Although the rich are often criticized for exploiting loopholes in our tax system to reduce their tax burden (which does happen), the top 10% in this country also holds the mark for shouldering a widely disproportionately big percentage of federal income taxes every tax year. Although the top 10% collect about 45% of our nation’s total income, they are responsible for paying over 70% of the nation’s income tax.
I suppose it is clear to see why states with the highest tax burden, like California, New York and New Jersey, have seen a net loss in domestic migration of its residents, while states with lower tax burdens like Arizona, Florida and Texas have seen a rise in migrations. Combined with state income taxes, many residents in the more heavily taxed states pay more than half of their income straight to the government.
Empirical evidence is clear that taxes effect inter-country migrations, and the states that confiscate more from residents are always on the losing end. When the rich leave, who is left footing the tax bill? The bill does not simply go away.
Even Bill Maher, hardly a source for right-wing or conservative commentary, has lamented on his program just this year that taxes are getting more and more outrageous. ”Liberals, you could actually lose me,” Maher said. “It’s outrageous what we’re paying [in taxes]. Over 50 percent. I’m willing to pay my share, but yeah, it’s ridiculous.”
California is often cited as an example of negative inter-country migration, and why not? Californians recently passed Proposition 30, which not only raises sales taxes from 7.25% up to 7.5%, but also creates new and higher tax brackets for the state’s more successful residents. Folks making between $250,000 and $300,000 are now forced to fork over 10.3% of their income to the state, up from 9.3%. The richest people, those earning more than $1 million a year, will pay 13.3%, up from 10.3% (a whopping 3% increase). Combine that with federal income tax rates and people’s tax burdens in California easily extend past 50%.
In terms of making the rich “pay their fair share”, I agree. Let’s lower the income tax rate, encourage further innovation, hiring and spending, and keep our nation’s rich people (and their money) happily settled into the United States and our bank accounts rather than in Cayman Island accounts to avoid our nation’s punitive system of taxation.