Following up a story I wrote a couple of months back on Maryland’s failed attempts to tax the rich, we now have New York Governor David Paterson saying:
“You heard the mantra, ‘Tax the rich, tax the rich,'” Paterson opines. “We’ve done that. We’ve probably lost jobs and driven people out of the state.”
New York, apparently, loaded up on the fees and taxes this year to bail themselves out of a budget shortfall. I guess it’s not working. Interestingly, I always wondered why financial firms located in New York City – with high state AND CITY income taxes, I thought it was unreasonably expensive to live there. I suppose costs were always outweighed by having everyone in the financial field in one place – it sure makes stealing employees from another firm a heck of a lot easier!
Anyway, this highlights a point I have made many times in my writing – we will lose to more business-friendly countries and eventually become very mediocre. Many Americans mistakenly think that there’s something in the water in the US that just grows ambitious people. They often do not think of how our (decreasing rapidly) attractive economic model would “steal” some of the best talent from other countries – just like sports fans, when new talent comes to town, you don’t care what he looks like as long as he wins.
This same phenomenon happens in business too – maybe you don’t like Chinese people but you love when one of their most talented citizens comes to Boston/MIT and starts A123 Systems (a recently hot stock IPO in the lithium battery arena). or Maybe French speaking Middle Eastern/African people don’t fit to your liking – but you like when a brown-skinned man comes to the US and starts a company like ebay, employing thousands and finding you a buyer for that crap that no one in your own town would buy.
My point is – some people think we can decrease the attractiveness of America’s free enterprise model and still these immigrants will come. I have news for you – it is increasingly attractive to do business in other countries. What does this mean? First off, more of them will GO HOME after graduating from a US college (our best export by the way is education) and START THEIR BUSINESS THERE. The second phase, when economically, it becomes so stifling to live here, our best NATIVE TALENT LEAVES and goes to these countries to start businesses. Countries such as Hong Kong, Singapore, New Zealand, gosh even Germany is talking about lowering taxes.
We may see more of a trend of Californians claiming residence in Nevada, East Coasters claiming residence in Florida, and so on and so forth. This will be to avoid the tyranny of local politicians. It will only be when the apathetic general public can’t find a job that changes might come. And I have to think even the most liberal businessman is not up for 50%+ taxes and if they are, great! They’ll still lose in the global market to lower cost countries. This trend is a trickle now, but with “Daddy O” taxing and over-regulating everything, we may see acceleration.
It will be interesting to see how this all plays out – we may have currency controls if too many people try to leave the country or too much money I should say, tries to leave. Other countries have done this – they will sink the currency then keep us from escaping and call us un-American for wanting to get money out.