Taxes And Wealth Mirgration
What happens when you beat on someone long enough? They get tired of it and leave.
I believe we see a bit of it here on Steem. Many, over the past few years, blasted the investors as greedy, caring only about their return, and destroying the platform.
Of course, we then see many of the same people turn around and complain about the drop in token price. Well, guess what sports fans: investors are the ones who buy tokens. I think we can say the blockchain world is proving that users tend not to pull money out to buy. Naturally, creating sinks is a great way to reverse the process, something that I believe is coming to the Steem blockchain in the next hard fork.
Why do I bring all this up?
For the last few years, it is fashionable to attack the rich. This comes from both the rhetoric spewed or from the governmental entities who demonize this group of people.
I am not here to debate the merits of it or not, the bottom line is what happens. Ultimately, it is the results that come from our actions that matter.
So how has this approach turned out?
Many states are becoming very well known for their high taxes. This includes a progressive tax system which ends up applying a hefty state income tax on those making a lot of money. At the same time, we see heavy property taxes, especially on those properties that are very costly.
California, New Jersey, New York, and Illinois are a few with the reputation. They end up trying to get more of their expenses covered by targeting this group.
On the surface this makes a lot of sense. After all, if you need money, it is best to go where the money is located.
The problem that arises is what happens when these people had enough.
Here is a chart that shows the wealth mitigation for 2018.
The problem is many of the affluent have choices. Since they are not dependent upon a paycheck, the ability to relocate is a lot easier. For the middle class, it is much more difficult to move to another location for financial reasons. Thus, they are stuck taking it on the lip as they say.
Looking at the chart, the largest gainer was the state of Florida. This should come as no surprise since it has warm weather, no state income tax, and relatively low property taxes. Plus, real estate is a lot cheaper than in many of the others areas of the country, furthering its appeal.
Of course, the biggest problem occurs when a few high income earners up and leave. When a government losses the taxes on a few million in yearly earnings, it takes a lot of middle class people to make up for it. Where are these areas going to find that money?
This takes on added meaning when we look at the global situation. While it is a bit more difficult to do this as an individual, we see the wealthy use tax havens for their companies. They simply establish the ownership of these entities in countries where there are favorable tax rates.
It is this maneuver that gets the likes of Amazon out of paying billions in taxes.
Simply put, the wealthy have opportunities for wealth preservation through smarter tax planning that most average people do not have available. Hence, the idea of targeting this group ends up backfiring.
How do we resolve it? That is beyond the scope of this article. However, it is important to realize that people like Rush Limbaugh have options most do not. I bring him up because he left New York years ago because of the taxes. He moved his entire operation into his Florida home (it is a big home), relieving himself of a large state income tax. When you look at the dollar amount on $35 million in earnings, it is a costly move for the state.
This could be a lesson that will be application as cryptocurrency gets move advanced. Demonizing and attacking people who have options might not be the best approach. When people can opt out of your system, then strong-arming is not going to work. At that moment, wooing them is needed.
Will the system wake up to this fact or keep behaving as it always has?
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Interesting and thought provoking..
Always good to see different perspectives.