Sunday, February 17, 2013

Exit Tax

      States like California, Illinois, and New York are bleeding tax payers. High wealth people and corporations are finding the financial policies of these states intolerable and potentially destructive.  In retaliation and fear of the inevitability such exodus, legislators in these states have proposed Exit Taxes (click here for an example).  The argument is that these people/ corporations were "enabled by these states" and the states have an financial investment in that success and consequently are entitled to a dividend.
      This topic has become part of the recent discussion in a Debate Club which we facilitate.  One of the participants offered,

Yep, a CA Exit Tax was proposed a few years ago and continues to be talked about as a "solution".  For individuals, one proposal is to double the person's state taxes for the year (or past 12 months) in which he/she leaves the state.  Some bankrupt CA cities have also talked about similar exit taxes.  I heard that bankrupt NY state already has something like this, but I have not verified that. 
We commented as follows.

      Actually, I had not heard of the “Exit Tax,” but it certainly seemed like a natural progression to halt an economy that is bleeding its tax base.  Since my previous note I researched it.  The only reference I could find to a NY exit tax was a comment made by Rush Limbaugh, which like much that leaves his mouth is not credible.  The closest thing to a state level exit tax is what New Jersey has that requires out of state owners of property sold in New Jersey to pay a portion of the income earned from that sale to New Jersey.
      As one thinks about an Exit Tax, why doesn’t it makes sense in terms of fairness?  If you participated in the democratic election of representatives who through their incompetence fail to provide for their spending sprees, why should you have an escape mechanism for your failure?  But you say that you didn’t vote for that idiot.  However, haven’t you bought into the American system that provided for his election?
      If you run up a bill on your credit card, you can’t disavow liability by canceling that card and subscribing to another.  The debt remains as YOURS and not the people who continue to retain that credit accounting.
      Researching the Exit Tax, the politics most against it are the conservatives.  Aren’t they the same people who preach “personal responsibility?” Or do they believe that it only applies when it benefits them?

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