The law of unintended consequences always seems to stem from government mingling in tax increases and subsidy programs. At the moment, the state of New York is dealing with lower-than-expected revenues from their “soak the rich” tax schemes which are sending their most successful taxpayers elsewhere, and I don’t blame them. When you get to a point where about half your income is being eaten by the government, from local to federal, where is the incentive to stay?
Yahoo News reports:
ALBANY, N.Y. – This year, New York’s deep-pocketed rich were required to dig even deeper to help shore up state finances.
They now pay higher taxes on their income and on limousines and yachts, more to enter a horse in a race and more to dabble in real estate. Meanwhile, many are losing millions from the closing of business tax loopholes and those making over $1 million are losing tax deductions others get.
It even costs more to hunt foxes or pheasants and have their taxes prepared.
Now, a half-dozen states in this recession-driven movement are nervously eyeing New York to see if it’s wise to demand so much from people rich enough to have a second home in less taxing states — and for whom a change of address can be its own tax break.
Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson, who had always warned targeting the rich could backfire, fears that’s just what happened.
Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.
The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. For New York, it’s the second temporary increase for high earners since 2001.
The first one ended as scheduled after three years. But Paterson and economists warn that came as the economy began to grow fast into another boom, something that isn’t expected now because Wall Street — which historically provided 20 percent of state revenues — is perhaps permanently downsized.
“People aren’t wedded to a geographic place as they once were. It’s a different world,” said New York Lt. Gov. Richard Ravitch. He said last year’s surcharge on income taxes, set to last three years, won’t likely meet expectations.
So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing. The state budget office says losses suffered in the recession could be largely to blame, and it may still come in next year when filers exhaust their extensions.
They’re $100 billion short in their estimates since they failed to realize that when you take people’s money, they tend to go elsewhere to try and protect it. I wish more wealthy, successful people would leave the higher tax states in favor of states like Florida and Tennessee where there is no state income tax.
The class warfare rhetoric spread by President Obama and the fiscally irresponsible Democrats is all well and good until the government’s best customers, the ones who pay the highest amount in taxes, decide that enough is enough and they aren’t going to be held hostage to oppressive taxation. Who pays for the unnecessary plethora of government programs in New York State? Here’s a hint, it’s not the poor, though they benefit the most from the state’s overly generous social programs. Why then would a state want to do anything that drives their gravy train elsewhere?
Higher federal taxation is going to have a similar effect of people moving to states with lower state income tax to offset higher federal taxes.