If you tax the rich, they won't leave | Hacker News Reader

If you tax the rich, they won't leave

theguardian.com

50 pointspmoriarty40 comments

I did. Virgin Islands (U.S.). Paid 4% in taxes and saved over $800k in taxes over 2 years. Others are doing the same via Puerto Rico. I’m lucky in that I got out before this hurricane season destroyed everything though.

Exactly. The cost to move off-shore is only getting lower and its knowledge becoming more wide-spread -- what this means is you no longer require "high" net-worth to access these "special" services.

True. But it I think it misses the root crux of the issue. That is, you can now leave the USA and enjoy the same (read: close enough) "amenities" for a lower personal investment.

That said, it might not be a brain drain per se but without infrastructure the mighty machine for printing money (often refereed to at the USA) becomes less and less effective.

C'est Le Capitalism, isn't it? Money first, all else - including country - a distance second.

Do you disagree with the point of the article (that in general rich flight isn’t significant) or are just sharing a personal anecdote?

4% is well below the effective rate that the wealthy in this country currently pay and are likely to ever pay (legally). Would you have stayed if your effective tax rate were 5% lower than whatever you were paying when you decided to move?

Did you do it by yourself or through some company?

And even if they do leave, so what? Actually, that sounds kind of great! Reverse-gentrification. The fewer multimillionaires in my neighborhood distorting demand, the more affordable everything will be for the rest of us. I'd offer to buy them a one-way plane ticket but I'm sure they can afford it.

When I hear someone say "I'm going to leave the country because of taxes" I say, don't let the door hit your ass on the way out.

Ditto. If they're not here to help and stick it out with the rest of us let them go. As the saying goes: "If you're not part of the solution then you're part of the problem."

The truth is, they (i.e., the ultra wealthy) need us more than we need need them. A Kickstarter to buy them one-way tickets out might be the best collective investment we'll ever make :)

They'll call themselves patriots too. Frankly disgusting.

Yeah -- there's something fundamentally flawed about creating government policies tailored specifically towards only the most flighty investors.

Do you want someone there because they like the area and want their taxes going towards improvements, or someone there because it's a bit cheaper than the next viable option? What kind of politicians would the latter support vs the former?

25% of New York’s tax revenue comes from Wall St bonuses and their taxes. They pull out, the place will implode.

So the city of New York should free Wall St from paying any taxes whatsoever as a sign of gratitude for not letting the place to implode. Moreover, people should be thankful and donate money from their pockets to them to prevent some major implosions.

> People with high levels of education have very high mobility – but only for a short period after finishing their education. ... Migration is a young person’s game, and moving overwhelmingly occurs when people are starting their careers.

> If millionaires were mostly college-going twentysomethings not yet tied to place by career or family responsibilities, place-based income tax systems would face serious challenges.

The data does suggest that, to a degree, but it may be better explained by a combination of age plus education and careers rather than single-focused career-mindedness.

It's just an anecdote, but in my experience 40-year-olds stay put because of their kids and homes, not because they couldn't find a career somewhere else. Someone a few years out of college with no kids can pack up their apartment into a few bags and try out something new on a whim. That gets more difficult with age and additional connections to an area.

Flagging this article because you disagree with the data presented or its conclusion seems to violate the spirit of Hacker News.

Yeah, it's the guardian. Don't think this isn't an editorial piece pushing an agenda

I came here to rant that "Never thought I'd see the day The Guardian was a top posts on HN"

As one of the uninitiated... why?

The state of Connecticut disagrees.

Not trying to troll, but do you have data for Connecticut that contradicts the data presented in the article?

Not proof but a strong anecdote. My parents have lived in Connecticut for their entire life (they are in their 70's) and are thinking of leaving. The primary reason they cite is taxes. And that is personal income, sales, property and estate tax, and my parents are middle class not rich.

Many people I know are doing the same thing.

But I'm not sure it is all taxes. A lot of jobs are leaving CT for the business powerhouses of New York City and Boston. So there are few jobs and very little incentive for young people to stay because there is nothing for them in the state.

I left CT for Boston MA for college when I turned 18. I will never move back to that state in a billion years even with family still there.

Connecticut's estate tax only applies to estates worth over $2,000,000. Either that doesn't apply to your parents' estate, or they're probably doing better than middle class.

Connecticut's income tax ranges from 3%-6.7%, which is pretty decent. The upper percentage is almost the same as my state's lowest! Admittedly, my state has higher than average income tax rates.

I misspoke, I should have included sales and property tax. When you take sales tax into consideration Connecticut has a much higher burden than just considering income alone. Edited my post accordingly.

> Connecticut's estate tax only applies to estates worth over $2,000,000. Either that doesn't apply to your parents' estate, or they're probably doing better than middle class.

There is a third option. He actually saved what the retirement planners recommend you save. Never went on vacations, never bought any luxuries, and was generally very frugal.

My father literally put every penny he had past food and shelter into retirement savings... add 60 years of interest, dividends, and market gains and $2M is not so crazy.

It also helps that he bought his house for $50k 40 years ago and it is now worth quite a bit more.

When he was working he was upper middle class for sure but still firmly in the middle class. He was also upper middle because he worked a blue collar job with plenty of overtime options and literally worked close to 40 hours of overtime a week for 50 years. The truly upper class don't need to work 80 hours a week.

Is he typical? No way. Would I even want to lie like that? No way either. But it is how he is able to be effected by estate tax and still be middle class.

