After I read, “the way to do this was to slow government spending and raise taxes on the wealthy,” in Larry Summers’s Evolution, I realized that it is no longer plausible to target the wealthy as a tax panacea. Simply put, the reason why State and Federal government cannot and should not target the wealthy, rich, and super-rich is because the wealthy — especially the super-rich — have many more options than you and I do: they can easily relocate.
If they’re targeted in Maryland, they can move to Virginia; if they’re targeted in the United States, they can move abroad. It is a constant game of chicken when it comes to attracting and keeping wealthy residents.
The upper middle class has several more options, while the middle class, the lower middle class, and the poor don’t have many options at all. Simply put, it is much easier to tax the middle class because they’re not going anywhere. They stay and suck it up. They are more rooted and a lot less likely to flee, although this is changing more and more.
So, if you wonder why even the Democrats are unwilling to target the rich to pay for the social programs of the poor, it is because they’re afraid as opposed to merely corrupt. The PACs and Associations don’t have to do all the work. When it comes to Connecticut, it benefits the State and Local government to protect New Canaan, Darien, Weston and Greenwich in order to fund Hartford, Bridgeport and New Haven. Borrow from St. Paul’s to pay peter, if you will.
I foresee that post-nups will define where the rich will live in the NY Tri-State area. In New Jersey, post-nups are illegal; whereas, in Connecticut and New York State, post-nups are in a sort of gray zone. I foresee lots and lots more private equity and hedge fund managers making the legal move to Connecticut and New Jersey, if only for this reason.
So, I think that State and Local Governments are smart of playing a little bit of the appeasement game with the wealthy and with big business. But sometimes it is hard to see — hell, if these super rich people have so much money, why don’t we tax them on it? Well, if you try to take too much of a share, you might start seeing lots and lots more Americans living off shore, with even more of their money hidden behind the wall of an offshore Corporation.
Be realistic.
