States across the country are facing huge deficits and their answer to solving the problem is to raise taxes, especially on the rich. But recent studies have shown that these taxes don’t help, they just drive away the rich to low tax states.
And the losers in the situation are the middle class. For real estate agents this is important as driving out the rich means that high priced homes will not sell. Soaking the middle class means that they will have much less disposable income. And typically the beneficiaries of the high taxes are the lower incomes which do not buy housing, they are renting.
So real estate agents in states that are raising their income taxes should talk to their local politicians. They are taking money out of your pockets in more ways than one.
More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found “a significant negative impact of higher marginal tax rates on state economic growth.” In other words, soaking the rich doesn’t work. To the contrary, middle-class workers end up taking the hit.
Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the “soak the rich” tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich. via WSJ.com.
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Sad, but true and logical. I would like to think that if I were rich, I would stick around despite high taxes because I know that my taxes are being used for good things. Unfortunately the American mindset is so against taxes that we will spend more money trying to get away from them than would actually have been paid in the first place.
Looks like that wealthy would have all moved to Connecticut earlier since they had the lowest tax rate. And, why do so many rich people live in New York City which has the highest taxes of all? Which states have the most wealthy people. Maybe that will show us where the wealthy prefer to live.
Give me a break!!! Before Jack Kemp schooled Reagan on Reaganomics, the tax rate for the rich was 70%…now the rich, who after the Bush tax cuts experienced an enormous transfer of wealth, AGAIN, are crying about their taxes being increased by 3.5%? Please….if CEO's took less money and distributed that wealth among it's employees we'd all be better off…everyone would be a little happier and we'd actually have a little extra money to spend!!!