Monday, May 18, 2009

Why Texas Loves California's Tax Policies

US states provide excellent data for comparing economic policies given their free mobility of labor and its broadly federal system that allows individual states to set a wide swath of varying fiscal policies. This data shows conclusively why thinking that taxing rich people will solve a country's fiscal problems - quite simply, they'll just leave (WSJ). Via Rich Kilgaard @ Forbes:

The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

“Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.”

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