Monday, April 8, 2013

So Are The Wealthy Fleeing High Tax Regions

A while back Chad told us that if you raise taxes the rich just leave, and that he expected this or something like it would happen in France.  There is some info on this and it looks like they are not fleeing.

Apparently California also managed to pass a large tax increase.  Things are still not great there, but they have improved a lot.  And as far as right wing predictions about the expected problems including the fleeing of the rich, once again it's just not true.  I know it sounds plausible to them prior to considering the data, but it seems like the data over and over prove their plausible sounding theories wrong.

In France unfortunately despite the tax hikes and election of a liberal it's still an austerity response.  Overall things are not great there, but people aren't fleeing because of high taxes.  It's really kind of baffling that regular people still believe this myth that low regulation and low taxation leads to economic growth and a better life for all.  I don't think there's a single case of austerity working in Europe post 2008.  Sure, I understand why politicians continue to pursue it.  I understand why Obama wants to cut Social Security and Medicare benefits even though it won't do any good.  His wealthy backers demand it, and they think in terms of short term increases in their wealth/profits.  So yeah, it's not terribly surprising that politicians pursue this strategy.  But it is kind of amazing that regular people, like most of us that reside amongst the 99%, also think the is the wise course of action.  It always fails.  The rich know and don't care.  It doesn't hurt them.  It hurts everyone else.

9 comments:

Jonathan said...

"I don't think there's a single case of austerity working in Europe post 2008."

What about Estonia? Latvia?

Paul said...

If things go according to plan in a few monhs I will be moving from Phoenix area to San Francisco area.

So I can expect my state income tax to increase as well as any property tax. As percentage of of property value perhaps CA is not more than AZ but home prices in CA, specially in SF area, are significantly higher than in AZ.

I do think there is some limit (laffer curve kind of thing) where one might see increased migration. I don't know where that number is. For me, given current rates, it is a trade-off. Are there other benefits to moving that offset the increased costs. For me at this time, yes.

Interestingly or is it ironically - my prospective increases in stat tax bill will lead me to a lower federal tax bill.

HispanicPundit said...

If you ignore the massive in migration of foreigners to California, California is actually experiencing serious depopulation. See here.

Jon said...

It's hard for me to motivate myself to read the corporate front groups any more. Got a credible source?

http://www.sourcewatch.org/index.php?title=Manhattan_Institute_for_Policy_Research

Jonathan, you could be right about Latvia and Estonia. I have to admit I don't know enough to say.

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Jonathan said...

Jon,

You might want to take a look at the data regarding Latvia and Estonia. If your basis for believing that austerity doesn't work is based not on economic theory or ideology, but simply by an analysis of the data, you might want to keep in mind then that the level of confidence one could reasonably hold this position is a function of the level of available data. If Latvia and Estonia prove to be successful examples of austerity working, then those who are in favor of austerity on the basis of economic or moral principals could be proven vindicated, and only it's a specific way in which austerity is applied which must be better defined which could predict a successful outcome. You might need to rethink the confidence level you place in "hard data" as compared to ideology or common sense models if your core data set is rather limited.

Secondly, I would assume that you are against austerity on the basis of minimizing suffering and hardship for a country/people. Would this be accurate? How do you then weigh the notion of moral hazard and the risk incurred by not employing austerity measures resulting in an increased likelihood of abusive behavior by governments and the rich, leading ultimately to a net increase in suffering?

I would agree one arguing for austerity cannot reliably predict the amount of avoidable future suffering either, but I am saying that it seems rather dubious to so confidently stand on one side or the other of the austerity issue on the basis of net suffering if neither side really knows for certain the net consequences of austerity for the future.

This is the quandary we found ourselves in regarding goldman sachs and AIG during the financial industry. It was simply not clear cut which direction would minimize the damage. If you haven't seen this series already (i'm guessing you might have) I think you'd find it quite interesting.
http://www.pbs.org/wgbh/pages/frontline/money-power-wall-street/

I should also point out that I would imagine a number of those who are in favor of austerity are not necessarily looking at it in terms of net suffering, but when pressed would be in favor of a "reap what you sow" type of mentality for reckless prior spending. Regardless if what you might or might not feel of this mindset, you cannot then argue that those who are pro austerity are doing so simply ignoring all the obvious "data" regarding the quickest road to recovery. That might not be their only objective, and from their standpoint the austerity measures could be completely rational.

