American Elephants


After the Election is Over, You Have to Perform. by The Elephant's Child
February 13, 2010, 4:26 pm
Filed under: Capitalism, Education, Taxes | Tags: , , ,

If you live in a low performance state, you probably know it. Unemployment is high, so the legislature is raising taxes.  Companies are moving out-of-state to locations friendlier to business.  Wealthy households are moving out, and fewer wealthy households are moving in.

In Virginia, Republican Bob McDonnell won a high-profile gubernatorial race. He has unveiled an ambitious proposal to expand the number of charter schools.  He also wants to create virtual schools in which students can learn outside of traditional classrooms, as well as laboratory schools that would benefit from partnerships with Virginia colleges and universities.  All three proposals must be approved by the General Assembly in a session that ends next month.

He is sticking to his no-tax pledge, and he is pushing ahead with an effort to sell off  state-owned liquor stores.  States which have privatized their liquor sales have gained million of dollars in new tax and license revenues, and cut millions of dollars in government expenditures.  In other words, he’s doing what he said he would.

In New Jersey, newly elected Republican Governor Chris Christie is also doing just what he promised.  He has appointed a school-choice advocate to the howls of the teacher’s union. And he has announced a real spending freeze on $1.6 billion of unspent money.  He was blunt. “Today we come to terms with the fact that we cannot spend money on everything we want.  Today, the days of Alice in Wonderland budgeting in Trenton end.”

A new study by Boston College’s Center on Wealth and Philanthropy looked at the decade from 1999 to 2008.  It found that in the decade’s first half, New Jersey was booming with a $98 billion net influx of capital due to wealthy households moving into the state.

Then the trend reversed.  From 2004 to 2008 there was “a large decline in the number of wealthy households entering New Jersey” as well as “a moderate increase in the outflow of wealthy households leaving.”  How come?  The study doesn’t say, but the top income tax rate went from 6.37% on incomes over $500,000 to 8.97% — a 40% increase.

Basic economics:  when you tax something you get less of it — in this case wealthy  households that help to create jobs and increase charitable capacity. The out-migration went to New York and Pennsylvania which have lower top tax rates. The third most popular destination was Florida which has no income tax and no estate tax.

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