Leaving High Taxes and Big Government Behind

This post is based on some very useful references provided in a comment to my prior post on the Cato Institute evaluation of the freedom in the 50 States 2016.

Between 1992 and 2014, the IRS tracked the migration of people and their AGI on their tax forms. The net results of these migrations are indicated in this map where red is a loss of income due to net migration and green is an income gain.

It is interesting to note that of the 8 least free states by the 2016 report of Cato Institute on Freedom in the 50 States of my last post, the following 7 states are either red or light red in this income migration map, indicating a loss of income:

New York
California
New Jersey
Maryland
Connecticut
Illinois
Rhode Island

Out migration from California tends to be strong to Arizona, Nevada, Washington, and Oregon.  All of these states are more free than California and the least free is Oregon, which perhaps explains why its income increased the least of these four states.

New Hampshire, the freest state, had a small increase in income due to migration. Oklahoma and Alaska were #3 and #2, respectively, and both have risen in recent years in freedom, so their newly deserved reputations were not yet established in many of the years 1992 - 2014.  Indiana at #4 has been more stable in its freedom and clearly has performed much better in minimizing losses than its neighboring states of Illinois, Michigan, and Ohio in this time period.  Indiana's weakest ranking of #26 was in fiscal policy which includes taxes and that is a particularly strong factor on the out-migration of income.  Tennessee, Idaho, Florida, and Arizona of the 10 most free states are also all green in this income migration map above.  #5 South Dakota is white, or income neutral, and #9 Iowa is pink.

Overall, the freer states were the Rocky Mountain states, the Great Plain states from Oklahoma north, and the Southeast with the exception of Mississippi, Louisiana, and Arkansas.  There are no red states in these areas.  Nebraska, Iowa, Missouri, and Kansas are pink, but three of these states are in the #16 - #25 grouping for freedom.  Missouri is further hurt by not being a Right to Work state.

Here is another interesting map from Peter J. Nelson of the Center of the American Experiment entitled Minnesotans on the Move to Lower Tax States 2016:

In the map, the bluer the color the greater the loss of taxpayers earning more than $200K a year.  We also find that most of the low freedom states have higher losses than do high freedom states.  All of the 9 states with gains equal or greater than 1.00% are in the top twenty most free states by the Cato Institute ranking.  Tax policy is under the Fiscal Policy ranking and in this area South Carolina is ranked #23, Nevada is #25, and Wyoming is #21, so there is a stronger correlation with the overall freedom ranking than there is with the Fiscal Policy ranking subset of freedoms for these high income in-migration states.  Some of these high in-flux states do have very high Fiscal Policy rankings, however, with New Hampshire, Tennessee, Florida, Montana, and Idaho having Fiscal Policy rankings from #1 to #8.  So general freedom may be more important for a subset of the wealthier migrators and tax policy alone may be the most important factor for another subset of these wealthier migrators.

Overall, I would judge it likely that income migration is affected strongly by tax policy, but it is also affected strongly by a desire for freedom in general.  Different people have different weightings on these aspects of freedom in their personal set of values.  Good government seeks to provide everyone with the freedoms their individual rights entitle them to.  When a state government offers a better service to freedom, rational and productive people will come to that state. Good things happen to states and the local communities when more rational and productive people choose to live there.

Many of 49% of Americans are Slaves,

while 51% are wastrels responsible for massive government spending they pay no income tax to fund.  Yes, in 2009, the number of Americans not paying income taxes to the federal government became a 51% majority.  For them, it does not matter how wasteful government spending is, because it is not their money.  They can and do ask, "Why should I care what it costs, I do not pay for it."  Obama has succeeded in creating a majority of recipients of his redistributionist theft.  It gets worse, since some of those 49% who pay some income tax, actually do get more in government goodies than the amount they pay in taxes.

For instance, according to the Bureau of Labor Statistics, there were 1,909,000 civilian federal employees in November 2008, excluding the postal employees.  With their generally high salaries and extremely good benefits, they can be said to mostly be receiving more in government payments than they are paying in taxes.  It is interesting to note that the Bureau of Labor Statistics provides data on total employment in April 2011, but only provides the number of federal employees as recently as November 2008.  Do you suppose they do not want the taxpayer to easily find out how bloated the federal bureaucracy truly is?  On top of this, I have seen numbers for January 2009 civilian federal employees without security clearances reported to be 2,748,978.  The CIA, NSA, and other complete federal agencies were left out of that 2.7 million number.  This number may include the postal employees.  Does the federal government have as much trouble keeping track of how many employees it has as it does of how much land, how many buildings, and how much equipment it has?  I would not be surprised.

