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?