Send not to ask not for whom the Laffer curves ‚ÄĒ it curves for thee. Even bluer-than-blue New York City, where millionaires pledge their own money for liberal causes such as former Mayor Michael Bloomberg‚Äôs campaign against gun ownership, the Laffer Curve still applies. Raising tax rates will often result in lower tax revenues.
New York Post columnist Michael Goodwin reports that the high tax rates contemplated by current Mayor Bill DeBlasio are driving the Big Money away from the Big Apple.
‚ÄúOne friend says 10 wealthy people have told him they are leaving and another says disgusted New Yorkers bought $1 billion in residential property in Florida since the November election,‚ÄĚ Goodwin reported. ‚ÄúThe Sunshine State confers an automatic tax cut of about 12 percent because it has no city or state income tax, nor does it have an inheritance tax. Beyond taxes, the mayor‚Äôs open hostility is a factor. His insulting treatment of former Mayor Bloomberg at the inauguration remains a cloud over him. As one affluent woman, a self-described liberal, told me, ‚ÄėDeBlasio hates me, so I hate him.‚Äô She doesn‚Äôt personally know him, but draws her conclusion from his words and deeds.‚ÄĚ
Goodwin rightly calls the New York mayor‚Äôs attitude toward wealth ‚Äúchildish,‚ÄĚ but it‚Äôs simply the logical extension of the Democratic Party‚Äôs attitude.
‚ÄúTaking a page out of Barack Obama‚Äôs playbook, DeBlasio casts his push for a tax hike on those earning over $500,000 as a moral imperative,‚ÄĚ Goodwin explained. ‚Äú‚ÄôI believe it‚Äôs time to ask the wealthy to do a little more,‚Äô he said last year. He paints taxes as a matter of giving back, as though the money was taken from others. The sneering suggestion that everyone with money is somehow guilty of something is not a surprise coming from a man who spent his honeymoon on an illegal trip to Castro‚Äôs Cuba. What is a surprise is his lack of appreciation for the impact of wealth on city revenues and the importance of philanthropy to the arts and education.‚ÄĚ
And what the Laffer Curve shows is that what raises taxes lowers revenues (and sends away those taxpayers philanthropists).
Economist Arthur Laffer‚Äôs famous ‚Äúcurve‚ÄĚ theory is that capital and people are inherently mobile. His theory says that if taxes are raised to levels considered unreasonable, then people will move to avoid them. Thus, revenues will decline even as rates increase (that‚Äôs the curve).
History is on Laffer‚Äôs side.
In 2011, Oregon hiked the state income tax on the richest 2 percent of its residents, in a typical ‚Äúsoak the rich‚ÄĚ scheme to plug a budget hole, but it soon found that its revenue estimates were off by more than a third.
And in Maryland, a ‚Äúmillionaire‚Äôs tax‚ÄĚ pushed by Gov. Martin O‚ÄôMalley between the years of 2007 and 2010 resulted in a net loss of $1.7 billion in revenues ‚ÄĒ because the wealthy moved their money (and often their homes) to states with more friendly tax codes.
New York City will see the same result. The Laffer Curves applies, even in liberal bastions.