Posted by Charity on May 18th, 2009

The Vermont Legislature will be back for a special session next month to deal with the state budget.

In the meantime, certain members of the legislature would be well served to read the WSJ piece, Soak the Rich, Lose the Rich.

As the title implies, the column focuses on the consequences for states that solve their budget gaps by raising taxes on the “rich.”

Here’s the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

That’s the bottom line, but there’s also data to back that claim up.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

There is so much more.  I recommend reading the whole piece, especially if you happen to be in the Vermont legislature.  It’s really not that long.

Here’s another excerpt, just in case you don’t read the whole thing.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

But that would never happen here, would it?

(Hat tip: Ace of Spades.  I also saw this linked over at Vermont Tiger.)

4 Responses to “A Warning to High-Tax States”

  1. As chattle on the right and left whine and point fingers about the coming greater depression, it may finally simply tear the nation completely in two (or more parts). Fact is we ALL are at fault for this. If you consume more than you create, you go deeper and deeper into debt. We all dug this hole, people on the right and left may have dug different parts of the hole, but we all dug it. Period.

    And no amount of loads/bailouts/spending can save you from debt!

    And the harshest lesson of history of all: its not like *some* or even *most* empires (yes we are one) crash — they ALL do. But its not like “everybody dies” when an empire crashes. Its just a time of change and coming up with new systems. However, if we throw a *temper tantrum*, and everybody blames everybody else, and we pick up arms internally against each other? Then this could be a bloodbath unlike any ever seen before in history.

    Frankly, we collectively deserve the worst, but I have kids. So this stuff scares the $*%(## out of me!

  2. Peter Buknatski
    May 19th, 2009 at 2:16 pm


    Barry Goldwater didn’t believe in welfare for the rich–although you wouldn’t have known it by the way the establishment media spun it.

    I think you would agree that the rich here are goddamn RICH ENOUGH.
    Instead of letting them get richer, we should use some resources to ‘fertilize’ the rest of America.

  3. There is a difference between supporting welfare for the rich (which I don’t) and opposing the punishment of success (which I do). People should not be excessively taxed for being successful. The rich already give back by creating jobs. Their resources already fertilize the rest of America.

  4. Peter Buknatski
    May 21st, 2009 at 2:57 pm


    PUL-leeeeese. The rich give back little and take more proportionally.
    Up until 1942, 85% of Americans didn’t pay income tax ($1500.00 deductible). WWII cahnged that. Yet somehow the country ran on income taxes from the top 15%. (Guess that’s why they arranged the Great Depression)