Monday, October 29, 2012

Fair Share

(Editorial cartoon by Mike Luckovich and published 10/21/12 in the Atlanta Journal-Constitution.  Click on image to enlarge and then please return.)

One of the interesting things about living in California is that we do a lot of our legislating by proposition, especially on issues too contentious for the timid souls in our state house and legislature. This election is no different.  We have multiple propositions for state and local issues, which means that our sample ballots/information packets are telephone book in size.

The one that that prompted this post is Prop 30, the governor's plan to increase the tax rates for the wealthy.  You can imagine the weeping and wailing and gnashing of teeth and dire predictions jamming the airwaves and telephone lines for this one.  The argument is always the same:  if we increase the tax rates on the wealthy, those who make jobs, they will flee California to states (or nations) not so greedy and short-sighted.

Yeah, right.

Michael Hiltzig doesn't buy this argument either, and he checked out some actual studies on the claims (see his articles for the links, most of which are in pdf format).  The studies show that millionaires do not flee when their tax rates are raised as long as there is no outright gouging.

A counterpart to the biblical adage that the poor will always be with us is the notion that the rich will always be one tax hike away from leaving us.

That's the foundation stone, after all, of the argument against raising taxes on "job creators" and of bestowing preferential treatment on capital gains (largely collected by the rich) over wage income (the sustenance of us other poor slobs).

And it's a linchpin of the campaign against Proposition 30, Gov. Jerry Brown's proposal to raise income taxes on income above $250,000, topping out at a 13.3% rate on income over $1 million. Go after the wealthy like that, the argument goes, and the rich will flow out of the state like rainwater cascading down a sewer grate.

It's refreshing, therefore, to see some hard data on the issue, and illuminating to learn what it tells us, which is: Not so.

The data came from the California franchise tax board and was crunched by two Stanford sociologists at the request of Board of Equalization member Betty Yee. Their main goal was to determine if the last big California tax hike on millionaires, the mental health surcharge of 2005, had a detectable effect on the out-migration of those who paid it. (The surcharge added one percentage point to the tax rate of incomes over $1 million, raising the top marginal rate to 10.3%.)

In their just-published paper the Stanford analysts, Cristobal Young and Charles Varner, also investigated whether the state's 1996 tax cut for high-income residents, which cut the top rate to 9.3% from 11%, had the opposite effect — that is, lured wealthy taxpayers into the state.

They found no such effects. The 2005 increase did not boost out-migration among the $1-million-plus population — in fact, the rate of millionaire out-migration declined after the hike. The 1996 tax cut didn't increase the flow of millionaires into California, either. The analysis, moreover, also augments what we know about who California's millionaires are, and why their customary response to a tax increase isn't to flee.
 There are multiple reasons for this, and I would direct you to Hiltzig's article and links for them, but among them are the fact that income for many of these millionaires is tied to their businesses which can't be moved easily.

I suspect that comparable studies on a national level would show similar results, even if "the makers" say otherwise.  Those that are offshoring  have already done so, and the loss of their presence and citizenship doesn't trouble me greatly.  If they were really into creating jobs, they would have done so by now. 

Maybe the President and the Democratic Congress Critters might want to look into this and quit huffing and puffing about the 1%.

And now an aside.  To those facing the fury of Hurricane Sandy, and I mean all of you, be safe and be well.  We need all of us to make this cock-eyed country work.

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