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Archive for January 22nd, 2013

I’ve already condemned the foolish people of California for approving a referendum to raise the state’s top tax rate to 13.3 percent.

This impulsive and misguided exercise in class warfare surely will backfire as more and more productive people flee to other states – particularly those that don’t impose any state income tax.

We know that people cross state borders all the time, and it’s usually to travel from high-tax states to low-tax states. And we’ve already seen some evidence that the state’s new top tax rate is causing a loss of highly valued jobs.

This mobility of labor and talent is one of the reasons why California is going to get a very painful lesson about the Laffer Curve.

Politicians (with help from short-sighted voters) can raise tax rates. But they can’t force people to earn income.

Now it looks like one of the super-rich is fed up and looking to make himself less vulnerable to California’s kleptocrats.

Here are some excerpts from an ESPN story.

Phil Mickelson said he will make “drastic changes” because of federal and California state tax increases. …The 42-year-old golfer said he would talk in more detail about his plans — possibly moving away from California or even retiring from golf… Mickelson said. “I’ll probably talk about it more in depth next week. …There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now. So I’m going to have to make some changes.” …”If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent,” said Mickelson, who lives in Rancho Santa Fe. “So I’ve got to make some decisions on what I’m going to do.”

He’s actually overstating his marginal tax rate. I suspect it’s closer to 50 percent.

California politicians got too greedy and now they may get 13.3 percent of nothing

But so what? It’s still outrageous and immoral that government is confiscating one-half of the income he generates.

Heck, medieval serfs were virtually slaves, yet they only had to give at most one-third of their output to the Lord of the Manor.

I hope he’s serious and that he escapes from the Golden State’s fiscal hell-hole.

And if he does, what will it mean for California government finances?

Well, here’s what Wikipedia says about his income.

According to one estimate of 2011 earnings (comprising salary, winnings, bonuses, endorsements and appearances) Mickelson was then the second-highest paid athlete in the United States, earning an income of over $62 million, $53 million of which came from endorsements.

Now let’s bend over backwards to make sure we’re not exaggerating. Notwithstanding the Wikipedia estimate, let’s assume his annual taxable income will be only $40 million for 2013 and beyond.

With a 10.3 percent top tax rate, California would collect about $4.12 million per year. And Mickelson apparently thought that was tolerable.

But guess how much the politicians will collect if he leaves the state? I’m tempted to say zero, but they may still get some revenue because of California-based tournaments and other factors.

Find Phil Mickelson

I can say with great confidence, however, that California won’t collect $5.32 million, which is probably what the politicians assumed when they seduced voters into approving the 13.3 percent tax rate.

After all, that assumption only works if Mickelson is willing to be a fiscal slave for Jerry Brown and the rest of the crooks in Sacramento.

As such, I’ll also state with certainty that California’s politicians won’t collect $4 million if Mickelson leaves for another state. Or $3 million. Or $2 million. Or even $1 million.

The best they can hope for is that Mickelson decides to stay in the state while also reducing his taxable income. In that scenario, the politicians might still pocket a couple of million dollars.

Not as much as they collected when the tax rate was 10.3 percent, and far less than what they erroneously assumed they would get with a 13.3 percent rate.

Regardless of Mickelson’s ultimate decision, California is going to be in trouble because most rich people – whether they’re golfers, celebrities, investors, or entrepreneurs – have considerable control over the timing, level, and composition of their income. And they can afford to move.

This is why you don’t want to be on the downward-sloping portion of the Laffer Curve. Everyone’s a loser, both politicians and taxpayers.

So we’re going to see the Laffer Curve get revenge on California and I’ll be first in line to say “serves you right, you blood-sucking parasites.”

If you want more information, here’s my video on the Laffer Curve.

And if you want to watch the full three-part series, they’re all included in this Laffer Curve lesson that I put together for the President. He seems oblivious to real-world evidence, but others may find the information useful.

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Back in 2009, I posted about a critical new scientific discovery that helps explain the functioning of government.

In the same spirit today, I reprint a notice that appeared in my inbox.

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The Americans With No Abilities Act

President Barack Obama and the Democratic Senate are considering sweeping legislation that will provide new benefits for many Americans. The Americans With No Abilities Act is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.

“Roughly 50 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society,” said California Sen. Barbara Boxer. “We can no longer stand by and allow People of Inability (POI) to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they have some idea of what they are doing.”

“This legislation is just a precaution in case either one of us is forced to look for a private-sector job”

In a Capitol Hill press conference, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U.S. Postal Service, which has a long-standing policy of providing opportunity without regard to performance. At the state government level, the Department of Motor Vehicles also has an excellent record of hiring Persons with No Ability (63 percent).

Under the Americans With No Abilities Act, more than 25 million mid-level positions will be created, with important-sounding titles but little real responsibility, thus providing an illusory sense of purpose and performance.

Mandatory non-performance-based raises and promotions will be given to guarantee upward mobility for even the most unremarkable employees. The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability (POI) into middle-management positions, and give a tax credit to small and medium-sized businesses that agree to hire one clueless worker for every two talented hires.

Finally, the Americans With No Abilities Act contains tough new measures to make it more difficult to discriminate against the non-abled, banning, for example, discriminatory interview questions such as, “Do you have any skills or experience that relate to this job?”

“As a non-abled person, I can’t be expected to keep up with people who have something going for them,” said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint , Mich. , due to her inability to remember righty tighty, lefty loosey. “This new law should be real good for people like me. I’ll finally have job security.” With the passage of this bill, Gertz and millions of other untalented citizens will finally see a light at the end of the tunnel.

Said Sen. Dick Durbin: “As a senator with no abilities, I believe the same privileges that elected officials enjoy ought to be  extended to every American with no abilities. It is our duty as lawmakers to provide each and every American citizen, regardless of his or her inadequacy, with some sort of space to take up in this great nation and a good salary for doing so.”

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While this bit of satire is amusing, the joke may be on us. Let’s keep in mind that a recruitment agency in the United Kingdom actually got in trouble because it placed an ad “for ‘reliable’ and ‘hard-working’ applicants.” According to the government, this was wrong because such language “could be offensive to unreliable people.”

Surely it’s just a matter of time before similar forms of government stupidity migrate to this side of the Atlantic Ocean.

What’s next? Government intervention on behalf of ugly people? Oops, forget I asked.

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