An Inevitable Outcome

I’ve bitched and complained about taxes time and time again on this site. Outside of my criticisms of taxation being a form of theft I also bring up the practical problem with raising taxes, those who have money will eventually leave when their taxes get high enough. California, the state that taxes so hard it almost qualifies as rape, is learning this lesson:

State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka”, i.e., ‘I have found it’. But what Chaing is finding as Controller is that California’s economy as measured by tax revenues is still tanking. Compared to last year, State tax collections for February shriveled by $1.2 billion or 22%. The deterioration is more than double the shocking $535 million reported decline for last month. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.


California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.

The State Controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes. Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out. But the Controller’s report shows personal income tax collections fell by $325 million, or 16% versus last year. Furthermore, leap year would have added another day for retail sales and use tax collection, but those revenues also fell during February-by an even larger $813 million, 25% decline from 2011.

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.

The common cry of the collectivist movement is “Tax the rich!” As Bastiat warned us, some people are unable to see the unseen effects of state actions. What happens when you start taxing the “rich” more and more? Eventually they leave. The “rich” have money, a fact made evident by their status as being “rich”, and therefore can afford to move to a new state or country. When they leave they take their tax money with them, money that is sometimes used to fund programs that are supposed to help the downtrodden like food stamps, welfare, and worker’s compensation.

In the long run taxing the “rich” causes more harm to the “poor” than anybody else.