When Will Death Spiral States Impose Taxes On Fleeing Citizens?

Our governments and universities are populated by bureaucrats and politicians screaming "You didn't build that....you had help...and now you need to put something back in....you need skin in the game..." (God knows how much I hate that saying). More than that they have a simple belief that all money is government's first and the government decides how much you can have back. And more and more they are deciding what you can do with it. Knowing that how can you see this happening in California or New York?

When Will Death Spiral States Impose Taxes On Fleeing Citizens?

By Bill Frezza

One of the most fascinating characteristics of government borrowing - whether at the local, state, or federal level - is that debts contracted over time are obligations tied to specific geographical boundaries but not to the citizens living there when those debts were incurred. For example, while it's customary to say that each of the 210,000 residents of Stockton, California, are on the hook for their share of the bankrupt municipality's estimated $700 million in unpaid bills, the day one of them picks up and moves, personal responsibility for that debt drops to zero.

Imagine if that type of tax "evasion" were eliminated. How would it change America?

Government debts are accrued on your behalf by elected officials for whom you had a chance to vote, all supposedly representing your interests. In a democracy, all citizens are obliged to pay the government's bills as determined by the duly empowered taxing authorities - regardless of whether they voted for a particular officeholder or not. What's to stop legislators from passing laws that make debt obligations due and payable by any citizen who decides to leave for another jurisdiction? After all, they don't hesitate to take your money when you die.

Mayors and governors of most tax-and-spend, heavily unionized, low-growth cities and states are both desperate for revenue and tired of watching disgruntled citizens vote with their feet. Think how politically attractive it would be for them to make "economic deserters" pay their "fair share" of old debts. I can see the arguments already: "You can't move away from credit card debt or commercial debt, so why should government debt be so easy to dodge?" Politicians could easily win kudos from both public employee unions and the overtaxed residents left behind, for the mere cost of enraging emigrants who won't be around to exact retribution at the next election.

And can't you just see the progressive commentariat lining up behind a movement designed to deter well-heeled blue state residents from seeking refuge in those despicable red hinterlands? Like Glenn Close rising from the bathtub to take one more stab in Fatal Attraction, don't be surprised when death-spiral states resort to exit taxes as a last ditch effort to forestall their impending bankruptcies.

Exit taxes imposed on emigrants have a long history, including their use in both Nazi Germany and the Soviet Union. They were imposed under the theory that, since citizens were educated by the government and were either provided benefits or allowed to profit from jobs and business held while living under the government's protection, they were obligated to pay back some of that money on their way out.

Sounds like something only a Hitler or Stalin would love? If only. Try surrendering your U.S. citizenship and moving to another country. Thanks to a series of expatriation tax laws passed by Congress dating back to the 1960s, with the most recent revision sponsored by Rep. Charles Rangel (D-N.Y.) (no stranger to tax evasion himself), emigrants leaving the U.S. must pay capital gains tax, including on unrealized gains, across all their holdings marked to market as of the day of departure. In addition, expats are liable for gift taxes on amounts above $12,000 a year given to anyone in the U.S., for the rest of their lives, even though they are no longer citizens themselves.

To date, the Supreme Court has had no problem with any of these laws. So what is to stop, say, California from imposing exit taxes on the steady stream of citizens heading off for Texas, Arizona, and Nevada? More than 200,000 people flee the Golden State every year, taking their money with them while leaving behind their share of the state's $617 billion in state debt, which comes to about $16,000 per resident. That's $3.2 billion a year in tax evasion!

If presenting every deserter with a $16,000 bill proves too unpopular, why not follow Uncle Sam's lead and make a grab for unrealized capital gains taxes? California taxes capital gains at the same rate as ordinary income - voters there recently passed a referendum to increase the top rate to 13 percent - so a tax like that would bite the richest nice and hard. That'll make those Silicon Valley millionaires think twice before escaping to a low-tax state before cashing in their shares! And who has any sympathy for them? After all, they didn't build that.

Perhaps class warfare politicians in the U.S. are waiting for their French role model to show them the way. French President Francois Hollande, proud of jacking the top income tax rate up to 75 percent, seems nonplussed about the fact that his wealthy subjects are decamping for London and Belgium. Gérard Depardieu, France's richest movie star, recently made the news not for a repeat of his classic performance of peeing in an airplane aisle but for becoming a resident of Estaimpuis, Belgium, less than a mile from the French border. Isn't it time to make an example out of such economic villains?

Of course, if that fails, states could consider building walls and posting armed guards at their borders. That's been tried before too.

True, border walls are not beyond the possibility in deep blue states. But I wonder if these morons realize if there was something like that passed say in the California Assembly what would happen. Assuming you had this proposed countless businesses would instantly look at moving to other states to escape prior to the bill's being passed or taking effect. And if the ACME Widget company did get caught it would be bled dry by the bureaucracy in The Iron Pyrite State. So Mr Spacely, Mr Cogwell and George Jetson would all be out of a job. However they would have skin in the game for the Train from Nowhere to Nowhere!