You misspelled Nevada. I know several rich guys who set up residence in NV to avoid paying CA income tax. It’s not that hard to do. Now, I don’t know how serious a problem this is, but it’s not as laughable as some here seem to be making it.
Nah.
While it does happen that the rich squirrel a lot away they still pay a lot in taxes.
Really depends on the details of a flat tax but in most cases I have seen taxes on the rich would go down and taxes on the poor would effectively rise. Essentially a regressive tax.
I remember Robin Hood being a good guy when I was growing up.
You are right that much of our problem comes from a volatile revenue stream. That stream is made up of income tax, which is progressive, and sales tax, which is regressive. Both have plummeted due to the recession. The tax that isn’t volatile, the property tax, is now a much smaller percentage of the revenue base thanks to Prop 13.
I think there will be a limited number of doctors who can move to Incline Village, or Tahoe, before they run out of patients, unless they expect patients to drive 4 hours or so on 80 to an office visit. Ditto for financial planners. As mentioned, places all over the world have tried to set up Silicon whatever and have failed. Intel, far from moving to Texas, has put a new fab in Austin on hold. Lots of companies do have smaller design centers there, but I’ve seen no big movement. Hell, American canceled the Nerd Bird.
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So increased pressure by the government on the high end of the income scale actually produces more rapid, and negative, effects on the collection of revenue than it would with a broad, smaller rate increase across the total population. 1,000 factory workers who average $60,000 per year at the NUMMI plant in the East Bay aren’t going to pull up stakes and move to Incline Village. But 10 professionals making $6,000,000 per year each, might. And apparently, they are.
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I agree that a more broadly based revenue stream would be good. We can do this by reducing the burden on the rich and increasing it on the middle class, but this will reduce savings and consumption. both of which drive the economy. The tax burden on the rich doesn’t reduce consumption very much. Perhaps a better way would be to decrease income disparity? if such a large part of wealth and income weren’t concentrated in the top few percent of the population, there would be more broadly based taxation - and probably an increase in consumption over all.
Now, you might say that this would decrease the money available for private investment. Quite true, however at the moment the last thing anyone with money is going to do is to invest in more production, since consumption is down so far. So, the money will be hoarded, and not create jobs. The government getting it will lead to more jobs, both in keeping state workers employed and in useful stimulus projects which will keep people like construction and road workers employed. That will increase consumption and will eventually lead to a situation where more production is actually useful.
As for Nevada, maybe some of the people who moved into Vegas, bought an overpriced house, and got foreclosed on will move back to California.
How does this work exactly? If they make money in California they still pay California income tax no matter where they live. Details in this pdf. Sure it works if they are writers or make most of their money from investments.
The income tax base is not particularly volatile (it is probably a lot less volatile lately than the real estate tax base), the sales tax base is probably a lot more volatile because sales tax is generally paid on discretionary spending (no sales tax on food or rent, etc., I guess some utilities impose a sales tax but - generally speaking, its not imposed on necessities).
The problem is that the hardwired items on the budget represent enough that a 10% drop in revenue probably means a 40% drop in the discretionary items unless you can borrow enough to get you through the hard times.
The OP is basically proposing a race to the bottom. Ireland might be able to skim some economic growth by cutting taxes because noone is going to chase Ireland but if California (or America) started skimming ecohnomic growth this way, EVERYONE would basically have to follow suit and there would be no advantage. It would also have the deleterious effect of bankrupting the state. Unless you are willing to cut government services, you have to fund it and a progressive system taxes those who are most able to pay those taxes.
There have been tax havens all over the world for decades. There was a time when America had a top marginal tax rate of 92% and yet people did not move en masse to Monaco.
Our financial industry cannot operate out of Bermuda, our tech industry cannot operate out of the Channel Islands and our entyiertainment industry cannot operate out of Texas.
How exactly would you reduce income disparity? The market may not distribute income equitably or even particularly efficiently but it seems to do it objectively. How exactly would you distribute income differently7 than we do now?
Since the development of corporations and mutual funds to accumulate large stores of wealth we no longer need wealthy individuals. However the fact of the matter is that when large amounts of wealth are created it is concentrated in a few hands and I think most people would agree that despite the vast amounts of good fortune that allowed Bill Gates to accumulate his wealth, he is probably more entitled to it than anyone else. Do we have consifiscatory estate taxes? That certainly doesn’t seem to the the direction we are heading ($3.5 million exclusion with lower rates on the overage).