Then there are also those many businessmen so cozy with the government who are collecting subsidies and who benefit from mandates, such as those to use ethanol, wind energy, solar energy, and partially electric cars.  There are also crony mercantilists benefiting from many regulations designed to bury their competition, especially that of small businesses, under a mountain of government requirements and paperwork.  These people are often called crony capitalists, but that is a contradiction of terms.  Crony mercantilists have been around as long as there have been governed nation-states, which long predates the day of the capitalists with their philosophy of open markets and freedom of choice.  Capitalism is the manifestation of the equal, sovereign individual right to associate with whom one wants for the purposes of one's choosing.

Just recently, every business in America doing any business with FDA-regulated companies or with FAA and DOD regulated aerospace companies has been hit with a blizzard of quality assurance paperwork and the pressure is mounting for every company to become International Standards Organization (ISO) certified at huge expense both initially and in an on-going way.  This is expensive for large companies and will be the death of many a small company.  The small company that always had to try harder to provide good service or quality products will now be killed in many cases in the name of increased quality.  Ha.  We will see what the monopoly of the few companies that can bear the expense of this extra-governmental regulation required by government agencies will provide in future quality!  Every lab will have calibrated equipment, but will pay no attention to correctly interpreting the data provide to obtain the real properties of the materials investigated.  There will be no quality in the end product analytical report, but every laboratory will be a quality lab because ISO says they are.  As Ayn Rand noted long ago, regulation by government sets up lowest common denominator requirements and no company thereafter has as much pressure as before to exceed those low requirements.  But, many a tired, old, and large company is very happy with such regulations, whether set by the government or by a one-world organization such as ISO.  ISO also serves the function of providing import protection to Europe primarily, but secondarily to the U.S., Canada, and Japan.

If you wonder why it is so hard to reduce the size of government or to reduce its out-of-control spending, this is why.  There are too few people paying taxes and many too many people getting payments, subsidies, and protection from effort.  The many have truly enslaved the productive and wealth-creating few.  But it is these few who create the jobs.  As our society has become most determined to enslave and whip these few, they have responded by laying off many of the employees they can no longer support and by refusing to hire more new employees even as they struggle to increase productivity while robbed of the capital with which to do it.

Democrat Unemployment Policy Rewards Immoral Mooching

The Emergency Unemployment Compensation program of 2008 was initially funded by the Supplemental Appropriations Act of 2008.  Since then, it has been extended or expanded 7 times.  The most recent extension was on 22 July 2010.  It now consists of:

• Tier 1:  Up to 20 weeks of benefits in every state.
• Tier 2:  Up to 14 additional weeks of benefits in every state.
• Tier 3:  Up 13 additional weeks of benefits in states with a:
• 13-week insured unemployment rate of at least 4.0%; or
• 3-month seasonally adjusted total unemployment rate of at least 6.0%
• Tier 4:  Up to 6 additional weeks of benefits in states with a:
• 13-week insured unemployment rate of at least 6.0%; or 
• 3-month seasonally adjusted total unemployment rate of at least 8.5%.

Since all but 4 of the states in June 2010 had unemployment rates of 6.0% or higher, all but the states of North and South Dakota, Nebraska, and New Hampshire may qualify for Tier 3 unemployment benefits.  Qualification for Tier 4 benefits is harder to get the data on, but it appears that slightly more than half the states presently qualify for Tier 4 benefits.  Thus, half the states are subsidizing the other half, as some unemployed people pick up unemployment benefits for as long as 53 weeks.  Curiously enough, people may qualify from as early as May 2006, or well before the recession, until as late as 30 November 2010, or conveniently after the upcoming elections.

What are some of the effects of such long-term unemployment benefits?  Here are a few: 

• The unemployed
• wait longer to look seriously for a new job.
• refuse to take lower paying jobs.
• continue to look for a job much like their old job.
• do not start their own business in order to create their own new job.
• do not move to states where jobs are more plentiful in general or for their job specialty.
• Employers
• cannot find as many qualified applicants as they would like for lower pay jobs.
• find their qualified applicants will not move to the job.
• cannot find people for training positions, even if post-training pay will be comparable to the unemployed person's previous employment pay.
• sell fewer goods and services because people will not buy due to the uncertainty created by high unemployment.
• have to pay higher unemployment taxes to the states due to the high unemployment, making it more expensive to hire anyone.
• generally are hit with more taxes by local, state, and federal government because their expenses are up and the tax base is depressed.
• watch the Federal Reserve print money, which will not circulate, but lurks about to create future investment hazards due to inflation.
• watch anti-business tirades, legislation, and regulations as desperate and befuddled government tries to find someone else to blame for its mistakes.
• cannot get business loans because financial companies are afraid of the unknown and there is much unknown.
• Employed taxpayers
• generally are hit with more taxes by local, state, and federal government because government expenses are up and the tax base is depressed.
• are more likely to become unemployed as higher taxes drive more businesses out of business.
• are more likely to become unemployed as desperate government scares, more heavily regulates, and burdens businesses with more paperwork, such as 1099s galore.
• are more likely to become unemployed as the recession drags on since the unemployed are not working productively and are dragging the economy down.
• suffer stagnant salaries and wages as recovery is delayed.
• watch the investments made for their retirement dwindle
• worry about the debt piled upon their children and grandchildren.
• worry about the many lost freedoms as governments meddle with and take over the private sector to give the appearance of having new ideas and responding to needs.

