Trickle-down apologists keep trying to sell the snake oil that tax hikes hurt the economy by decreasing investments. That pretty much has been debunked.
[H]uge tax cuts in 2001 and 2003 signed into law by President Bush were actually followed by a pronounced decrease in the fraction of G.D.P. devoted to business investment (although the fraction of G.D.P. invested in homes rose apace, begetting the current financial crisis in the mortgage market). Remarkably, the fraction of G.D.P. devoted to business investment also fell after the enormous tax cuts during the Reagan years. Even more remarkably, it rose after the tax increases during the Clinton years.
In case you missed it, another canard of trickle down devotees – that if you raise taxes in a jurisdiction, people will move out – has shown to be false.
“At the level we’re talking about, there’s no quantitative evidence that it affects the mobility decisions of affluent taxpayers,” said Douglas S. Massey, a demographer at Princeton University and president of the American Academy of Political and Social Science.
…New Jersey raised taxes on the wealthy in 2004, increasing by 2.6 percent the tax rate levied on those making more than $500,000 a year; and Gov. Jon S. Corzine this month proposed a new increase on high earners.
But a study by Professor Massey and two colleagues, published in September, estimated that the previous tax increase cost New Jersey only 50 to 350 existing “half-millionaire” households — a relatively small number against the total of 44,000 such households in the state.
While those departures cost the state about $38 million a year in revenue, the study estimates, the higher taxes levied on those who stayed have brought in an average of $895 million a year. Also in 2004, California voters approved a 1 percent income tax surcharge on personal income over $1 million, and Silicon Valley and Beverly Hills appear to remain well populated with the wealthy. From 2004 to 2007, according to a study by the California Budget Project, a left-leaning research organization, the number of millionaire taxpayers rose by close to 50 percent, well outpacing the 8.6 percent growth in the total number of those paying personal income tax.
“It is one of the oft-cited urban legends in California politics — that the rich are leaving California because of higher taxes,” said Jean M. Ross, the project’s executive director.
Between 2003 and 2005, after the Sept. 11 attacks, New York State imposed a temporary surcharge on incomes of more than $100,000, as did New York City. While the city did lose residents at all income levels in 2005, according to a 2007 study of population data published by the city comptroller, William C. Thompson Jr., households with incomes of $250,000 and higher were the least likely to leave.
Why do people decide to live in a certain area? Young singles probably look for good jobs and a vibrant social environment. Young couples? Good jobs, affordable housing, safe environments. Young families? Ditto, plus good schools. Retired folks? Maybe a warmer environment but also safe communities. This is the only group that I think might even consider a move due to taxes in the hopes they can preserve their nest egg. Otherwise, taxes fall way down on the list of reasons to choose where you live.