What Happens when the Rich are Taxed? They Leave!

Wednesday, May 27, 2009

I keep hearing how the rich need to pay their fair share. I’m dying to know what that fair share is. What’s the magic enumerated amount that moves a productive person from the evil column to the fair column? I wonder what my own fair share is and if I could get it in writing, pay off the debt, and be left alone. It seems every day that fair share number seems to be moving higher and higher. Don’t kid yourself when it comes to taxation, because any increase in any tax has very real consequences.

WSJ reports of the great State of Maryland:

“Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."”

What was the result? According to the article 1/3 of the state’s millionaires left the state. As a result, the amount of revenue raised by the state came in $100 million less than they did before they created their millionaire’s tax bracket.

NY saw a similar occurrence when a more progressive income tax was promised this year and Billionaire Tom Golisano uproot himself from NY to move to Florida as opposed to paying $14,000/day in state income taxes. How much must Golisano pay to the government before he’s reached his fair share and when you are busy calculating that how much is founding Paychex and creating over 7,000 jobs worth? How much is his millions in contributions to hospitals and colleges worth?

The problem when trying to soak the rich is that wealth is very mobile. It is not hard for the rich to move elsewhere and be rich somewhere else. It is not hard to switch from intelligent productive American workers to intelligent productive Indians. I know this for a fact having previously worked on efforts to outsource to India. As the economies of the world become more interconnected, how much harder will it be to hold wealth hostage to a burdensome tax system?

To phrase Governor David Patterson, the problem with NY was that “We made too many promises with too few sacrifices.” Obama has proposed a $1.8 trillion dollar deficit, which nearly doubles the amount of Federal promises versus sacrifice ($3.5 trillion budget vs. $1.7 trillion total in revenues), who is going to make up the difference? How much are you personally willing to sacrifice? Are you willing to give away 50% of your income, 60%, all of it? How much?

With taxes on workers frozen for over a decade now, the American worker has been lulled into a dream world where tax increases are only to be going to the rich. However, when the rich step out of the way of the Obama train is still standing on the tracks? As wealth leaves this nation as they left MD, the only one left to make sacrifices are people like you and me. You are welcome to pay my share.

7 comments

I read this yesterday and couldn't agree more. I would like to know what my 'fair share' is as well....and then be done with it

May 27, 2009 at 4:57 PM
Euripides said...

Doesn't anyone put two and two together to understand why the middle class is shrinking in this country? Obama's deficit spending and plans for tax hikes only exacerbates the problem. We'll all end up penniless and at the mercy of the state.

Oh wait. That's been the Marxist liberal idea all along.

May 27, 2009 at 6:12 PM
The Law said...

=/

The Obama "skyhigh OMFG tax increase on the rich" is right back to the way it was under Bill Clinton. Nothing more. Life was good in the 90s, was it not?

In my profession, I get to meet quite a few millionaires, and on ocassion we talk politics. Surprisingly, they have no issues with Obama's wish to return the tax brack to the way it was under Clinton. In fact they say it'll be in the best interest of the nation. Of course the few people I met is hardly a statisically relevant sample, but I think the notion that this tax rate is going to be some astronomical number is rather silly.

Just as there are consequences for over taxing, there are consequences for cutting programs. We will begin to see more programs being cut and trimmed to save money, while at the same time incresing revenue through taxes, while at the same time buiding a new 21st century economy. I know you guys this everything will go down in flames, but I don't see it happenign like that just yet.

May 27, 2009 at 8:03 PM

tL,

I see you are a little detached from recent news since at this very moment, congress is trying to work out a way to pay the short fall in Obama's healthcare (taxing health care benefits from your employer or federal sales tax). Both those options greatly affect me and I'm not a millionaire, I'm sure at least one of them will affect you.

Although I'm sure there are many millionaires who may not care, I wonder how many do care and will make changes that affect workers? The reality of the situation is you cannot raise taxes like this without some kind of fallout. That fallout almost always lands on the American worker. It's an occurrance well documented in economics. It's call tax shifting.

Still, you didn't answer my question. How much is enough? Is 39.5% enough? I'm sure if taxes would never go higher, the rich millionaires...I mean people making $200k may not mind, but then again, most state are also looking to have the rich foot the bills.

What happens if raising taxes to 39.5% is not enough? What if they fall short instead, like MD. Who pays then? You?

The question still stands. How much are you personnally willing to pay? Even with Obama's tax increase, his deficit is $11 trillion over 10 years. Who pays for that? What is our fair share. Like I said, I wish someone would write it out in stone for me, let me pay it and be done. It seems the politican answer every year is greater increases in spending and greater taxes. There is hardly ever a year this isn't the case.

May 27, 2009 at 10:04 PM

LCR,

It certainly would be nice. I know when I'm done paying my car off, my mortgage, I just wish I could end my debt to society aka taxes.

Euripides,

If we aren't taxed into our social classes, we will be printed out (inflation) or pink slipped (unemployment). I don't see how one argues that Obama can have a $1.8 trillion deficit and it's only going to be felt by the middle class.

May 27, 2009 at 10:08 PM

CG - I just wrote up a little piece on the VAT idea, would you mind possibly adding anything to it, just email me at the link at the right side of my site....

May 27, 2009 at 10:38 PM
The Law said...

I've been keeping in touch. The answer to your "fair share" question is exactly what I said, the return of the Bill Clinton tax bracket.

And as far as your fair share in the Obama Administration, the benefits, however large or small, go to you, unless your household is making $250,000/yr or more. I don't think the proposed healthcare taxes are gonna fly personally, as it acheives the opposite desired effect lol. I'm just not sure if we can do universla healthcare now. I just fear yet another administration is going to go by where we don't address healthcare. I'm lucky that an alum from my undergraduate alma mater created helped to create the free health clinic. To go to a doctor w/o insurance it would have cost $750. For the same procedure to be done, I donated $20 (though I could have gotten it for free) Without the latter option, a bad situation would have gotten worse because I can't afford to pay $750. I don't understand why people don't want that. Because if people did want that, we'd put our thinking hats on and find a way. But many on the right think universal healthcare is socialist and junk like that and yet again, more people get really sick for awful reasons.

May 28, 2009 at 3:07 AM

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