Too often, elected officials overlook the cumulative costs of regulations, taxes and fees on taxpayers. It can come back to bite them hard when people move, or take matters into their own hands by initiative.
Consider what is happening in high-tax and cost-of-living states, such as California, New York and Connecticut.
Florida recorded the highest level of net domestic migration in 2018 and added 1.2 million people from other states since 2010. “Many Florida transplants are retirees and tax refugees from the Northeast, but businesses of all sorts are also recruiting young workers from other states to serve the state’s booming population that has reached 21.3 million,” Bloomberg reported.
Connecticut lost the equivalent of 1.6 percent of its annual adjusted gross income, as the people who moved out had an average income of $122,000, which was 26 percent higher than those migrating in. “Leavers” outnumbered “stayers” 5 to 4.
In 2017, the Census Bureau reported California saw a net loss of just over 138,000 people, while Texas had a net increase of more than 79,000 people. Arizona gained more than 63,000 residents, and Nevada gained more than 38,000.
A USC Dornsife/Los Angeles Times poll of Californians found the high cost of living, including housing, and taxes, such as the state’s new gas tax (which increased by 40 percent) were driving factors.
The good news is the Pacific Northwest is gaining population, and some key advantages for Washington are no income or capital gains taxes.
However, there are warning signs as well. The Legislature adjourned last spring after raising taxes substantially. While legislators killed carbon and capital gains tax proposals, the Democrats’ tax package aims to raise more than $830 million over the next two years and $2 billion over four years.
“That doesn’t factor in a new payroll tax to fund a first-in-the-nation long-term care benefit that was passed separately. It also doesn’t include an overhauled hazardous substance tax designed to raise $359 million over the next four years,” NPR’s Austin Jenkins reported.
Tax increases drive citizens away and spawn a raft of initiatives. For example, a similar increase in state taxes in 1993 led to approval of I-601, a citizen’s initiative to limit state spending. (It was overturned by the state Supreme Court in 2013).
Twenty years ago when residents objected to high license tabs fees, voters overwhelmingly approved a $30 car tab initiative. Although the courts invalidated the initiative on technicality, Gov. Gary Locke and lawmakers immediately reinstated the law.
Seattle Mayor Jenny Durkan and the city council learned the hard way when they voted unanimously to add a “head tax” primarily directed at Amazon and Starbucks. “No Tax on Jobs” formed and amassed more than 45,000 signatures calling for a public referendum. The mayor and council backtracked and repealed it by a 7-2 vote.
Politicians may earnestly believe their actions will have no repercussions, but they do. When cumulative taxes and costs of living exceed what people can afford, they either move or seek relief by initiative or referendum.
School boards, cities, legislatures and Congress overlook the total impact of their collective actions, but there is a tipping point. There is no argument that politicians can justify every tax, fee or regulation they add; however, that approach often ignores how much taxpayers can afford.
It isn’t as much an issue of which tax or fee is increased. It is about their accumulation on taxpayers and the family budget.
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