California and New York may very soon see a mass exodus as the taxes that people are already paying have reached such a height that citizens paying them are about to move to other states. As CNBC reports today, there are about 800,000 taxpayers who are really that sick of paying the high rates in those states, and another half million who are looking to relocate away from a few other deep blue lands.
Economists Arthur Laffer and Stephen Moore “are predicting a new mass exodus of wealth from New York and California because of the new tax law,” news that the liberal governors of those states are loathed to hear. Some supposed “academics” have called the prediction “pure nonsense,” but the facts seem to show otherwise.
The case for the huge departure was published in a Wall Street Journal entitled “So Long, California. Sayonara, New York.” Both men are advisors to President Donald Trump and they show that the 800,00 mark could be reached easily within the next three years. If true, these high tax havens would collapse like balsa wood under a Buick.
The deductions for state and local taxes are about to be capped at $10,000 the duo wrote. Those who earn the most money will see a further tax increase, and while that may sound “fair,” it will result in their departure. Once those who pay the most money for taxes leave to lower tax states, the current structures of those states won’t be able to function as they are now or even close to it.
The “effective tax rate” (what is actually paid by taxpayers) will soar from 8.5% to 13% in California. This is a massive tax hike that will rock the ships of even the “middle-high” earners.
New York City is not going to be doing much better with those making a million or more seeing a 50% tax increase. While even the most conservative of people will often admit that the so-called 1% population is out of control, doubling anyone’s tax code is going to cause them to leave.
“In years to come, millions of people, thousands of businesses and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states,” the pair of economists said.
They also prognosticate that “Connecticut, New Jersey, and Minnesota will lose a combined 500,000 people over the same period” of three years. It seems that tax n’ spend liberalism is failing once again.
Debating this is “economist and sociologist Cristobal Young of Stanford,” the gentleman who found the words of Laffer and Moore to be “pure nonsense.” Currently, New York and California have the most number of rich people living in them, and since they have always had a tendency to gouge the taxpayers, he feels that they will take the abuse no matter what.
“There is no correlation between the top tax state tax rate and the number (or rate) of millionaires in a state,” opined Young. His reason for thinking this is because tax rates tend to affect the “late-career working rich” the most. Since they are “embedded in place for a host of social and economic reasons” – company location, family, etc, – a move from these people are unlikely.
Then again, does this really conflict with what the pair wrote? They said that 800,000 people would leave, not everyone.
Already, “3.5 million Americans on net have moved from the highest-tax states to the lowest-tax ones.” Not all of them were ultra-high earners, but high taxes can often affect those with low to middle range tax brackets who self-pay.
The argument is that millionaires have increased in these two states but that, too, is misleading. Many of those who have become rich in those states are the ones thought to be planning a move, so the increase would be negated by this fact.
For sure, CNBC stayed true to their MSM liberal roots and tried very hard in their article to downplay the fears, but even if everyone pretends that the two are only half right in their prediction…that is 400,000 rich people taking flight.
It is unlikely that two economists of that stature are more than 50% mistaken, so no matter the spin, New York and California had better brace for a shift.