Skip to comments.California’s One-Man Laffer Curve
Posted on 01/23/2013 7:50:53 AM PST by Kaslin
Ive already condemned the foolish people of California for approving a referendum to raise the states top tax rate to 13.3 percent.
This impulsive and misguided exercise in class warfare surely will backfire as more and more productive people flee to other states particularly those that dont impose any state income tax.
We know that people cross state borders all the time, and its usually to travel from high-tax states to low-tax states. And weve already seen some evidence that the states new top tax rate is causing a loss of highly valued jobs.
This mobility of labor and talent is one of the reasons why California is going to get a very painful lesson about the Laffer Curve.
Politicians (with help from short-sighted voters) can raise tax rates. But they cant force people to earn income.
Now it looks like one of the super-rich is fed up and looking to make himself less vulnerable to Californias kleptocrats.
Here are some excerpts from an ESPN story.
Phil Mickelson said he will make drastic changes because of federal and California state tax increases. The 42-year-old golfer said he would talk in more detail about his plans possibly moving away from California or even retiring from golf Mickelson said. Ill probably talk about it more in depth next week. There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesnt work for me right now. So Im going to have to make some changes. If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rates 62, 63 percent, said Mickelson, who lives in Rancho Santa Fe. So Ive got to make some decisions on what Im going to do.
Hes actually overstating his marginal tax rate. I suspect its closer to 50 percent.
But so what? Its still outrageous and immoral that government is confiscating one-half of the income he generates.
Heck, medieval serfs were virtually slaves, yet they only had to give at most one-third of their output to the Lord of the Manor.
I hope hes serious and that he escapes from the Golden States fiscal hell-hole.
And if he does, what will it mean for California government finances?
Well, heres what Wikipedia says about his income.
According to one estimate of 2011 earnings (comprising salary, winnings, bonuses, endorsements and appearances) Mickelson was then the second-highest paid athlete in the United States, earning an income of over $62 million, $53 million of which came from endorsements.
Now lets bend over backwards to make sure were not exaggerating. Notwithstanding the Wikipedia estimate, lets assume his annual taxable income will be only $40 million for 2013 and beyond.
With a 10.3 percent top tax rate, California would collect about $4.12 million per year. And Mickelson apparently thought that was tolerable.
But guess how much the politicians will collect if he leaves the state? Im tempted to say zero, but they may still get some revenue because of California-based tournaments and other factors.
I can say with great confidence, however, that California wont collect $5.32 million, which is probably what the politicians assumed when they seduced voters into approving the 13.3 percent tax rate.
After all, that assumption only works if Mickelson is willing to be a fiscal slave for Jerry Brown and the rest of the crooks in Sacramento.
As such, Ill also state with certainty that Californias politicians wont collect $4 million if Mickelson leaves for another state. Or $3 million. Or $2 million. Or event $1 million.
The best they can hope for is that Mickelson decides to stay in the state while also reducing his taxable income. In that scenario, the politicians might still pocket a couple of million dollars.
Not as much as they collected when the tax rate was 10.3 percent, and far less than what they erroneously assumed they would get with a 13.3 percent rate.
Regardless of Mickelsons ultimate decision, California is going to be in trouble because most rich people whether theyre golfers, celebrities, investors, or entrepreneurs have considerable control over the timing, level, and composition of their income. And they can afford to move.
This is why you dont want to be on the downward-sloping portion of the Laffer Curve. Everyones a loser, both politicians and taxpayers.
So were going to see the Laffer Curve get revenge on California and Ill be first in line to say serves you right, you blood-sucking parasites.
If you want more information, heres my video on the Laffer Curve.
The Laffer Curve, Part I: Understanding the Theory
And if you want to watch the full three-part series, theyre all included in this Laffer Curve lesson that I put together for the President. He seems oblivious to real-world evidence, but others may find the information useful.
The purpose of Dem tax policies is not to maximize revenues, but to attempt to maximize control.
It’s too bad we keep judging their actions and policies by what we accept to be the “obvious” goals of economic growth, prosperity, and individual liberty and well being.
Those AREN’T their goals.
It’s like scoffing at the man walking “the wrong way” as being ignorant or stupid because you assume you know where he wants to go.
Not necessarily. Moochers love high-tax states. There's a reason that California has 10% of the nation's population and over 40% of its welfare cases. And it isn't just the gentle climate.
And this is exactly what would happen if there was a secession or even just a strict enforcement of the 10th amendment.
All the non-productive takers would move to the liberal states and the makers would move to the conservative states.
This is why the left fears the secession/10th amendment movements so much.
He’s obviously greedy and unwilling to pay his fair share.
He’s obviously greedy and unwilling to pay his fair share.
Sound more like Atlas Shrugged.
Tournament players could go a long way to revealing the cost of confiscatory taxation by refusing to participate in an event in high tax states. If big-brand players only played in tournaments in low tax states, prize funds would shrink at the tourneys with no-name players, and tax revenues would further erode.
I believe that 0bama is fully aware of the economic implications of tax policies, but he is not interested in them. He sees tax policies as a tool to affect social change, to narrow the gap between "the rich" and "the poor."
Of course, he views himself and his ilk as above and beyond that "acceptable" range of income/wealth, as most dictators are known to do. Unlike those who work hard for their money, he believes he is to be rewarded above and beyond what "normal" people deserve for his efforts to make life "better" for the people. Hence the $$$$ vacations to Hawaii etc.
Tax rate of 13.3 = Retirement funds
The con-artists who infest the legislature of our once-Golden State are spending $2.6 billion for the initial 130-mile segment of the bullet train that will connect the two financial centers (ha!), Madera and Bakersfield.
Clearly, they do not know from where money comes; and do not know what happens to state finances when large sums are squandered.