On Saturday a superb editorial appeared in the Providence Journal, “When Taxpayers Flee a State.” Here’s an excerpt:
Despite its name, Rhode Island is not an island unto itself. People are free to come and go, including business executives who create jobs and pay high taxes. That is why the state has to be careful that its tax policies do not drive away too many investors or taxpayers…
In high-tax Connecticut next door, billionaires are already escaping. As Chris Edwards of the libertarian Cato Institute notes (“Wealthy Taxpayers are Fleeing These States in Droves,” Daily Caller, Oct. 2), Connecticut in recent years “has lost stock trading entrepreneur Thomas Peterffy (worth $20 billion), executive C. Dean Metropoulos ($2 billion), and hedge fund managers Paul Tudor Jones ($4 billion) and Edward Lampert ($3 billion).”
People can, and will, relocate no matter how nice the climate. I loved living in Irvine, California, but California’s business climate drove me (and I’m not a billionaire) to low-tax, low-regulation Nevada. Rhode Island has lost $1.4 billion of income over the last ten years. The solution for both a small state (Rhode Island) and a large state (California) is identical: low tax rates over a broad swath, rather than very high tax rates in narrow areas. Of course, California now has high taxes over almost everything and a regulatory climate that is the worst in the country.