A few years ago, Tom Bergin, a journalist for Reuters, wrote a book challenging several ideas, such as supply-side economics.
In a nutshell, the book criticised the idea that people respond to economic incentives in a linear fashion. It does not dismiss the role of incentives entirely but does generally poo-pooh the idea. Bergin appears to have a generally left-liberal political bent. For all that, the book is well worth reading because he attempts to back up his claims with a lot of figures, although it is worth noting that there are studies that don’t support his case. See an example also here.
And in a new article from the Wall Street Journal, the paper notes how the exodus of US citizens from high-tax states to low-tax states is now so pronounced that suggesting that people don’t respond to incentives is not just wrong, but a case of intellectual evasion:
Each year the IRS publishes data on the migration of taxpayers and aggregate adjusted gross income between states. Its latest release for 2020 shows that migration from high- to low-tax states surged amid pandemic lockdowns and a shift to remote work.
Yes, that is what I am seeing.
The biggest winners were Florida ($23.7 billion), Texas ($6.3 billion), Arizona ($4.8 billion), North Carolina ($3.8 billion), South Carolina ($3.6 billion), Tennessee ($2.6 billion), Nevada ($2.6 billion), Colorado ($2.3 billion), Idaho ($2.1 billion) and Utah ($1.3 billion). Idaho, Wyoming, Montana, Florida and South Carolina gained the most as a share of their 2019 income.
The biggest losers: New York (-$19.5 billion), California (-$17.8 billion), Illinois (-$8.5 billion), Massachusetts (-$2.6 billion), New Jersey (-$2.3 billion), Maryland (-$1.9 billion), Ohio (-$1.4 billion), Minnesota (-$1.2 billion), Pennsylvania (-$1.2 billion) and Virginia (-$1.1 billion). New York, Illinois, Alaska, California and North Dakota lost the most as a share of 2019 income.
Notably, four of the 10 states that gained the most income in 2020 don’t impose an income tax (Florida, Texas, Tennessee and Nevada). The others have generally low tax burdens. States losing the most income generally have high income and property taxes. Taxes aren’t the only factor in migration. Schools, quality of life and cost of living also matter.
Yet high-tax states don’t provide better public services and often have worse schools and public works despite spending more.
Another example that I hear about as a barometer are U-Haul rates. It cost a lot more to go from California to, say, Tennessee than the other way around. If I order a U-Haul from San Francisco to Nashville, TN, on 8 July, the price I am quoted is $3,587. To go from Nashville back to what has been dubbed “San Fransicko”, and on the same date, it is $1,913. Okay, I hear you cry, there may be other factors. Well, there may be reasons why people are so much keener to pay to go to the Smoky Mountain State from California, and that talking about taxes is so much evil neo-liberal ideology. But I am betting that taxes, which are after a cost, do have a bearing.
Depends.
If those who move vote for the same party and policies that f*ked up their previous state, it’s just long term losers.
There are confounding factors.
States with high taxes tend to be states where the police protect criminals and the ruling class, rather than the middle and working classes.
States with high taxes tend to be states where you are in constant danger of being cancelled.
States with high taxes tend to be states where you cannot send your kids to school without worrying about their being groomed.
And then we have to talk about lockdowns, mask mandates, and vaccine mandates; but i am not sure how much of a factor they are at this point.
Exactly. All of those confounding factors are merely symptoms of progressivism. Many people are fleeing progressivism in this country.
The kind of people running toward progressivism are welcome to it. But they insist that I transform my home to fit their vision, too.
This is why it’s important to remember that we are a conglomeration of states, not merely one unified country.
Good heavens it’s clear that Florida is ruled by the Huns.
“The freedman [who had fled Rome to the Hunnish empire] exposed, in true and lively colours, the vices of a declining empire of which he had so long been the victim; the cruel absurdity of the Roman princes, unable to protect their subjects against the public enemy, unwilling to trust them with arms for their own defence; the intolerable weight of taxes, rendered still more oppressive by the intricate or arbitrary modes of collection; the obscurity of numerous and contradictory laws; the tedious and expensive forms of judicial proceedings; the partial administration of justice; and the universal corruption which increased the influence of the rich and aggravated the misfortunes of the poor.”
-Gibbon
I wonder what “supply-side” economics is? I remember hearing the term a lot in the early 1980s and occasionally since. It still makes no sense to me.
Let’s also not forget the significant numbers of wealthy Americans who invest $100,000 or so in an ‘economic citizenship’ program to get themselves a new citizenship and a new passport, then hand back their US passport and renounce their US citizenship.
They are responding to two powerful incentives to divest themselves of their US status: 1) The US is almost unique in imposing taxes based on citizenship rather than residence, so wherever in the world you live you still have to pony up to Uncle Sam, and B) the US passport makes its holder the #1 preferred target of every violent grievance-monger the world over. A one-off six-figure payment frees you from both. No-one ever hijacked a plane and threatened to shoot all the St Lucian or Vanuatuan passengers.
Which is why, in the old days, people who travelled a lot in dodgy regions (mostly the Middle East), but could not obtain the citizenship of a foreign, ideally neutral country would obtain a camel passport, usually issued in the guise of a recently demised country or colony.
When terrorists took over the plane, you would then hand them your camel passport instead of your US, UK or whatever.
Can’t tell if you’re being serious or sarcastic, apologies if the latter and it flew over my head. “Supply-side” refers to the distinction between the part of the economy that is actually productive (i.e. supplies the goods and services consumed) and the consumptive, demand-side. The state and its organs are demand-side, as are many other things of course.
Most proponents of supply-side economics reason that reducing taxes and regulation help stimulate production (and economic productivity in general). The exact reasoning differs from various theories but the basic idea is that reducing taxation and regulation has a double effect in that the producer (i.e. supply) will keep more of the value of their product and in turn be able to reinvest, and the consumer will keep more of their income and be able to purchase more goods and services.
This stands in contrast to the current mainstream economists that focus excessively on factors like “consumer confidence”. In an economy with high taxes and high regulatory burden, increasing consumption doesn’t necessarily improve economic productivity. The focus on consumer confidence, for instance, is largely because the consumption is incurring debt, which people are less apt to do when the economy feels rocky. There’s no focus on the supply-side, the producers of goods and services, who still must labour under increasingly heavy burden of tax and regulations and consequently there’s sluggish response in job creation or increase in production because the producers aren’t retaining enough earnings to be able to invest in those things, or “producer confidence” is low: they are loth to take on more employees that they have to provide with paid paternity leave, sick pay, &c. when although demand for the product is high there is a poor correlation of demand with retained earnings. In short, economic incentives exist and when you do lots of things to break the link between risk and reward you end up with an unproductive economy focused on low risk, low value ventures like fast food rather than manufacturing companies producing aerospace parts or the next generation equivalent.