Top income earners contemplate “Going Gerard”
Millionaire golfer Phil Mickelson may have been pressured into shutting his 19th hole about high taxes, but he might very well remain in touch with realtors outside California, and according to Fox News he’s not alone:
Federal taxes on the top income bracket just rose by roughly 5 percent, and, while there’s nothing rich athletes can do about that, they are paying attention to which states dip into their game checks — and how much they take.
“They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”
The tax situation for pro athletes is especially complicated, due to the taxes assessed while they’re on the road. Given the sums of money involved, this gives them powerful incentives to decamp for low-tax states, especially since – to put it mildly – California is only going to get worse, and these people have accountants who can read the handwriting on the wall.
Who cares, right? We’re just talking about a handful of millionaire athletes!
For starters, the Sainted Middle Class should care about these developments because Soak the Rich taxes have a habit of pouring downhill until they soak everybody. The Alternative Minimum Tax, and the income tax itself, both began as modest burdens targeted exclusively at the super-rich. The complexity, and capriciousness, of state and federal tax codes is a bad thing for everyone, even when the most complex rules are supposedly reserved for the mega-wealthy.
Then you’ve got the loss of business to those who collect all the money these departing millionaires spend. Such businesses tend to employ a great number of middle-class people. They are well aware of how threadbare the class-war mythology of rich S.O.B.s hoarding their treasure in underground vaults really is. I can guarantee you that a sizable number of Californians will be deeply and immediately sad to see Phil Mickelson and company go. Especially since these tax migrations tend to spread, as others in the same social circle notice their friends taking a powder and begin phoning their own realtors. Nobody wants to be the last millionaire in California when the political class gets really desperate for revenue.
And there’s the delicate matter of where those desperate politicians know they can find the real money. Hint: it’s not in the wallets of millionaires. It’s in the millions of wallets held by the far larger populace of middle class workers. This will become especially obvious after the millionaires leave. Capital flight subtracts the old targets of class warfare, obliging the class warriors to lower their aim a bit.
You can ask the French how all this works. The French employment minister just caused an international crisis by admitting, in public, that its socialist government is “totally bankrupt.” As the UK Independent noted, capital flight is very much a part of the problem:
It also calls into further question Hollande’s controversial “tax and spend” policies that have seen numerous entrepreneurs and high profile celebrities leave the country.
The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn (£17bn).
Among those who moved their wealth out of France are Hollywood star Gerard Depardieu and the country’s richest man Bernard Arnault.
There are even reports that Nicolas Sarkozy, the previous President of France, is preparing to move to London with his wife Carla Bruni for economic reasons.
Prime Minister David Cameron has previously said that Britain will “roll out the red carpet” to attract wealthy French people.
In honor of Mr. Depardieu, I think of it as “going Gerard.” It’s not quite the same thing as “going Galt,” because the stampeding wealth creators of Ayn Rand’s Atlas Shrugged were running toward something, not just escaping from a dying system. Healthy state and national governments compete to attract taxpayers. Unhealthy governments try to fence them in. The really sick ones castigate them for even thinking about escape.