California is still leaking tax payers, because they have the highest state income tax rate in the nation. As America follows the lead of California and raises taxes, we will begin to see the people who were targeted, “rich people”, leaving America for tax havens, or just places where tax rates allow them to keep the majority of their money. A prominent California resident has just told the press that he is considering moving out of California, and out of America because he effectively pays a 62% or 63% tax rate when state and federal taxes are added up. The pro golfer Phil Mickelson said he will make it more clear at a later date what he plans to do, but so far he has drawn a direct link between his tax rate, and wanting to move, according to this Daily Caller article.
“But if you add up, if you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent. So I’ve got to make some decisions on what I’m going to do,” said Mickelson.
Michelson currently makes about 40 million dollars a year on endorsements, so state and federal governments will miss out on over $25 million in tax revenue each year if he moves out of the country. Up until this point, he has apparently been putting up with forfeiting more than half of his money to the government, but as conditions change, people change their behavior. We are witnessing the breaking point for one particular millionaire, when he will no longer work more than half the year to support the people who claim he is greedy, undeserving, and a bad person, simply because he is successful and makes a lot of money. It is the governments’ greed which has killed the goose that lays the golden egg.
Also, reports have begun to surface that former French President Nicholas Sarkozy will move to London in order to avoid the new 75% top tax rate introduced by the new Socialist government in France, on all earnings over one million euros. Sarkozy plans to set up a billion dollar investment fund, which he would obviously set up in a place with fewer tax burdens. If the investment fund is successful, the investors do not want 75% of the benefit to go directly to the government, because if the fund is unsuccessful 100% of losses will fall on the investors. Why risk all that money to reap only 25% of what you have sown?
The fact is that people will only take a risk with their money if there is sufficient reward. No one in their right mind would start a billion dollar investment fund in France where the best possible success will only see 25% of the profits. Investment funds can help fuel the economy with innovation, new companies, and expansion of already successful companies, so by introducing a ridiculously high tax rate in France, the French government has ensured that no economic growth can be expected. California has done the same in discouraging high earners from living there, because “rich people’s” taxes in the state amount to more than half their income.
America is now following suit, albeit to a lesser degree than California and France. Tax rates do not rise in a vacuum however, and any decrease in incentive to invest or earn will be met by some people investing less or in less productive endeavors, moving, retiring early, and earning less. If we want to see our economy grow, attract business, and attract rich people to pay our taxes, then we must give incentives to those people to invest, and earn in America. Recently Gov. Bobby Jindal called for the elimination of Louisiana’s state income tax, and state corporate taxes, in order to fuel job growth, attract business, and attract high income earners to the state. It is time America take a page out of his book, if we ever want to improve our economy, and get people back to work.