History offers lesson on tax policy

February 11, 2010


“What experience and history teach is this — that people and governments never have learned anything from history, or acted on principles deduced from it.”

— (Georg Wilhelm Friedrich Hegel, “The Philosophy of History,” 1837)

Last week, the Newark Star-Ledger reported that New Jersey lost $70 billion in wealth over the past five years. The reason? Affluent people have moved to states with a lower tax rate or no income tax at all.

The findings are from a study conducted by the Center on Wealth and Philanthropy at Boston College, the first study on interstate wealth migration in the country. The report found that wealthy New Jersey residents apparently grew tired of the state treating their success as an ATM for politicians and so they moved to Florida, Pennsylvania and even New York, a state not known for low taxes, but its levies are not as high as New Jersey’s.

The study found that wealth migration is a relatively new phenomenon. In the five years preceding 2004, researchers discovered an influx of $98 billion into the state. That would have been during a period when New Jersey was enjoying tax cuts after a run of four successive Republican governors. The Democrats who followed raised taxes, some substantially.

Dennis Bone, chairman of the New Jersey Chamber of Commerce, told the Newark Star-Ledger, “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth.”

The problem in New Jersey and with the federal government under Democrats and some Republicans is that ideology has trumped history and common sense when it comes to taxes and spending. Politicians can see the results of lower taxes, which bring greater prosperity and higher revenue to federal and state governments because more people are working and earning money. But their liberal ideology is so frozen it cannot move from its desire to “tax the rich,” even though overtaxing the rich drives the rich to other states. Unfortunately, there is no escaping the long arm of the federal government, which may be why the Obama administration wants to cut back on space travel.

What can be said about politicians who refuse to see the obvious and stick, not to principle (a principle would make them change their minds), but to a rigid ideology that is cult-like in its refusal to accept reality? If you tax more, you will get less because businesses won’t hire and in extreme cases — like New Jersey — people will move to other states.

The problem for New Jersey and other states — and Washington — is that governments are run by politicians whose main focus is their re-election. In this pursuit they don’t want to say “no” to anyone’s request for an earmark, a project, a program, or an “entitlement.” The result has been a growing addiction by too many people to government instead of reliance on self. As more become dependent on government, more vote to preserve the status quo. And rabid political opponents will set upon anyone who suggests a cut in spending.

Welfare reform should have taught a valuable lesson. There were claims that people would starve in the streets if their welfare checks were ended and recipients were forced to get jobs. They got jobs and no one starved.

Government must begin weaning people from government. If it won’t, we the people must do it. All programs should be continually subject to reauthorization and justification. Social Security and Medicare should be means-tested with incentives for people not to sign-up for them. Families should take care of elderly parents, like they once did. Government should be a last resort, not a first resource.

Just as too many have been conditioned to turn to government, we must be reconditioned to turn away from government and embrace the higher virtue of liberty. We can’t go on taxing and spending ourselves into financial oblivion. New Jersey proves there are limits. Does the Obama administration and a Democratic Congress understand? Will they learn from history?

— Cal Thomas is a columnist for Tribune Media Services.



frank mcguinness 8 years, 3 months ago

You know what this is beyond absurd.

We get Cal Thomas We get Charles Krauthammer We get Dolph Simmons For op-ed.

This rag is a joke both in print and online.

Stuart Evans 8 years, 3 months ago

you should round out your reading with one of these. you might not feel so exasperated.

p>thefreemanonline.org slate.com

kugrad 8 years, 3 months ago

If the anti-tax crowd's arguments were true, then here in Kansas the top-ten counties for business in terms of attracting new businesses should be the ten counties with the lowest tax rates. However, the exact opposite is true. The counties with the greatest business development are the counties who continually choose to implement taxes to support better schools and infrastructure. Case in point: Johnson County.

Fangorn 8 years, 3 months ago

It takes more than low taxes to attract new business. There must be a population base large enough to support the new business and any peripheral supporting businesses. If the business is industrial, it must be located close enough to its sources of raw materials and to its customers to ensure transport costs are not prohibitive. Few Kansas counties meet these criteria, regardless of their respective tax rates. All of New Jersey meets these basic requirements but recent tax policy has turned it into financial wasteland. A more meaningful comparison would be between counties with similar populations and proximity to resources and customers.

George Lippencott 8 years, 3 months ago

With all due respect, I do not think the article or some of the above posts completely reflect the situation.

You are right about Johnson County and to an extent Douglas County. Both have a large number of well-paid professionals who are more than willing to tax themselves in order to have civic amenities. Happens all over the country. Sometimes the professionals lose control and taxes increase to support ever-increasing income transfer at their expense.

Unfortunately, in many of these situations there are citizens who do not enjoy a substantial income and who are affected by the taxes levied to provide the amenities or income transfer. Those individuals tend to move to avoid unaffordable taxation. One would hope that the well-educated professionals would understand that and go slow so that the impact on others is less abrupt. It is harder to convince politicians when buying votes with social services as the consequences are frequently deferred until after their term in office.

Now, New Jersey is a particularly high tax state. Recent political actions there suggest that many citizens are becoming jaded with those taxes. Since there are a number of states around New Jersey, some professional can have it both ways by moving to a lower tax state while still working in NJ and taking advantage of tax reciprocity.

That happened to The District of Columbia some years ago when we lived near by with the result that many professionals moved to Virginia or Maryland. The District has never fully recovered.

There are limits to how high taxes can go before there are consequences, at the ballot box, in economic development, or by population loss.

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