Punitive Tax Increases Could be Proverbial Last Straw

If states raise taxes on the wealthy, what’s to keep the well-heeled from leaving the state to escape the punitive tax increases?

When reading Arthur Laffer and Stephen Moore’s editorial “Soak the Rich, Lose the Rich” in today’s Wall Street Journal, I almost choked on my coffee at the end of the first paragraph.

“Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% of 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the “fair” way to close his state’s gaping deficit.”

If Gov. Quinn is successful in passing a 50% increase in the income tax rate on the wealthy, the consequences of such a tax punishment may in fact punish the state. The irony is this punitive taxing of the wealthy may push the rich to join the conservative ranks and/or leave the state of Illinois for a more tax-friendly state like Texas.

Soaking the rich will have unintended consequences. Click to read The Buffalo News’ article about billionaire B. Thomas Golisano, owner of the Buffalo Sabres, moving to Florida from New York to escape the punitive New York taxes.

As state and federal tax revenues fall, the competition for the wealthy will only increase. Doesn’t it make sense that no income tax states will be a magnet for businesses and the much-villified wealthy?  

Image Source: own work