It's not only taxes, but taxes have played a major role in the state's poor business climate. Some of the state's major employers have moved or threatened to move out of the state in order to motivate other states to offer financial incentives to stay. GE left for Boston [1]. Aetna left for New York [2]. Stamford grew to support UBS and RBS, only to see them depart ... leaving enormous vacancies in prime real estate. You can find varying polls rating the business climate, but Connecticut has been ranked towards the bottom of many of those [4], with the state capital facing potential bankruptcy. State and Local Tax Burden Rankings study reported that Americans paid an average rate of 9.9 percent in state and local taxes in 2012. According to the foundation, the five highest state-local tax states were [4]:

New York 12.7 %

Connecticut 12.6%

New Jersey 12.2%

Illinois 11.0%

California and Wisconsin 11.0%

2014 CNBC Top States for Business (Connecticut ranked #46) [5]:

Economy – 49th

Cost of living – 48th

Cost of doing business – 47th

Infrastructure – 42th

[1] http://www.nationalreview.com/article/429874/ge-leaves-conne...

[2] https://www.bloomberg.com/news/articles/2017-06-29/aetna-s-d...

[3] http://www.hartfordbusiness.com/article/20170509/NEWS01/1705...

[4] https://turbotax.intuit.com/tax-tips/fun-facts/states-with-t...

[5] http://www.ctcpas.org/content/26536.aspx

So does France.

I'm not sure this article is accurate. I started here:

https://mises.org/blog/california-illinois-and-new-york-keep...

>This is why places with highly progressive income taxes –

>such as New York and California – still thrive as centres

>for talent and elite economic success.

It it tax policy, or is it the thriving academic|tech|financial mass that accumulated due to historical events, an attractive climate, and defense related spending? I'm pretty sure its not tax policy.

>Migration is a young person’s game, and moving

>overwhelmingly occurs when people are starting

>their careers. By the time people hit their early forties, PhDs, college grads and high

>school drop-outs all show the same low rate of migration.

Is it primarily young people migrating? I ask because two generations of cold climate dwellers have migrated to Florida, Arizona, North Carolin and California. This has left many of their former states with high taxes and declining populations.

And according to the Tax Foundation: "Between 1999 and 2010, high-tax New York, New Jersey, and California lost about 1.2 million individual taxpayers and more than $97 billion of personal income. This does not include the corporate losses. Meanwhile, low-tax Nevada, Wyoming, and South Dakota –not known for their magnificent climates – gained about 172 thousand individual taxpayers and $15 billion of personal income during the same period, again not including corporate losses. People are moving to these states and their money is following. Certainly this trend is not a coincidence."

The millionaires may not physically relocate, but what about their money? I would guess they stay where they are but use more elaborate tax planning.

There is a reason why the Laffer Curve exists. https://en.wikipedia.org/wiki/Laffer_curve

Not just their money, but their businesses. Here in Illinois, business of all types are relocating to Indiana, Iowa, etc. The jobs go with them, even if the rich owners still reside in IL. I have many personal anecdotes confirming this trend.

There’s even a political ad running now where governors of neighboring states thank the inept Illinois Assembly leadership for all the new jobs and tax base in recent years.

The Laffer curve applies even if nobody moves - if you have to pay 95% of your income in taxes, you are going to go have a beer with your friends and plot how to get a nice sinecure where you don't have to do much of anything.

>One implication of the Laffer curve is that increasing tax rates beyond a certain point is counter-productive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are controversial. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70%.[2] There is a consensus among leading economists that a reduction in the US federal income tax rate would not raise annual total tax revenue.[3]

How does taxing the rich matter ? The 0.1% on top you can't tax. Just won't work. And to boot, won't matter in the budget.

Then the 0.1% - 1% doesn't matter if you tax them, since they mostly (>50%) get money from taxpayers in the first place. I mean, I love the rightist "make money go round" argument, but what's the point. Obviously these people will simply demand more money from the government and judging by past performance doing that, they will succeed at this.

I don't know what the solution is, but outright increasing taxes will make the problem worse.

If we think about this as a wealth pyramid (a quite narrow one), then perhaps the answer is taxing progressively up the pyramid until the very top is reached. Otherwise, I agree, there's no clear solution to this, unfortunately.

Anecdotal, but I have one multi-millionaire friend who left California strictly because of taxes. It takes a certain type of personality to just up and do it and he exemplifies whatever personality trait that is.

Millionaires are established, and the article goes into reasons why they don't move around. However, what potential effect does higher taxes have on people starting businesses or thinking about starting one?

I would argue that their wealth composition determines their capacity to move around -- or, more to the point, how liquid their assets are. Real-estate owners are obviously anchored to the land that their property occupies, naturally.

One potential effect is that earned income (ie: wages and salaries) would precipitously fall much faster than cost of living, resulting in the drying up of credit and causing a credit crunch/housing crisis.

There are literally billboards on 101 in Palo Alto inviting people to leave California, and they will, if taxes, regulation, and zoning do not lighten.

The local U-Haul place had "Free Gas to California".

They won't, because they can't. Where else are they going to go?

The rich are the most capable of leaving. Even if they don't leave, they can have their money leave by playing silly games with corporate structuring or whatever, which they are the most capable of doing.

Anywhere. We're experiencing the prisoners' dilemma on a global scale where nation states conspire against each-other, a sick tragedy of commons.

Some argue that U.S. territories such as Puerto Rico and the Virgin Islands are good places to go, but because they are still US territories, I'd argue that implementing a good tax plan would include stricter control of what happens when businesses are moved here. Outside of that, I wonder about the viability of moving to actual other countries?

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