
Will a ‘Millionaire Tax’ Cause an Exodus of Talent? - robg
http://economix.blogs.nytimes.com/2009/04/27/will-a-millionaire-tax-cause-an-exodus-of-talent/
======
azgolfer
The real cost is putting the money in the hands of government. Successful
entrepeneurs are the engine of the economy. Government is by far the worst
investor. They get around 50 cents on the dollar when they spend your tax
dollars. As a charity, they are even worse, giving out 40 cents on the dollar.
It's far better for Bill Gates to decide where to invest and donate than Nancy
Pelosi.

~~~
eru
"For a non-profit organization of its size, the federal government is
surprisingly efficient. Most federal employees work in big box-like office
buildings, not in $300 million monuments to an architect's ego."
[<http://philip.greenspun.com/materialism/early-retirement/>]

(Just an interesting tid-bit. I mostly agree with your comment. Though I doubt
all charity are as efficient as the Melinda-and-Bill-Gates-type.)

~~~
tc
The key point in Greenspun's sentence is, an " _organization of its size_."
And he's right about that. It's amazing that a $3-4T/yr organization can do
anything coherent at all.

------
russell
I dont think so. People with incomes over $500K have the economic flexibility
to live where they want. Will a millionaire move from Long Island to Conn. to
lower hes taxes? In general no. Northern CA is a magnet for talent and
millionaires in spite of expensive housing, high taxes, and miserable
transportation. The weather is good though.

These considerations hit the middle class harder. During downturns people
leave CA, because of the costs.

~~~
ryanwaggoner
The comparison of Northern CA to NYC isn't really a fair one, as there are no
non-CA options for living in the Bay Area, but you can live in CT and still do
business in NY.

~~~
russell
Agreed, but I dont think many high income individuals will pull their families
even from Westchester to Conn. to save a few $K. Also taxes follow your place
of employment/business not residence. So someone who has to commute to
Manhattan isnt going to save anything.

------
gaius
_Taxing the rich always has costs, like reduced entrepreneurship and hours of
work, but those costs may be worth paying to achieve greater equality._

At what point is it worth taxing Henry Ford so much that we are all equally
riding donkeys?

~~~
req2
At what point is it worth taxing an argument so much that no one can take you
seriously?

------
indiejade
_My colleague Martin Feldstein and Marion Valliant argue that states can’t
really redistribute income at all, because wage rates respond quickly to
changes in the tax rate. When the tax rates on low-income earners fall, their
wage rates also drop, and when tax rates on high-income earners rise, their
wages rise. These wage effects rapidly undo any attempt by the state
government to create a fairer society._

This is assuming that "high-income earners" pass their tax increases on to
those lower-income workers below them? But isn't there also a cost associated
with passing that tax on? There seems to be something wrong with this idea. .
..

~~~
jcl
That assumption doesn't follow, at least not directly. Sure, the extra
compensation for a highly taxed high-income employee _could_ come from paying
a low-income employee less, but it could also come from charging more money
for the product or cutting expenses elsewhere (maybe by firing a few other
high-income employees).

I think the implication is that companies will naturally equalize
after-(state)-tax incomes for high earners so that they don't go to
competitors in other states with less-fair taxes.

(And yes, the company may not operate as efficiently after reallocating funds
to compensate for state taxes. I think this reinforces the article's point
about cities being "near the peaks of their revenue hills".)

------
peregrine
I'd say no. People don't live in the Bay Area cause the housing is so
affordable or cause the taxes are so low or cause the air is so clean. Do the
math.

~~~
dschobel
They did the math. Read the article.

------
callahad
I'm not so sure about the plot in the article. It looks a bit like the "Two-
Handed Regression" method mentioned in ["The Management Myth"][1]:

"The huntsman achieved some celebrity for having invented a new mathematical
technique dubbed “the Two-Handed Regression.” When the data on the correlation
between two variables revealed only a shapeless cloud—even though we knew damn
well there had to be a correlation—he would simply place a pair of meaty hands
on the offending bits of the cloud and reveal the straight line hiding from
conventional mathematics."

[1]: <http://news.ycombinator.com/item?id=581487>

------
tc
_It is perfectly consistent to be in favor of soaking the rich at the national
level but to be against such policies at the state or local level._

No, it isn't. Policies that inhibit growth at a local level also inhibit
growth at a national level. The effects may simply take longer to become
visible.

~~~
req2
I think the point is that a policy that dissuades the rich in Iowa will just
push rich people out of Iowa to a much greater rate than a national policy
that dissuades the rich in America will push rich people out of Iowa.

------
jemmons
Only if they're doing it for the money.

~~~
patio11
Its not just about money, though. There is a psychological element to it.

A 1% pay cut would have no appreciable impact on my standard of living, but it
would communicate that my company was not interested in keeping me around, and
I would probably respond accordingly. That is a hair trigger sensitivity to
1%, where I know I make something like 50% less than the market wage I'd get
in California or (certain jobs in) Tokyo. But I mentally file that
differential away as fair, where the pay cut would be taking something I've
already "earned".

Similarly, I think a lot of people are more concerned with the notion that
they're being scapegoated or screwed by the government than they are actually
concerned by a rigorous accounting of what they are paying in taxes. (A _huge_
number of very intelligent people do not understand progressive taxation, at
all. They think if you cross into the next bracket you suddenly owe thousands
more if you cross the threshhold. They think they pay marginal taxes over $1
on their last $1 of income. etc, etc)

You can hear some of that frustration in the recent discussion of "going
Galt". Is it rational? Eh, its _real_. Governments should understand how it
affects them prior to getting bright ideas about covering shortfalls by
increasing taxes.

(Speaking of which: the people who are most likely to interpret the tax code
accurately and objectively are professional tax advisers. You know who uses
professional tax advisers? Well, almost everybody these days, but in
particular people who stand to save a lot of money on taxes if they get good
advice. That would include pretty much anyone who can afford to move for tax
advantages. Another thing to consider, oh bright policymakers. Rich people
have a lot of options for structuring their financial affairs such that their
total tax burden is minimized. Heck, I know _I_ have a lot of options, and I'm
nowhere close to rich.)

~~~
gaius
_A 1% pay cut would have no appreciable impact on my standard of living, but
it would communicate that my company was not interested in keeping me around,
and I would probably respond accordingly._

Given the UK's recent announcement of a new 50% rate of taxation for the
highest earners, the _only_ thing keeping those people around is that tax is
even higher in Paris. If Amsterdam or Frankfurt played its cards right, it
could be the new European financial capital almost overnight, and then the
UK's economy which has been propped up by financial services for years would
be well and truly fucked...

------
dschobel
It's bizarre to hear the author use _redistribution_ in a positive-light.

That's normally a conservative attack word (like _amnesty_ ).

~~~
dmh2000
economics as a science is generally neutral on redistribution as to whether it
is 'good' or 'bad'.

