for children's health care.

(sarcasm)Well, at least here he wasn't discriminating against the wealthy. Since cigarette smokers are overwhelmingly middle, lower-middle and lower class citizens typically, he was at least being more even-handed in his confiscation of other people's money! (/sarcasm)

All of this has contributed to the trend of wealthy taxpayers disappearing from the state. State finance office data indicate that the number of Californians reporting million-dollar incomes fell to 25,000 in 2003 from 44,000 in 2000. That decline has cost the state $9 billion a year in uncollected tax revenues. The dot-com implosion of 2000 and 2001 no doubt wiped out many paper millionaires, but migration out of the state to escape its hefty tax premium has also played a role. Republican Assemblyman Ray Haynes notes that the average high-income individual can buy a newly built house in neighboring Nevada and pay for it just from the money saved in a year of not paying California taxes.

When are the tax-and-spend liberals going to get it through their meatheads that the people who pay the most taxes ARE rich, and that taxing them more only causes them to do what they need to do (and they can afford to do whatever that is typically) to avoid your increase. Study after study shows that tax revenues (at the federal level especially) remain fairly constant regardless of whether taxes go up or down. There appears to be an amount people of all stripes are "comfortable" paying, and whenever government asks more, they just work harder to avoid paying either by sheltering their money or moving or simply electing to earn less (yes, believe it or not, this happens).

What brings in more revenue is the creation of MORE TAXPAYERS, not the garnishment of wages (what it is really) of the few high-income ones. Even I--a person with no background in economics whatsoever--understand this like I understand that two plus two equals FOUR!

The state has been here before, as a new report from economist Arthur Laffer reminds us. In the early 1990s under Republican Governor Pete Wilson, the state raised its top income-tax rate to 11%, triggering one of the worst fiscal crises in the state's history. Tax revenue fell as high-income people fled the state, while public debt exploded. That tax surcharge was removed in 1995, but now the state's politicians want to do it all over again.

Well what do we expect from the same people who say--with a straight face--that the reason communism hasn't worked anywhere it's been tried is that it's never really been tried properly? History is not their strong-suit.

This is the best evidence I've seen in a while that taxing people and business to death not only doesn't produce prosperity for anyone, it can even create economic hardship for everyone.

Can you imagine what would happen to California if the Bush tax cuts (as they are called--should be called the "Bare-Minimum-Should-Have-Been-Done-Long-Ago tax cuts") aren't made permanent? It will be the Un-Gold-Rush with the modern-day equivalent of wagon trains spreading out from California with people heading TO the prairie to find prosperity.

Kinda funny if you think about it.

Posted by insomnomaniac at March 1, 2006 1:53 PM | TrackBack