If You Raise Taxes On Rich People And Businesses, You Get Fewer Rich People And Businesses
After Phil Mickelson created controversy with his comments about too-high taxes, professional boxer Manny Pacquiao is refusing to fight in the United States because of our national tax rate.
This is what happens when tax rates are prohibitively high. People take their business, and their wealth, to friendly tax climates:
Manny Pacquiao’s chief adviser insisted Monday that the Filipino superstar’s preference is for his next bout – a fifth fight against Juan Manuel Marquez – to take place away from Las Vegas, with the off-shore Chinese gambling resort of Macau emerging as the “favorite.”
Michael Koncz told Yahoo! Sports that the 39.6 percent tax rate Pacquiao would face if he were to fight again in the U.S. makes a fall bout in Las Vegas “a no go.”
Promoter Bob Arum is hopeful of arranging a fifth match between Pacquiao and Marquez in the fall, potentially on Sept. 14. Arum’s preference is for the fight to be at the MGM Grand in Las Vegas, which is his company’s home base.
But Arum and Koncz say Pacquiao is balking at the additional money he’d lose to the government if the fight were held in Las Vegas. Arum said Pacquiao would not have to pay taxes if the fight takes place in casinos in either Singapore or Macau.
“Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million?” Arum said. “If he goes to Macau, perhaps his purse will only be $20 million, but he will get to keep it all, so he will be better off.”
Meanwhile, we’re seeing this trend among the various states within US borders too. The State of Illinois, which seems to be in a competition with California to see which state can go bankrupt first, implemented massive tax hikes to address big budget shortfalls. The result? Businesses like State Farm are fleeing to states like Texas with lower taxes:
Insurance chain State Farm is reportedly buying up substantial workspace in Texas, which may signal a coming exodus from the company’s home state of Illinois. …
At the end of 2010, in a special session, the Illinois Legislature passed a 67% hike in its corporate and personal income tax. The state is struggling with a structural deficit and its credit rating was recently lowered. The state now has the worst credit rating in the country. A number of businesses have floated the idea of leaving the state. A move by State Farm, however, would devastate the downstate economy.
Not only is America plagued with high taxes, we’re plagued with tax uncertainty as well. Our government can’t even bring itself to budget, and in recent years our tax policy as been setfor a year or so at a time through a series of edge-of-the-cliff hostage negotiations.
Is it any wonder that businesses, and some of the richest and most talented people, are looking elsewhere in the world?
What’s particularly frustrating is the way our friends on the left carry on as though changes in tax policy have no impact on the decisions people and businesses make in the economy. Clearly, tax policy does impact decision making.