Jon said...

If Latvia and Estonia prove to be successful examples of austerity working, then those who are in favor of austerity on the basis of economic or moral principals could be proven vindicated,

Do you think so? So for instance if austerity is tried in 20 locations and success follows in 2 but failure follows in 18, would this mean austerity's advocates are vindicated?

All I said was I was unaware of success. I am aware that there is discussion about Latvia and Estonia. I just say I'm not prepared to call it success yet because I don't know enough, but it could end up being successful. Economics is complicated stuff and I don't think one or two cases of anything prove a rule. I think you have to look at things in aggregate.

So for instance almost every modern successful economy got their by violating free market orthodoxies. But there were a couple of places that did lean more towards a free market approach, like Hong Kong and the Netherlands, and they saw some success (I have some questions about the success of Hong Kong that I'd like to explore, but it generally looks to be better than some others, I think they have a major inequality problem). Does this change the fact that the vast majority violated those orthodoxies and most of the places that closely aligned with those orthodoxies are basket cases? No. The one or two exceptions wouldn't vindicate free market orthodoxy. When you are dealing with whole economies you don't expect any sort of mathematical adherence to a principle. It's too complicated for that.

How do you then weigh the notion of moral hazard and the risk incurred by not employing austerity measures resulting in an increased likelihood of abusive behavior by governments and the rich, leading ultimately to a net increase in suffering?

You look at how economies performed when they violated these austere principles. So you take a look at the US between 1945 and 1971. An amazing success when there's tons of so called moral hazard. Take a look at this study from Canada related to a guaranteed income.

http://www.disinfo.com/2013/02/the-forgotten-history-of-a-canadian-towns-experiment-with-guaranteed-income

So on the one hand it makes sense to conservatives that if you give people money for nothing disaster follows, but what about the test cases? I place greater emphasis on that.

Of course if it failed 2 times in 20 would this prove the right wing correct? I don't think so. This is induction, not the proving of geometric theorems.

Examinator said...

Um ,
Success of austerity in Latvia and Estonia really? You of course has proof of this.... I mean proof that that isolates all other factors other than Austerity?
Thatcher did that and whole swathes of the country are well disaster zones today.
In reality you are being highly selective in your assessment. I would also point out that while business may have picked up but the average person um ....really...just no.
Business in the USA is making huge profits ...but who is getting those profits.
If one takes out the problematic finance sector and the military sector business isn't uniformly on the up. And then there's the off shoring of jobs.
Like it or not western capitalism is built on exploitation of the weaker and as such is ideally Pyramidal shaped in its receivers of the wealth. i.e. 1%ers at the top and the rural/urban under educated skilled etc at the bottom.
Therefore if one made the calculation of numbers of people at the bottom or under middle class in Latvia you would discover that wealth pyramid is more like an inverted capital 'T'.
Apart from which Jonathan is confusing Austerity with frugality when it comes to morality(?).
I'm all in favor of needs/frugality but asceticism? ... so much. It is a nuanced distinction but an important one.
Also note it is one thing to get a Bicycle economy up but another thing one that is the equivalence the USS Enterprise up. So your comparisons are worthless.
Least of all in the concept of political ideology.
I.e. Iceland went broke but righted it's self with a loan from Russia the populations of Latvia and Estonia are small.

Chad said...

Are you suggesting that the wealthy or businesses aren't leaving California or finding ways to reduce their tax burden? I hope not because you know that is a lie. No business shows up to a state because of high taxes.

It's embarrassing that the 10th largest economy with all the resources it has is bankrupt in about ten ways. Its also emarrassing for anyone who says that higher taxes result in balancing the budget. California is most likely the first state to go bankrupt, but Jon is right.

Name one company looking to relocate to California - just one private business. I will wait for the rest of the month for your answer.

Earners are leaving California - period.