Incentives matter

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LINDSAY MAST, HOST: Good morning! This is The World and Everything in It from listener-supported WORLD Radio. I’m Lindsay Mast.

NICK EICHER, HOST: And I’m Nick Eicher. The latest IRS data simply confirm what we’ve all known: upper-income people are leaving high-tax states and heading for lower-tax states. Here’s commentary from WORLD’s Cal Thomas.

CAL THOMAS: New York Governor Kathy Hochul has provided one of the clearest demonstrations in recent memory of what happens when political rhetoric collides with economic reality.

Back in 2022, campaigning against Republicans, Hochul had this to say:

HOCHUL: The era of Trump and Zeldin and Molinaro, just jump on a bus and head down to Florida where you belong. Okay, get out of town. Get out of town because you don’t read. You don’t represent our values. You are not New Yorkers.

That was then.

Here is Hochul last week:

HOCHUL: I need people who are high net worth to support the generous social programs that we want to have in our state. Right? … maybe the first step should be go down to Palm Beach and see who you can bring back home, because our tax base has been eroded.

So this is how you woo people back?

First you tell them they do not represent your values and do not belong. Then, when their departure begins to pinch the treasury, you demand they come back to resume paying the bills.

I cannot imagine that sales pitch succeeding with many people.

Perhaps Albany should try something more realistic: learning to live on a tighter budget, like everyone else.

Even someone with a rudimentary understanding of economics should know that if you tax a business or an individual beyond the level of tolerance, many of them will pack up and leave for a state with lower taxes and a friendlier climate for success. One cannot escape the long arm of federal taxes, but at the state level people have choices, and many are making them.

The latest IRS migration data, highlighted by the group Unleash Prosperity, show the pattern continuing: income is still flowing out of high-tax states and into states with lower taxes. California leads the list of states losing tax revenue to migration. New York is a close number two, followed by Illinois, Massachusetts, New Jersey, and Pennsylvania. The destinations are familiar, too: Florida, Texas, North Carolina, South Carolina, and Arizona.

None of this should surprise anyone except politicians living in denial who cannot seem to help themselves when it comes to squeezing more money out of successful individuals and businesses.

The only surprise is they’re saying the quiet part out loud—come back and fund the welfare state.

But that is precisely the point.

For government to grow and spending to rise, somebody must pay. And if the people expected to pay decide they have paid enough and leave, that starves the tax-and-spend machine.

This is not complicated.

Incentives matter. People respond to them. Businesses and investors do, too.

Democrats in Washington state seem determined to learn this lesson the hard way. They have adopted a 9.9 percent state tax scheduled to take effect in 2028.

That gives those affected ample time to study a map and call a realtor.

As this is the centenary year of our 30th president, Calvin Coolidge, his words remain instructive:

“A government which requires of the people the contribution of the bulk of their substance and rewards cannot be classed as a free government, or long remain as such.”

That may sound old-fashioned in an age of ever-expanding government, but it has the advantage of being true.

A state may raise taxes. It may expand programs. It may even convince voters that both are necessary.

But it cannot insult productive citizens, drive them away, and then plead for their return once the going gets tough.

For WORLD, I’m Cal Thomas.

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