A Stitch in Haste

Question: How should a high-tax state deal with the problem of residents moving to a low-tax state?

1. Lower taxes to remain competitive.

2. Impose a “leave-the-state tax.”

Wealth Tax. Constitutional Amendment and Statute.

Imposes one-time tax of at least 55% on property exceeding $20 million of a California resident or held in California by nonresident. Imposes one-time tax (between 36.5% – 54.3%) on income exceeding $10 million when resident dies or leaves California. Imposes additional 17.5% tax on total incomes of taxpayers with income exceeding $150,000 if single, $250,000 if married; 35% if incomes exceed $350,000 if single, $500,000 if married.

One thing is certainly true about Californians: They sure do love their constitutional amendment initiatives.

My first best guess, like that of the Tax Foundation, is that a “leave the state” tax (some have taken to calling it the “Hasta La Vista Tax”), even if only applied to wealth over $10 million, is unconstitutional on either (or both) dormant commerce clause grounds or as an impermissible infringement upon the fundamental right to interstate travel. There is also no legitimate state interest in taxing migration, hence such a tax ought to fail rational basis review (at least in a libertarian utopia).

In any case, note the premise upon which this initiative (still in the signature-gathering phase) is based: Taxes were once predicated on the notion that if you live in a jurisdiction, then you should pay for the government services you receive while residing there. Now, taxes are also to be based on the services you will be not be receiving because you do not live in that jurisdiction.

Wealth taxes, such as the estate tax and this proposed migration tax, are especially obscene in that the wealth that is being taxed has already been subjected to several underlying tax regimes: income taxes, sales taxes, property taxes. To suggest that such wealth should be subjected, one last time, to yet another tax — “just because” — reflects a public greed that swamps any example of private greed that has ever manifested itself. It is nothing more than government-as-vampire: sucking out the blood of the productive for no other reason than because it tastes sweet.

(For the uninitiated, Directive 10-289 here.)

Previously:
–Directive 10-289 Watch (“Reasonable Profits Board”)