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Deroy Murdock: High tax rates cause money, and people, to flee

January 27. 2013 4:57PM

The only thing more stunning than the kleptomania of tax-hiking politicians is their unswerving faith that taxpayers, especially wealthy ones, simply will smile and surrender even more of their money. This fundamental misunderstanding of human nature is impervious to mounting evidence that taxpayers go where taxes are low.

French President Francois Hollande thought he could impose a 75 percent top tax rate and simply watch revenues flow into Paris like the Seine. Instead, actor Gerard Depardieu rushed into the loving arms of Vladimir Putin and Russia's 13 percent flat tax. Former French president Nikolai Sarkozy, of all people, reportedly may move to London to escape Hollande's thievery. (Potential fraud charges also may fuel Sarkozy's wanderlust.)

Last year, a record 1,788 Americans renounced their citizenship, mainly in favor of countries with lower taxes and friendlier political rhetoric.

Golf great Phil Mickelson generated headlines last week when he suggested that high taxes might drive him from California - or perhaps America.

"There are going to be some drastic changes for me," Mickelson said.

"If you add up all the federal [levies], the disability, the unemployment, the Social Security, and the state, my tax rate's 62, 63 percent." Imagine keeping just 37 cents of every dollar you earn. Is that a fair share?

Before President Obama, Washington Democrats, and even some invertebrate Republicans boost taxes any higher, they should read "How Money Walks." Author Travis Brown demonstrates how Americans between 1995 and 2010 shifted some $2 trillion in wealth by abandoning California, Illinois, New Jersey, and other high-tax states and unpacking in low-tax states like Florida, Nevada, and Texas.

"After spending several years mapping and analyzing these data, one correlation keeps popping up: Income moves to where it is most welcome, tax-wise," Brown writes. "Money walks because opportunity talks."

As I observe in Brown's book, this reality is undeniable among the Empire State and its neighbors.

"I have identified the most compelling incentive of all," Paychex, Inc. chairman Tom Golisano wrote in the New York Post. "Move out of New York State." Golisano spent about 90 minutes transferring his vote registration, driver's license, and domicile certificate to Florida. "By domiciling in Florida, which has no personal-income tax, I will save $13,800 every day. That's a pretty strong incentive."

One-way traffic from the Empire State to the Sunshine State is so steady that Harrington Moving and Storage, Inc. specializes in easing that exodus. "Our professionals work hard to ensure that you don't have to during your move from New York to Florida," boasts the Maplewood, New Jersey-based company's website. "You can rest assured knowing that your New York to Florida move will be smooth, relaxing, and seamless throughout."

Connecticut still is smarting over the relocation of hedge-fund manager Edward Lampert. With an estimated net worth of $3 billion, according to Forbes, Lampert was considered the fifth wealthiest man in the Nutmeg State. In August 2011, Connecticut increased taxes by $875 million, retroactively to that January. It cut the maximum property-tax credit from $500 to $300 and lifted its top state income-tax rate from 6.5 percent to 6.7 percent. Then, on June 1, 2012, Lampert moved his company, ESL Investments, to Florida. Lampert also took with him the $10.6 billion that ESL reportedly controlled at that time.

Supply-side economists Arthur Laffer and Stephen Moore found similar unintended consequences after New Jersey boosted its top tax rate from 6.35 percent to 8.97 percent. As they wrote in the Wall Street Journal, "Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect." State deficits soon erupted like Jersey barriers beside a ditch.

From class-warrior-in-chief Barack Obama to sticky-fingered city councilmen, politicians always should remember that taxpayers are not oak trees. Shake them too hard, and they and their money soon will be gone with the wind.

Deroy Murdock is a Fox News Contributor, a nationally syndicated columnist with the Scripps Howard News Service, and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University. New York City's Neal K. Carter, Esq. furnished research for this piece.

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