You can’t spread wealth that’s running away

Back during the campaign, then-candidate Obama famously told an obscure plumber that he wanted to “spread the wealth” around a bit, that it would be good for the country overall to take more money from those who are successful and give it to those who aren’t. Tito dug up the video from the archives. I’ll wait while you go watch.

And there you have Progressive economics in a nutshell: government is a better arbiter of wealth distribution than the market and, in the name of fairness, government decides when you’re too much of a winner and how your “excess earnings” should be deployed. Hence, higher taxes on the wealthy (however the government defines “wealthy”) are needed so the statists can re-engineer society to correct what they see as its ills.

Questions of effectiveness aside, however, it’s hard to tax someone who’s escaped moved away. The Manhattan Institute’s Steven Malanga asks Tax the Rich? How’s That Working?

When David Paterson became governor of New York after Eliot Spitzer’s hooker escapades, the former state senator from Harlem shocked New Yorkers by declaring that taxes were too high and that he had many friends who had left the state because there were better opportunities elsewhere. New York had to grab control of its spending rather than continue raising taxes, said the former state senator with a long tax-and-spend track record, in what amounted to the equivalent of ideological heresy.

Still, as a political lightweight and accidental governor, Paterson quickly got rolled by the big-government wing of his own party, who passed a budget for this year with $6.1 billion in projected new taxes and fees, led by sharply higher rates starting for those earning more than $200,000 a year. Asked if the budget made sense in the recession an outgunned Paterson said, “None of this makes sense.”

I suppose it is cold comfort to New Yorkers that Paterson is now giving his political enemies the “I told you so” treatment. Speaking to reporters recently in Albany, Paterson noted that revenue from tax increases was running 20 percent below projections and that, in particular, the wealthy were not paying up. So far, the state had only collected about half of an expected $1 billion in income tax revenues from the state’s wealthiest residents. “You heard the mantra, ‘Tax the rich, tax the rich,”‘ Paterson said. “We’ve done that. We’ve probably lost jobs and driven people out of the state.”

Emphasis added. Be sure to read the whole article.

Malanga looks at several other states, including Ohio, New Jersey, and my beloved California, and sees several interrelated problems. Not only are high taxes driving high earners to earn less, shelter their income, or even move away; the crashing economy means there are fewer of these high earners around, further cutting revenues. Federal taxes are sure to rise (especially if ObamaCare passes), which, combined with rising state taxes, will create tremendous incentives to work and earn less, not more. Contrary to the statists’ expectations, government revenues also fall, as we’re now seeing.

The progressives can’t even make the argument that they at least provide good services to the people. Far from it: the states with the highest tax rates are notorious for poor services. Taking California as an example, we’ve poured billions upon billions into our public schools, yet student performance has hardly improved. If you’re going to get poor service from the government, why not move to a jurisdiction that at least won’t take as much of your money?

You would think that, seeing the results in states that have already jacked up their taxes, the federal government would think twice before making the problem ten times worse. But, nooooo. The Bush tax cuts are set to expire, the cap-and-trade bill will create a huge new tax, and, on top of all that, Speaker Pelosi (on behalf of my state I apologize to the nation for letting her escape her cage) wants to pay for health care reform with a value-added tax on top of all manufacturing.

That will give people plenty of reasons to work harder and invest more, you betcha!

They won’t take it, but the President and his allies in Congress really need a basic, easy-to-understand lesson in tax policy and the economy. I have a suggestion for them.

(Cross-posted at Public Secrets)