Revovulotion on Wheels
Yesterday I wrote about the forces that pushing Rhode-Island to change its tax code into a more reasonable one. Today, while reading this article in the Barron I found out that this phenomenon is even bigger.
From 2000 through 2004, a net 1.3 million people moved out of states with taxes on ordinary income and into those without such taxes, says Richard Vedder, an economics professor at Ohio University. While climate clearly has played a role in the moves — the destinations are often in the Sunbelt — many of the low-tax states posting gains aren’t generally considered dream spots: Nevada, New Hampshire, South Dakota, Tennessee and Wyoming.
"It’s a stealth migration, and it’s one of the biggest, most significant yet least recognized movements of the population in American history," says Vedder. "People are voting with their feet to say that taxes do matter."
But the biggest question remains open, what will force the federal government to move toward flat tax rate. The fact is that Bush’s tax reliefs are not a change but a candy he hands to the voters. Moreover the chance to make a real reform in the federal government tax was wasted by this administration.
While people can move comparatively easily between states this is not a real option when hoping to find some incentive that force change in Washington DC.
THE LOGJAM IN WASHINGTON, meanwhile, has left many taxpayers increasingly impatient. Bush’s annual tax-relief measures over the past five years were seen as incremental moves toward tax reform. Indeed, a reduction in rates on ordinary income, dividends and capital gains was promising. But with the federal budget increasingly strained by the prolonged war in Iraq and the need for hurricane disaster relief, President Bush is under political pressure to stop cutting taxes, says Dan Clifton, chief economist for Americans for Tax Reform, a taxpayer-advocacy group in Washington.
The federal government’s alternative minimum tax is perhaps causing the most angst. Originally created for the super rich in the 1960s, the AMT is whacking more and more middle-income earners. This tax, which strips taxpayers of almost all deductions, is more likely to strike taxpayers who live in high-tax states. "The AMT can be so bad that I have actually recommended that some of my clients move to avoid it," says Cal Brown, a financial adviser at the Monitor Group in McLean, Va.
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Rogel @ February 12, 2006
That’s interesting. I knew it was happening, but wasn’t aware that it was that measurable yet. I suspect this migration will bring about, over the long term, significant change in the tax patterns of the states. I wonder if the potential for forcing change on Washington is there, or not. I really think the answer is competition, and there just isn’t any visible competition at the Federal level. The Congress and President will never get it that we are less competitive in the world market because of higher taxes that companies must absorb into their prices.
[...] Rogel, at It Looks Obvious (newly added to the blogroll as well), followed up on my previous article about tax reform in Rhode Island. He did some research on migration related to taxes at the state level and that resulted in this article on his blog. The interesting part is, of course, this: From 2000 through 2004, a net 1.3 million people moved out of states with taxes on ordinary income and into those without such taxes, says Richard Vedder, an economics professor at Ohio University. [...]
I think that in the theoretical level they understand this, however the power of the unions and the lobbies are just to much to ignore. I can’t see what, in the near future, will balance this.
[...] Facing large migration out from the high tax states it is amazing to read that the reaction isn’t necessarily the logical one. One would assume that in order to stop the fleeing of the competent and able population states, like California, will change their tax philosophy. But it seems that the reaction of the plunders is that they need to squeeze more from those who didn’t leave yet. [...]
[...] Awhile ago I wrote about the migration of population away from high tax states to low tax state. This phenomena becoming more and more visible, at my work place alone we had 4 people leaving in the last two months moving to southern states like North Carolina, Texas and Florida. One of this people is John and he blog about the move: We moved down to North Carolina on February 28th. Early in the morning we packed everyone and everything into our Honda Odyssey with the U-haul on the back and started down the road. 2 Adults, 3 kids, 1 4 week old infant, 2 dogs and 500 miles to go.Sound like an American story, isn’t it? [...]
[...] Last week Rhode-Island reformed its tax code and adopted flat tax rate of 5.5% , if giving up on all deductions. In addition the state cut property tax rate and modified its health insurance policy, making it more reasonable for small businesses. Amazingly all of this blessed cuts done with state legislature body control by the democrats.[...]
[...] Since I linked to the Barron’s story about the great migration I notices more and more people fleeing NY and moving to the south. In the small company where I’m working alone more than 10 people moved to the south in the last year. And what I observed in my immediate surrounding is actual a very large phenomena: [...]
[...] for how not to run a state economy. It will take some time, and the high tax state will continue to loose businesses and population, but ultimately the common sense will have to win. I only wonder what can trigger the same [...]