It’s an ironic fact that those who hate the wealthy probably benefit the most from their success.
The wealthy pay the vast majority of income taxes, with the top 1% paying nearly half of all Federal income taxes. Those at the bottom actually pay “negative” taxes, meaning they receive more in transfers from Federal programs than they pay in Federal income tax.
So here’s the problem: tax the wealthy too much, and you run the risk of ending up with less revenue, not more. How would this happen? A number of ways.
The wealthy could shelter their income, placing it in offshore tax havens. They could invest in tax-exempt Treasury or Municipal bonds. They could work less hours.
Or they could simply pack up and leave – and New Jersey, a notoriously high-tax State, is learning a HUGE lesson in the consequences of that.
Billionaire David Tepper’s decision to leave New Jersey for tax-friendly Florida has Garden State lawmakers scrambling to find a way to avoid the edge of an income tax deficit cliff.
“We may be facing an unusual degree of income-tax forecast risk,” said Frank Haines, budget and finance officer with the Office of Legislative Services, according to Bloomberg.
New Jersey’s annual budget relies heavily on personal income taxes for as much as 40% of the state’s revenue. Currently, less than one percent of Garden State taxpayers, i.e., the uber-rich like Tepper, actually pay about a third of New Jersey’s income tax bill.
Tepper’s unexpected departure — moving his Appaloosa Management from New Jersey to Florida, pocketing those personal income and estate taxes — could mean a “one percent forecasting error in the income-tax estimate or a $140 million gap,” Haines said.
Before Tepper took his fortune to Florida, New Jersey was already facing a $1.6 billion budget gap.
They’re left scrambling for revenue – and he’s just one guy.
When Bernie Sanders and other liberals bash the wealthy, they need to remember one thing: without them, there’s no one to fund the programs that are “free” to everyone else.
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