Posted on 05/18/2010 6:41:25 AM PDT by SeekAndFind
This month, Governor Tim Pawlenty successfully resisted an attempt to institute a "Millionaire's Tax" on high-income people in Minnesota. In New Jersey, Governor Chris Christie is standing firm in his insistence that a temporary high-income tax surcharge won't be extended this year. By taking these stances, Pawlenty and Christie are bucking a trend that took (mostly blue) states by storm last year, for the long-term benefit of their states' budgets and economies.
Minnesota's budget scramble arose when the state Supreme Court invalidated $3 billion in budget cuts that Pawlenty had imposed unilaterally. The legislature responded by sending a budget-closing bill to Pawlenty, which would have raised the top income tax rate from 7.85% to 9.1% for single taxpayers making over $113,110 per year (or married couples over $200,000). As such the tax would kick in at a lower income than other states' taxes on the well-off-but not by much, as Oregon has a Millionaire's Tax threshold of $125,000, followed by Hawaii and Maryland at $150,000.
In any case, Minnesota will not test the question of whether a taxpayer who just barely passes the Social Security tax cap can really be liable for "Millionaire's Tax", or at least not this year. Pawlenty promptly vetoed the bill, and won the ensuing showdown. This weekend, in an overnight session, the legislature passed a budget closing the gap solely with spending cuts - largely legislating what the Governor had tried, and failed, to do by fiat.
Meanwhile in New Jersey, the Democratic-controlled legislature wants to extend 2009's temporary income tax increase to apply in 2010, but Christie has repeatedly said that he will veto any tax increase bill. Lately, Christie's insistence that he won't raise taxes has taken on a General Sherman-meets-Green Eggs and Ham vibe.
(Excerpt) Read more at realclearmarkets.com ...
* Since 2008, eight states have imposed income tax increases that apply only to high-income people: Connecticut, Hawaii, Maryland, New Jersey, New York, North Carolina, Oregon, and Wisconsin.
* only three states raised the income tax in a broad-based manner: California raised rates on all tax brackets, Delaware raised income tax for people making more than $60,000, and Ohio cancelled a scheduled income tax cut.
* Oregon's Millionaire's tax (and associated business tax increases) were even approved by voter referendum. Californians, on the other hand, were asked to approve a broad-based tax increase and rejected it.
* Wealthy people tend to have the most volatile incomes, especially because they often have significant capital gain income that goes away when stock markets crash. California, which has the most progressive income tax code of any state, has seen some of the country's wildest revenue swings in the recession, contributing to its worst-in-the-country fiscal situation.
* New York raised its top rate for taxpayers earning over $500,000 from 6.85% to 8.97%, expecting to raise an extra $4 billion in 2009 - and has already fallen at least 10% short, with the gap likely to widen due to weaker-than-expected revenues with 2009 tax filings in April of this year.
* Increased tax progressivity appears to have negative effects on states' economic prospects. Higher marginal tax rates correlated with lower economic growth, and greater tax regressivity correlated from higher economic growth.
* Because barriers to mobility are so much lower between states than countries, states are less able to impose greater tax progressivity (i.e., higher rates on high income people) without driving taxpayers and/or capital to lower tax jurisdictions. Federal tax changes to come in 2011, which will reduce high-income taxpayers' ability to deduct the cost of paying state income taxes, will heighten the competitive advantage of high-tax states over low-tax ones.
* States enacting Millionaire's Taxes will suffer competitive disadvantages on a permanent basis.
But that's OK because the sacrifice (competitive disadvantages on a permanent basis) is for the cause of SOCIAL JUSTICE!
You know what I don’t understand? If I were a millionaire entrepreneur...why wouldn’t I just start a country of my own, like say on an island in the Carribean or Pacific and call it Millionaire Island or something. We could all reject our national citizenship and emmigrate there. By Millionaires...For Millionaires and set up our own rules. Run it right and before long, we’d be running the world. Studies show that people who are self made can have it all taken away from them and put back to par and still come out on top. I am wondering why they haven’t thought of this...
“* Because barriers to mobility are so much lower between states than countries, states are less able to impose greater tax progressivity (i.e., higher rates on high income people) without driving taxpayers and/or capital to lower tax jurisdictions. Federal tax changes to come in 2011, which will reduce high-income taxpayers’ ability to deduct the cost of paying state income taxes, will heighten the competitive advantage of high-tax states over low-tax ones.”
Dont they mean, * Because barriers to mobility are so much lower between states than countries, states are less able to impose greater tax progressivity (i.e., higher rates on high income people) without driving taxpayers and/or capital to lower tax jurisdictions. Federal tax changes to come in 2011, which will reduce high-income taxpayers’ ability to deduct the cost of paying state income taxes, will heighten the competitive advantage of low-tax states over High-tax ones.
I don't think so ! I think it's the other way round.
Of course. It looks like the layoff of all editors has reached the new media by now.
There is one.
I think its called Singapore.
This is exactly why Gov. Christie is adamantly opposed to the proposed tax hike in New Jersey. The loss of $70 billion in net wealth over the course of five years has been devastating to New Jersey.
A few hundred millionaires *have* moved offshore and renounced their US citizenship, knowing that it would take them years of effort to get it back. They number only a few hundred, but their actions speak eloquently to the sad state of what was once — and will again be — our nation.
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