Whenever progressives put out an economic plan, it always involves some form of “tax the rich,” along with plenty of euphemistic language about making the wealthy “pay their fair share.” According to the left, the “working people” can have everything from quality health care to better roads if only the “rich” were taxed more. Even relatively moderate Democrats like Hillary Clinton were forced to sing from the tax-the-rich hymnal in the last election.
Well, one progressive governor is now changing his tune. Connecticut’s Daniel Malloy, a second-term Democrat, has been forced to admit that soaking his state’s wealthy was not stable economic policy.
“The reality is that in Connecticut we get most of our money from very few people and that can produce some very wild swings,” Malloy said. He’s now opposing a proposed 19 percent tax on hedge funds, warning that it could further the exodus of rich people from Connecticut.
Connecticut’s state budget woes are compounding with collections from the state income tax collapsing, despite two high-end tax hikes in the past six years.
It means the current budget year, which ends in just two months, is now seriously in the red and next year’s deficit has ballooned to $2.2 billion. …
It’s been ten full days since the April 18th tax filing deadline, and workers at the state tax department are still processing returns coming in the mail. Even though about 90 percent of all Connecticut residents file electronically, many still send their checks for taxes due in the regular mail. It now looks like expected revenue from the final Income filing will be a whopping $450 million less than had been expected.
For the past six years, Connecticut has been hiking taxes, particularly on wealthy taxpayers. The last big tax hike came in 2015. Yet Connecticut has been in a never-ending budget crisis. Now 2017’s budget has a shortfall and tax increases are being floated once again.
It isn’t just at the state level where raising taxes “on the rich” doesn’t work. It fails internationally as well.
In 2012, France imposed a 75 percent tax on all earnings over 1 million Euros. The levy was designed to force the wealthy to pay “their fair share” so the country could move on from the global financial crisis, yet it failed to generate the expected amount of revenue as wealthy taxpayers simply left the country. It was repealed in 2014.
There is increasing evidence that rich Americans are choosing not to live in the United States in order to avoid taxes. “Between 2008 and 2016, the number of Americans renouncing U.S. citizenship or terminating their long-term U.S. residency jumped by more than 2,240 percent,” writes Patrik Chougule at the American Conservative.
In an era where capital and money can flee borders with the click of a mouse, soaking just the rich just isn’t sound economic policy anymore. Instead, there needs to be a broad tax base with modest rates across the board. Otherwise you end up in perpetual budget crisis, much like Connecticut.