States: Fewer Businesses Creates Fewer Jobs and Collects Fewer Taxes March 1, 2006
The Wall Street Journal’s opinion piece yesterday wrote about how some US states, namely California have driven away families and businesses by treating the most productive businesses and workers as if they were ATM machines and people like Rob Reiner is playing the part of “Meathead economist”. What I found interesting is not about Rob Reiner, but the economics of the taxation and migration patterns.
…in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho is $2,090 - or some eight times more than the cost of moving in the opposite direction.
California’s tax system isn’t helping. The business tax rate of 8.8% is the highest in the West, and is the second highest to New York when it comes to marginal income-tax rate at 12.0%. According to WSJ, this has contributed to the trend of wealthy taxpayers disappearing from the state and has cost the state $9 billion a year in uncollected revenues due to a loss of almost 20,000 million-dollar income earners from 2000 to 2003. Migration out of CA is seen in the map from Next Bracket’s previous entry on migration patters in the US. Since many of these millionaires are small business owners who create jobs, there must be more incentives for business owners to keep their businesses there and in other high taxed states such as New York (12.15% state income tax rate) and New Jersey (9.0% state income tax). This on top of the Federal tax rate and local taxes.
Source:
The Wall Street Journal, Page A16
February 28, 2006