In Defense of Realistic Taxation

In defense of the Tea Party — in the broad movement sense — Fred Deusch of North Providence sums up the problematic thinking of those who advocate for progressive taxation:

Rhode Island has about 1 million people, but only 12,000 pay 41 percent of the state’s taxes, according to Treasurer Frank Caprio. How much does Mr. Platt want from those 12,000? In a May 9 Commentary piece, Michael McMahon, former head of the Rhode Island Economic Development Corporation, wrote: “Montgomery County, Md., similar in size and population to Rhode Island, tried to balance its budget by increasing taxes on the top wage earners from 4.75 percent to 6.35 percent. This was supposed to generate $106 million of additional revenue. But many of the wealthy, who are very mobile, left town. Revenue actually fell by $257 million as the number of millionaire taxpayers declined from 7,989 to 5,529.”
When the wealthy leave for greener pastures, whether from Maryland or in Rhode Island, who does Mr. Platt think makes up the for the loss in tax revenues? Answer: We all do.

As I’ve pointed out multiple times, for much of the last decade, Rhode Island’s tax policies — the flat tax and the capital gains tax — appeared to be maintaining our base of wealthy residents, while high property taxes (to fund unrealistic contracts for public-sector unions) and the general hostility of our political culture to economic growth continued to drive out the working-to-middle class folks who wish only to build on that base of wealth in order to improve their own circumstances.
Now, the capital gains tax is back with a vengeance, and the flat tax has been eliminated through a clever “overhaul” that appears to make the income tax more progressive, in its real effects, not less. And nothing has been done to improve the lot of those who’ve been fleeing all along. As Mr. Deusch suggests, we’re all going to pay the consequences… all of us, that is, who stay.

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