As a follow-up to my well-received post below (four comments!), here's another reason why concentrating tax revenues from a handful of citizens is bad policy: when there's a downturn, a good chunk of that taxable income disappears. From the Boston Globe: "State considering capital gains diversion plan"
The economic downturn has produced a record decline in the taxes Massachusetts collects from taxpayers on their investment profits, a $1.6 billion drop-off that is largely responsible for the worst fiscal crisis to hit state government in decades.The federal government now finds itself in a similar pickle: revenues from the "rich" are way down (and spending is way up) fueling record deficits. But instead of helping to foster businesses that create jobs and the income tax they generate, this administration is pushing a hefty levy for health insurance and energy costs.
The 75 percent decline in capital gains tax payments for the fiscal year that ends June 30 is also producing an unusual consensus on Beacon Hill, where Governor Deval Patrick’s administration and lawmakers are moving to protect the state against wild swings in income by diverting more of the tax proceeds into savings.
What have years of high-tax, soak-the-rich, statist policies done for New Jersey?
Big Government is why New Jersey created only 6,800 private sector jobs from 2000 to 2007 - while public sector jobs grew by more than 55,800. Big Government is the reason New Jersey ranks as the worst of 50 states on the Small Business Survival Index. And Big Government is a leading reason New Jersey has a "corruption problem" that an FBI agent at Friday's press conference characterized as "one of the worst, if not the worst, in the nation."There's a special kind of hubris in Washington, one that believes that it will somehow avoid the health care pitfalls of Massachusetts, the business-killing machine of New Jersey, and – hell – even the history of mankind.
Hope and change, baby!