I am sure that I could go on and on with direful consequences of the unemployment benefit extensions, but we are all surely tired of bullets by now.  How many reasons does it take to establish that something is a bad policy after all?

It is sad to see many people, who were once productive workers, now out of work.  Very many of them lost their previous jobs through no fault of their own in this government-induced and prolonged recession.  But, there comes a time, rather quickly, when someone unemployed either finds new employment or they create their own job by starting their own business, unless they are immoral.  There are unemployment programs based upon unemployment taxes.  I do not think government has the right to impose such taxes, but they do and those taxes will support a rather brief unemployment period as the unemployed transition to new jobs.  But, presently, there is little such transitioning going on.  This is due to wrongheaded government meddling in the private sector and these extensions of unemployment benefits are one of many boneheaded actions by the government to prolong this recession.  In very many ways, the Obama administration is mimicking the Roosevelt administration in the folly, erratic, and threatening nature of its economic policies.

The Tier 3 and Tier 4 unemployment benefits are analogous to the Thompson administration in Atlas Shrugged deciding to drain the wealth of burgeoning Colorado to keep going a bit longer in what is clearly a death spiral.  Mooch off  Ellis Wyatt with his new oil fields, Nielson Motors, and Hammond Cars so the unproductive can go on a few more days even at the expense of destroying the last healthy part of the country.  This is a great way to prolong a recession which should be over by now.  This unemployment compensation makes the states with fewer anti-business policies bear the costs of supporting the larger numbers of unemployed generally found in the states with poor business policies.  It takes those companies and industries which are stronger throughout the country and makes them weaker to support those who will not take the personal responsibility of moving to where the jobs are, of taking a lower paying job, of learning a new profession, or creating their own job.  It is often said that Obama is the second coming of Carter, but he is more like the transformation of Thompson from fiction to life.

John Smith the Creator

One of the really good things to come out of this election was the rise of Joe the Plumber, Tito the Builder, and Cory the Well Driller. Each has built or intends to build a business and each is making or doing something that responds to the needs of others. None of them want handouts from government. They just want to be allowed the freedom to work incredibly hard to produce and create things that others want to purchase from them.

They all have the temerity to think that no one deserves to receive the wealth they created and Obama wants to spread around to others who have not worked as hard and taken the risks they have. I like the fact that each has been identified as a producer and creator of wealth and jobs. These are good men and many people seem to have responded positively to that. There are still good Americans who are not bent on mooching off others and are proud of their ability to be productive and creative.

One of the tragedies in America is that we do not call the parasites who want to receive the money Obama wants to spread around, Sally the Parasite, Joan the Moocher, and Greg the Bloodsucker. We are a nice people who rarely assume that those who produce and earn little most likely deserve to earn little. In reality, there often are good reasons why some Americans earn little.

Of course, many who earn little are also learning the skills or developing the business that will one day allow them to have a very good income. Our upward mobility in America is largely unheard of in other countries around the world. Many of the poor are on their way to wealth. If we spread the wealth as Obama wants to use force to do, then many Americans who want a chance to become wealthy will never be able to do so.

The Right to Life and Slavery

Most Americans believe that as human beings one has the inalienable right to life, liberty, and the pursuit of happiness. Today, I want to revisit a single aspect of our individual right to life, liberty, and the pursuit of happiness.

There are many ways to look at one's life, liberty, and pursuit of happiness. There are other ways to look at it which are also right than the viewpoint I am going to take today. But, fundamentally our life consists of all the hours we have lived and our plans for the use of our future hours. Let us oversimplify this further to consider each hour that we have just lived and each hour that we are about to live and make decisions on what we are going to do with it. If an individual had no control over how he just used his last hour, then it is unlikely that that hour added much to his life, it surely did not add to his sense of living in liberty, and he is unlikely to have been very successful in the pursuit of his happiness. Similarly, looking forward to the next hour of our life, we have a decision or several decisions on how to use it. If we can chose to spend all of that hour doing things that we believe will enhance our life, then we are already assured that our life will be better, we will feel free, and we will be pursuing our individual happiness in those ways which uniquely define that happiness to us as an individual, living creature.

