G.L.Piggy [at] gmail.com
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A couple of recent posts by TLOTB have drawn my interest. He is focused loosely on the battle between California and Texas for wealthy citizens (or any citizens in general). He argues that California’s high tax rates won’t push residents towards Texas and its lower tax rates because wealthy Californians don’t want to live in Bible country.
I don’t think Californians’ general desire to avoid Texas and Texas’ culture has as much to do with it as their general love of the landscape and weather of their state. That should come at a premium, and you’d expect to be able to charge more money for access to mountains and the beach and relatively nice year-round weather. But, of course, all along the tax spectrum marginal taxpayers will decide that access to nice scenery has become too expensive.
While I’d expect that economists have discussed tax rate elasticity between states and regions, I wonder if they’ve modeled access to landscapes. Why wouldn’t states with access to the ocean charge more? Why wouldn’t counties within those states have higher property taxes or sales taxes? The same concept applies to cities which offer amenities that generally lower-tax rural areas don’t have.
Taking each state as a whole then, we see that the natural offerings of each state – it’s weather, landscape, waterways, and general scenery – help formulate its destiny. We could model two states, The Ugly State and The Beautiful State. Just running through the model quickly, The Beautiful State would move towards a blue model because the people who are willing to select environment over low tax rates would more likely be liberal in disposition. Ugly States could only compete on price (tax rates). The people it would attract would be price-focused.
But as for TLOTB’s present discussion, California’s increased taxes will surely push some people away, but it will push those who are least attached to the state (and more attached to their money). Retirees will move away and so will business owners. Many Californians do also enjoy the return they get on their tax dollar investment. The state provides some decent amenities to its residents. But the new tax hikes aren’t really providing any new amenities; it’s bailing the state out for ineffective amenities it has provided in the past.
This is just a quick model, and I’m shooting from the hip here. I expect push back in the comments so let ‘er rip.