ELDER PATRIOT – During last night’s Republican debate New Jersey Governor Chris Christie was asked if 68% of Americans who favor raising taxes on millionaires are wrong? He answered from experience when he said, “Your wrong.”
New Jersey had a millionaires’ tax before he was governor and $70 billion in wealth left the state in under a decade. That wealth could’ve been the seed money for up to $1.5 trillion dollars in new investment.
Instead that money left NJ for more welcoming tax states and with it went a mass migration of workers who saw opportunity drying up and the cost of living too expensive. New Jersey became, and continues to be, the leading state for outward migration because of its unreasonably high tax structure.
Now, New Jersey’s tax burden is at the bottom of numerous corporate inversions – corporations leaving the United States for more welcoming tax environments.
“Let New Jersey be the canary in the coal mine,” Christie warned.
Unfortunately, it’s already too late for that. Americans have been fleeing the United States in record numbers year over year since the Democrats took control of Congress and the White House in 2009.
These Americans are exercising their freedom of movement just as our ancestors did when they first came to the United States to escape the tyranny of their homelands. The sad truth is where once the United States attracted the brightest and most industrious minds those renouncing their citizenship today are exactly those same people.
As they resettle in countries with less confiscatory tax rates they are taking an untold amount of wealth and ingenuity with them that, just as in New Jersey, would’ve been used to fund investment and economic growth.
The exodus of money out of the United States is not restricted to individuals. Corporate decision-makers are responsible to their shareholders and paying taxes instead of dividends is bad management.
Doing business under current United States tax law has become a detriment to the bottom line and increases the cost to market of American companies leaving them less competitive in an increasingly global economy.
You may call it unpatriotic if that suits your argument but it’s no more unpatriotic than your ancestors were or the current crop of immigrants are towards the countries they left.
Donald Trump is the only candidate to openly discuss the flight of this wealth and the damage that it’s loss, and the underlying reasons for it, has caused the American economy. Perhaps this is because the establishment candidates were complicit in laying the groundwork for this exodus, or maybe they just didn’t understand the economic facts of life. The graph below shows the rise of corporate inversions under high tax administrations. The current crop of Republicans controlled Congress (and the purse strings) yet did nothing to stop Obama’s tax increases or out of control spending.
Taxes are a line item expense just like every other expense of doing business and corporate decision-makers must reduce costs anywhere they can to remain competitive. Thus was born the corporate inversion:
High taxes are not the only reason corporations and the wealthy are leaving. Uncontrolled growth of debt and a growing belief that taxing the wealthy will cure what ails us presents a dismal picture for, both, the treatment of those with money, and of future economic conditions in the United States. For the wealthy who can find brighter prospects elsewhere the decision to leave is being made increasingly easy.