In their recent op-ed in the Wall Street Journal, Arthur Laffer and Stephen Moore, whose names are swear words in some circles and who are hallowed saints in others, point out something useful. One of the aspects of the recent federal tax reform legislation is that it’s certainly a shot across the bow of states who are depending on taxing the rich to support their ambitious state programs:
Since 2007 Texas and Florida (with no income tax) have gained 1.4 million and 850,000 residents, respectively, from other states. California and New York have jointly lost more than 2.2 million residents. Our analysis of IRS data on tax returns shows that in the past three years alone, Texas and Florida have gained a net $50 billion in income and purchasing power from other states, while California and New York have surrendered a net $23 billion.
Now that the SALT subsidy is gone, how bad will it get for high-tax blue states? Very bad. We estimate, based on the historical relationship between tax rates and migration patterns, that both California and New York will lose on net about 800,000 residents over the next three years—roughly twice the number that left from 2014-16. Our calculations suggest that Connecticut, New Jersey and Minnesota combined will hemorrhage another roughly 500,000 people in the same period.
It will also provide an opportunity for entrepeneurs in California and financiers in New York to demonstrate their commitment to their belief that the rich should pay their fair share. There’s an old wisecrack about “voting with your feet”, i.e. moving from one jurisdiction to another to avoid the effects of onerous legislation. Now they can vote with their butts, electing to sit where they are.
“It will also provide an opportunity for entrepeneurs in California and financiers in New York to demonstrate their commitment to their belief that the rich should pay their fair share.”
Heh. Right. You focus way too much on “financiers,” “billionaires,” etc. Its a convenient path to pop criticism, but useless in analysis. Bias exposed.
We have been down here long enough to become part of activities such as the “gourmet dinner” group. And so on. People talk. More and more the Midwest and Canada are being replaced by people moving in from NY, CT, NJ, MA and Philly. (IL remains strong – heh) We are talking people with net worth of $15-$50MM. Relatively rarified air, I guess, but hardly billionaires. More importantly, wildly disproportionate funders of the home states………….except they are now outta there. They’ve had it. This isn’t what the high tech or hedge fund guys in the press do, its what small business owners, the engine of growth, do.
Watching Democrats commit seppuku might be entertaining, but my heart goes out to those who want to, but can’t, leave.
My understanding was that the deduction primarily benefitted high W-2 earners and did not have as big an effect on the rich who rely on investment income. If that’s the case, then what will happen with those jobs?
Also, consider telecommuting over the long term. People can potentially have their cake and eat it too.
“Voting with your butts…..”. We live in interesting times with provocative slogans.
So far, this has mostly been old people retiring to warmer climates, which they have been doing all along. Will have to see if we see younger people moving now. More broadly, it is an interesting experiment. Will the country do better long term if our model is Texas where 1/3 of people don’t have health insurance and the best university is Texas A& M, or something, or Massachusetts where most people have health insurance and the best school is MIT?
Steve
The best university in Texas is Rice, ranked #14 nationally. If you limit your consideration to public universities, UT Austin is higher-ranked than A&M.
Using the same criteria, the best public university in Massachusetts is Boston University, which ranks below several public universities in Texas.
Yeah, that’s my point.