The re­dis­tri­bu­tion racket

Res­i­dents of high-tax states are vot­ing with their feet

The Washington Times Weekly - - Commentary - By Stephen Moore

Mas­sachusetts Sen. El­iz­a­beth War­ren ap­peared on one of the late night talk shows last week, beat­ing the class war­fare drum and ar­gu­ing for bil­lions of dol­lars in new so­cial pro­grams paid for with higher taxes on mil­lion­aires and bil­lion­aires. In re­cent years, though, blue states such as Cal­i­for­nia, Illi­nois, Delaware, Con­necti­cut, Hawaii, Mary­land and Min­nesota adopted this very strat­egy, and they raised taxes on their wealthy res­i­dents. How did it work out? Al­most all of th­ese states lag be­hind the na­tional av­er­age in growth of jobs and in­comes.

So, if in­come re­dis­tri­bu­tion poli­cies are the so­lu­tion to shrink­ing the gap be­tween rich and poor, why do they fail so mis­er­ably in the states?

The blue states that try to lift up the poor with high taxes, high wel­fare benefits, high min­i­mum wages and other Robin Hood poli­cies tend to be the places where the rich end up the rich­est and the poor the poor­est.

Cal­i­for­nia is the pro­to­typ­i­cal ex­am­ple. It has the high­est tax rates of any state. It has very gen­er­ous wel­fare benefits. Many of its cities have a high min­i­mum wage. But day af­ter day, the mid­dle class keeps leav­ing. The wealthy ar­eas such as San Fran­cisco and the Sil­i­con Val­ley boom. Yet the state has nearly the high­est poverty rate in the na­tion. The Golden State, alas, has be­come the in­equal­ity state.

In a new re­port called “Rich States, Poor States” that I write each year for the Amer­i­can Leg­isla­tive Ex­change Coun­cil with Arthur Laffer and Jonathan Wil­liams, we find that five of the high­est-tax blue states in the na­tion — Cal­i­for­nia, New York, New Jer­sey, Con­necti­cut and Illi­nois — lost some 4 mil­lion more U.S. res­i­dents than en­tered th­ese states over the last decade (see chart). Mean­while, the big low-tax red states — Texas, Florida, North Carolina, Ari­zona and Ge­or­gia — gained about this many new res­i­dents.

So much for lib­eral poli­cies cre­at­ing a work­ers par­adise.

One lib­eral eco­nomic think tank — the In­sti­tute on Tax­a­tion and Eco­nomic Pol­icy — re­cently is­sued a re­port on the states with the most and least “re­gres­sive” tax sys­tems. The con­clu­sion was that states should raise their in­come taxes on the rich to be more “fair.” Ex­cept it turns out that peo­ple are leav­ing the states that the think tank ranks as fair, and they are mov­ing to the states the think tank ranks as eco­nom­i­cally back­ward.

The least “re­gres­sive” tax states had av­er­age pop­u­la­tion growth from 2003 to 2013 that lagged be­low the na­tional trend. The 10 most highly “re­gres­sive” tax states, in­clud­ing nine with no state in­come tax, had pop­u­la­tion growth on av­er­age 4 per­cent above the U.S. av­er­age. Why was that? Be­cause states with­out in­come taxes have twice the job growth of states with high tax rates. Un­like the ex­perts at the In­sti­tute on Tax­a­tion and Eco­nomic Pol­icy, most Amer­i­cans think that fair­ness means hav­ing a job.

Ohio Uni­ver­sity econ­o­mist Richard Ved­der and I com­pared the in­come gap in states with higher tax rates, higher min­i­mum wages and more wel­fare benefits with states on the other side of the pol­icy spec­trum. There was no ev­i­dence that states with th­ese lib­eral poli­cies had helped the poor much and, in many cases, th­ese states recorded more in­come in­equal­ity than other states as mea­sured by the left’s fa­vorite statis­tic called the Gini Co­ef­fi­cient.

The 19 states with min­i­mum wages above the $7.25 per hour fed­eral min­i­mum do not have lower in­come in­equal­ity. States with a su­per min­i­mum wage — such as Con­necti­cut ($9.15), Cal­i­for­nia ($9.00), New York ($8.75), and Ver­mont ($9.15) — have sig­nif­i­cantly wider gaps be­tween rich and poor than states with­out a su­per min­i­mum wage.

States are sup­posed to be lab­o­ra­to­ries of democ­racy, right? Th­ese lab­o­ra­to­ries are pro­vid­ing us with con­crete ev­i­dence that Robin Hood poli­cies don’t help make the poor richer, they make most peo­ple poorer. In other words, the blue states have tried the El­iz­a­beth War­ren “pro­gres­sive” agenda and peo­ple are vot­ing with their feet by flee­ing in droves. The kinds of in­come re­dis­tri­bu­tion poli­cies that Ms. War­ren and oth­ers en­dorse can only work by build­ing a Ber­lin Wall so no one can leave — though I hope I’m not giv­ing them any ideas. Stephen Moore is an econ­o­mist at the Her­itage Foun­da­tion and a Fox News con­trib­u­tor.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.