Wednesday, April 14, 2010

The Tax Death Spiral

Sometimes, a politician will decide to raise taxes for whatever purpose. This is done early in the term, so folks will forget Indeed, what happened in Maryland happened to be a smart move: The bottom fell out mid-term, and no one's discussing raising taxes. But when your neighbor Virginia manages to keep taxes low through fiscal responsibility, that's when you know you don't have a captive population. Indeed, tax records presented by the right-leaning Washington Examiner indicate that over 100 millionaires have left one county of Maryland for Virginia, presumably, since the instatement of the populist-based millionaire tax. What do you do when the result doesn't work as intended? Hold the tax rate? Bad idea. Raise it? There goes the Tax Death Spiral. As taxes rise, more and more people will flee. Then, when you start taxing the middle class- whizz bang, there goes your neighborhood. Thus, what remains is a failed state with a chronically ill budget. Witness any big city in the last part of last century.

So what do you do when you become the maverick of tax increases? Lower them. While that means less revenue in the short run, this is the only redeeming path to a decent state future. This applies to all sorts of taxes, including real estate, income, sales tax and any fees one thinks of imposing.

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