We don’t need welathy individuals to invest anymore, we have mutual fdunds and corporations to do that for us.
I generally support progressive taxes and reducing the runaway income at the top of the scale but how do we do this without doing more harm than good?
It’s very common for the really rich to make most of their money from investments.
Flat Tax or Fair Tax; it’s immaterial unless the tax reform starts with capping government spending.
I would be in favor of any proposal to cap government spending at a percentage of revenue.
I spend a fair amount of time staring at our federal budget and one of the first things to pop out is that our deficit is larger than our non-military discretionary spending.
In other words if you elimated all discretionary spending that was not military ALL OF IT (no stimulus, no bailout, no department of commerce, no department of energy, no department of treasury, no judiciary, no money for congress or the white house, NONE OF IT), we would still have a deficit at these tax levels. And this is based on economic figures from 2008 (things have probably not gotten better since then).
The vast majority of our spending falls into a small handful of categories.
service on the national debt
meciare/medicaid
social security
military/defense
These four items account for 2.9 Trillion of out 3.2 trillion dollar budget in 2008 (pre-stimulus).
The deficit under the same model was over 400 billion.
Unless you are ready to overhaul health care, reduce military spending AND raise taxes, we are going to have a hard time balancing the budget.
If this is accurate, it seems what they have is very close to a flat tax already.
Like I said. But they’d have to live in Nevada, which only works if you have very long fingernails.
Well, you have to have your primary residence in Nevada. When you’re rich, it’s easy to do that without actually doing it.
I wish. From here
That’s true for almost any business also. Variable expenses are not that large a part of total expenses, so you get clobbered when income goes down. States are worse, because they often need to spend more (on unemployment, welfare) when the economy is bad.
As an example of this, a state (I think Mass.) is considering passing a law rescinding tax breaks to get movie companies to film in the state. It has gotten to the point that the increased tax revenue from ancillary services doesn’t make up for the credit, and since every state is doing it there is no competitive advantage in offering the tax break. The same thing goes for tax breaks to move factories, but that at least is a long term commitment.
That’s a good question. How does Europe and Japan do it? Higher minimum wage would help, as would taxing the hell out of bonuses. But my point was really that if you have a problem with the rich paying a giant share of all taxes, the problem may not be that the rich are getting taxed too much but rather that they have too large a share of the pot. It’s a point that conservatives who bemoan this horrible inequity like to avoid.
We’ve been through this before. I have no problem with those who create lots of wealth getting a good chunk of it; I’m more concerned about those who destroy wealth also getting lots of money, since only they can get out of the hole they themselves dug. I’m concerned about stock incentives encouraging managers to push in income and lie about their balance sheets in order to cash out this year.
As for inheritance taxes, I’m still waiting to find that mythical family farm lost due to them. Godot will arrive first.
Thanks for the data. In another thread about California, I noted that if you fired every state worker (not including teachers, who aren’t quite state workers) you still wouldn’t close the deficit here.
As far as I know, there’s little evidence that tax breaks actually attract business, or keep them there, or are a net gain in most cases. The situation you describe is the norm; some place tries to keep/attract business with tax breaks, and finds it’s losing money on the deal even if the company doesn’t just choose some other location anyway. A good golf course, or good private schools - something executives who run the company find attractive - is more effective than a tax break.
“We” do not own society, and then allow some high-ability people to come in as guests. Your framing is fundamentally flawed.
Do you really think those “high ability” people got that way without the help of society ?
And yes, “we” do own society. Who else ?
There is a high degree of correlation between states with high tax burdens, and states with high unemployment. For example, as of the end of 2008, CA had the 3rd highest unemployment rate in the country. They also have the 6th highest tax burden.
Why? Because when you tax businesses (and the rich) at a higher rate, they have less money to push the economy and employ people.
And I will also say the first time I remember hearing about the flat tax it was California governor Jerry Brown who was proposing it. And he certainly wasn’t a conservative. 
The argument that the high-ability people will leave if you do not cater to them by taxing everybody else more instead frames the high-ability people as guests.