Los Angeles Times: Voting Away the Tax Base?

The Los Angeles Times has a fascinating article about the theoretical effect Prop. 82 would have had on taxpayers. The question is, if taxes are targeted at the so-called "rich," will they leave the state for more tax-friendly places?

...Bill Hamm, a former legislative analyst for the state, estimated that California's general-fund coffers would have lost at least $4 billion in revenue in the first five years if 82 had passed.

The rich, Hamm said, can and would take steps to protect their income from higher tax rates. Some would leave the state. Others would defer compensation, boost tax-sheltered retirement savings or cut their taxable income in other ways, such as by investing in California tax-exempt bonds, he said.

His report, he said, was based on 'well-established economic modeling' of how people react to changes in marginal tax rates.

What's key, Hamm contends, is that the high-income group is a sliver of society, but its total contribution to California's tax revenue base is substantial

Of course, this begs the question of how businesses (and business owners) react to high taxes. I don't think a study of this kind has been conducted to gauge the effect of eliminating or severely limiting Enterprise Zones.

You have to read all the way to the bottom of the article to get the Lenny Goldberg quote:

Even Goldberg allows that it's possible to go too far in taxing the rich. "To say there's got to be an upper bound, I wouldn't argue with that," he says.