Saturday, August 21, 2010

High taxes equal high emigration and high deficits

This is from the TaxProf blog, where Paul L. Caron lists the states with the highest tax rates for top earners.  All of these are Blue States that went for Obama, by the way:
  1. Hawaii:  11% (income over $400,000 (couple), $200,000 (single))
  2. Oregon:  11% (income over $500,000 (couple), $250,000 (single))
  3. California: 10.55% (income over $1 million)
  4. Rhode Island:  9.9% (income over $373,650)
  5. Iowa:  8.98% (income over $64,261)
  6. New Jersey  8.97% (income over $500,000)
  7. New York:  8.97% (income over $500,000)
  8. Vermont:  8.95% (income over $373,650)
  9. Maine:  8.5% (income over $39,549 (couple), $19,749 (single))
  10. Washington, D.C.:  8.5% (income over $40,000)
Ok, so what? 
Well, this is from the Wall Street Journal.  It's a map showing the migration patterns from state to state. 

With the exception of Oregon, all of the top tax states lost population from 2008 to 2009.  Most of them were already losing population in the earlier time period. 
Entrepreneurs don't like putting money at risk in places where greedy little government munchkins can confiscate more of their increasingly unlikely earnings. 
(Washington D.C. isn't shown on these maps, and would probably be an exception to all trends since it is ground zero for the currently popular porkfests.  Looters are moving there to be a part of the ongoing orgy of stimulus pillaging.)

But don't state governments need more money to operate?  Can't states just increase the tax percentage and have an automatic increase in revenue? 
Here's a map from The Economic Populist, showing each state's budget deficit as a percentage of the state's overall budget:

Hawaii is the only pale outsider among the ten listed by The TaxProf above. All of the other top tax states have a large gap between revenue and spending.  (Granted, a state can "go Reagan" with low taxes and insanely high spending levels and go dark brown on this map.) 
So what does it all mean? 

Be like Texas.  Take less away from people.  Spend less of their money.  You'll probably end up with more people and more money. 

1 comment:

Nick Rowe said...

Oregon gets a lot of domestic migrants from California which is a net improvement in tax rates and cost of living, so I wouldn't give them too much credit for drawing people in despite high taxes.

I spent the Fourth of July weekend in Portland. I've never seen so many combat boots so far away from a military base. Everyone had a tattoo and most had piercings, including the children.

I drove to Multnomah Falls and all the way to the Pacific Ocean. The state is beautiful. Portland had some great restaurants and good bands, but the scenery got old fast.

California gets enough international migration to offset domestic outmigration. What happens to a state when its tax payers leave and tax recipients come?