So, what shall I choose to do in the next hour? Well, it is Sunday, so I could go home and work on building a new retaining wall for the garden. Let us suppose I do that. I get some fresh air, I get a wee bit of exercise, and I get a nice garden retaining wall. Oh, and my home value goes up a bit and my property taxes go up with it. Of course, I also paid sales taxes already on the wall blocks waiting to be used and on the gasoline used to go buy them. OK, so I guess I will do something else. I could watch TV and listen to the news. How exciting to find out about the latest effects of flooding in Iowa and the new declaration of a federal emergency area to cover the troubles there. And, I learn about how Obama is sure that there is no need to allow the drilling of oil in federal lands, which just happen to cover most of many of our western states. Or, I could hear McCain proclaim that he thinks the north slope in Alaska is pristine and we should leave it that way. I could hear many schemes to make the American medical system like that in Canada, the UK, France, or even Cuba. Yes, even Cuba, but I will not talk about that one, since only the truly insane want Cuba's medical system. So, if I watch TV news, I am frustrated, but, hey, I made the choice, right? But, I did still pay taxes to purchase the TV and I have a room for it in my house on which I must pay property taxes. Still, both choices to work on the garden or to watch TV are relatively lightly taxed and both are relatively free of government expropriating some of my time during that hour or in subsequent hours because I made one of those choices.

Let us suppose that being a small business owner, I decide to go to my laboratory and work on analyzing a carbon coating said to have been applied to a cubic zirconia gemstone to make it look more diamond-like. The income of an hour of work on that project will have federal income taxes, social security taxes, Medicare taxes, Workman's compensation insurance, and Maryland and Federal unemployment taxes withheld from it. I have no determinative choice in how that money is used and I oppose most of the ways in which it is used. Some of the ways it is used are just wasteful and evil for depriving me of the better things I could do with it, but many of them are for the actual doing of further evil deeds. Because I am a business owner, I have further bookkeeping to perform for replacing any supplies I may use in the laboratory analysis I chose to do in this hour. If I take some part of the money I made and invest it in buying additional laboratory equipment, then I get to pay property taxes on that equipment and do the bookkeeping to keep track of its depreciation over the years. Now, I happen to enjoy finding out such things as the nature of new coating technologies and I have specifically in the area of coatings on gemstones discovered some false claims in advertising. I also like working to be able to add to my laboratory's analysis capabilities by buying new equipment. This is fun, but is there any valid reason why when I make this choice to do productive work, I am taxed many more minutes of the hour with tax payments and with the mandated, unpaid contribution of future time than I would be if I worked on the garden retaining wall or I watched TV?

I think it is fair to say that this is clearly wrong. This is clearly a violation of my right to life, liberty, and the pursuit of happiness. I do not have the liberty to choose to spend the next hour of my life on anything without government taking a part of that hour away from me. This is especially true if I try to do productive work which requires an income to enable me to carry out that work. It costs a lot of money to keep a laboratory working. Most of the income the laboratory makes goes into paying the bills to keep it going. A small part, highly dependent upon the fluctuations in the laboratory income, goes to me in the form of a salary or into buying equipment which enables the laboratory to make more money in the future or at least to keep it up-to-date enough to continue making as much money as it does now. But, each new piece of equipment brings more taxes and more bookkeeping. I may love doing the scientific investigating that I do into the properties of materials and in evaluating the success or failure of various manufacturing processes, but I am forced by governments to pay a heavy price in precious minutes out of every hour that I choose to put into such work. Why? Why do I have less right to an hour of my life put into laboratory material analysis than I do if I put it into building a garden retaining wall or into watching TV?

What gives those who vote for these government policies that discriminate against what I like to do the right to make such forceful demands upon the minutes of each hour of my life? Is it not the case that each such minute they take is one in which they hold me as their slave? For years I have been asking this question. No one ever gives me an answer. Those elitists who believe they know how a man should live his life and that they are the ones to force him to do so according to their values never answer my question. Why should they? They have the power. The force and as-needed violent power of government is in their hands. I am deprived of many minutes of every hour I choose to work by applying my time, my investment of untold thousands of hours in all the technical and scientific knowledge I have acquired, and my investment in the laboratory I have struggled to build and I do not even get an answer as to why.

It is especially wry that many of these socialist elitists controlling governments claim to be egalitarians. This is a fraud. We all have the same number of hours of life in a week, yet they take many more hours in the form of taxes and mandated requirements for our work from some of us than from others. This taking is the taking of the hours of lives. They seek equality of income and property, but the most precious thing that any of us have is the hours of our lives. That, these socialists tax with extreme inequality.

Walter E. Williams wrote a column called "Are Americans Truly Against Slavery" in which he identified excessive taxes as slavery. As I have noted in the past, Williams is very good at getting to the heart of the matter and he does so with an obvious passion. I wrote a comment in reply to this column also at this same website. A number of the other comments are also quite good.