California proving validity of Laffer Curve
...I’m glad when that happens to French politicians. I’m glad when it happens to Italian politicians. I’m glad when it happens to Illinois politicians. And British politicians. And Spanish politicians. And Maryland politicians. I could continue, but I think you get the point.
I’m even glad when it happens to the politicians in Washington.
I smile because I envision the moment when some budget geek tells these sleazy politicians that projected revenues aren’t materializing and they don’t have more money to spend.
So I wish I could be a fly on the wall when this moment of truth happens to California politicians. Theyconvinced voters in the state to enact Prop 30, a huge tax increase targeting those evil, awful, bad rich people.
Governor Brown and his fellow kleptocrats in Sacramento doubtlessly are salivating at the thought of more money to waste.
But notwithstanding a satirical suggestion from Walter Williams, there aren’t guard towers and barbed-wire fences surrounding the state. Productive people can leave, and that’s happening every day. And they take their taxable income with them.
Usually in ways that don’t attract attention. But sometimes a bunch of them leave at the same times, and that is newsworthy. Here’s an example of that happening, as reported by the San Francisco Chronicle.
Chevron Corp. will move up to 800 jobs – about a quarter of its current headquarters staff – from the Bay Area to Houston over the next two years but will remain based in San Ramon, the oil company told employees Thursday. …The company already employs far more people in Houston – about 9,000 full-time employees and contractors – than it does in San Ramon.
We don’t know a lot of details, but these were positions at the company’s headquarters and they were “technical positions dealing with information and advanced energy technologies…tied to Chevron’s worldwide oil exploration and production business.”
Let’s assume these highly skilled employees earn an average of $250,000. I imagine that’s a low-ball estimate, but this is just for purposes of a thought experiment. Now multiply that average salary by 800 workers and you get $200 million of income.
And every penny of that $200 million no longer will be subject to tax by the kleptocrats in the state’s capital.
In other words, we’re seeing the Laffer Curve in action.
Politicians can raise tax rates all day long, but that doesn’t automatically translate into more tax revenue. Politicians keep forgetting that taxable income is not a fixed variable.
What’s happening in a big way with Chevron is happening in small ways every single day with investors, entrepreneurs, small business owners, and other “rich’ people.
P.S. It’s just an anecdote that the Chevron jobs are going to Texas. But when you add together a bunch of anecdotes, you get data. And according to the data, Texas is kicking the you-know-what out of California. Maybe there’s a lesson to be learned?Conservatives have always argued that when dynamic scoring is used lower rates will produce higher revenue flow. The opposite happens with higher rates, but Democrats are reluctant to accept this logic even though the proof is out there for all to see. And, yes, Texas is kicking the crap out of California and Illinois when it comes to attracting business. Florida is also attracting business from high tax states like New York. Yet liberals still don't get it and they are trying to turn the federal government into their failed blue state model.