The WSJ editorial page reported today on the current California bill to raise the top marginal income tax rate to 12%. And there’s more:
The plan would raise the top marginal income tax rate to 12% from 10.3%; that would be the highest in the nation and twice the national average. This plan would also repeal indexing for inflation, which is a sneaky way for politicians to push middle-income Californians into higher tax brackets every year, especially when prices are rising as they are now. The corporate income tax rate would also rise to 9.3% from 8.4%. So in the face of one of the worst real-estate recessions in the state’s history, the politicians want to raise taxes on businesses that are still making money.
Do massive tax increases on California businesses have an impact? Of course they do:
This latest tax gambit was unveiled, ironically enough, within days of two very large California employers announcing [that they are leaving] the state. First, the AAA auto club declared it will close its call centers in California, meaning that 900 jobs will move to other states. “It costs more to do business in California,” said a AAA press release, in the understatement of the year.
Then last week Toyota announced it is canceling plans to build its new Prius hybrid at its plant in the San Francisco Bay area because of the high tax and regulatory costs. Adding to the humiliation is that Toyota will now take this investment and about 1,000 jobs to a more progressive and pro-business state: Mississippi.
The article even mentions Nevada:
The Democratic tax plan will give rich people a further incentive to flee at the very time the real-estate market is in collapse. … The politicians in Nevada, the state with the third worst real-estate market, are hoping California raises taxes, because this could be a fast way to revive the Reno and Las Vegas housing markets.
With all the tumult of the current real estate slump, it’s easy to lose track of Nevada’s core competitive advantages. Our lack of an income tax is a huge magnet that will continue to draw people and wealth to Las Vegas. When Frothing Developer made his first fortune building Internet companies, he was living in California, and he wrote millions of dollars of checks to the California state government. Now he lives in Las Vegas, and that money that would go to the State instead gets reinvested locally. For example, the profits from Manhattan Condominiums were reinvested in ManhattanWest, which currently employs about 400 people.