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Star Wars economics in three easy lessons

Star Wars economics in three easy lessons

Many politicians fail to understand an inherent point of economics I refer to as the “Star Wars Tax Rule”:  The more you tighten the tax grip, the more revenues will slip through your fingers.

Today, I would like to highlight three recent news items that underscore this concept.

First, a story via Aaron Clarey, The State Owns That, Not You.  It looks like a Microsoft executive wants to buy a California sports franchise and move it to Seattle, and Democrats in my state’s senate feel they have a right to express an opinion about this transaction.

Senate President Pro Tem Darrell Steinberg is not backing down from a request for information about Microsoft’s dealings with California, a gesture that many interpreted as a warning to prospective Sacramento Kings buyer and Microsoft CEO Steve Ballmer….

Steinberg faced criticism from those who said he was unfairly bullying Ballmer and endangering a lucrative partnership. But Steinberg defended his move on Thursday as a service to constituents and said he would press on.

As Ed Morrissey notes:

It takes quite a bit to generate sympathy for Microsoft, but this qualifies. Using the power of the state to interfere with a private sale — and one based in large part on the ridiculous policies championed by politicians like Steinberg himself — makes it clear that California isn’t in the governing business any longer. They’re running a protection racket.

True, that. Microsoft did not get to be where it is today by ignoring the business climate.  For some strange reason, the Microsoft CEO thinks operating this franchise somewhere other than California may be more profitable.

The second story comes from San Diego compatriot, W.C. Varones, and involves international pop star Tina Turner.  It seems the bloom is off this rose:

Tina Turner, a 73-year-old American-born singer whose career has spanned more than half a century, has lived in Switzerland since the mid-1990s and was officially granted citizenship by the Swiss government on Friday….

Although Turner is estimated to be worth about $200 million and says she wasn’t motivated by taxes, keeping her US citizenship would have forced her to continue paying the IRS, even if she never returns to the US….

Even though the multimillionaire doesn’t have to worry about her finances, giving up her US citizenship will at least reduce the paperwork – and save her a million or two.

As W.C. Varones notes, the news of Facebook co-founder Eduardo Saverin’s forfeiting his U.S. citizenship caused Senator Chuck Schumer to propose a Flight Tax to confiscate the assets of wealthy Americans trying to change citizenship.  We both wonder where Schumer’s outrage is over Turner’s move.

Turner seems to be part of a “protected class” because of her status in the entertainment industry.  However, the songstress is at least fiscally savvy, if not politically so:  Switzerland has a very favorable tax climate that appeals to the wealthy.

Last but not least:  As was predicted by any pundit with a modicum of business smarts, wealthy French citizens are fleeing the country in droves since Francois Hollande was elected with his dream of a 75 percent millionaire tax. In this case, the relocating citizen was once France’s richest man:

The richest man in France has officially transferred his multi-billion pound fortune out of his homeland to Belgium.

Bernard Arnault, head of luxury goods group LVMH, insists he has moved his assets for ‘family inheritance reasons’.

But others are convinced that the 63-year-old has joined other tycoons and celebrities in wanting to avoid taxes – including a 75 per cent top rate on income – introduced by Socialist President Francois Hollande.

Mr Arnault applied for a Belgian passport soon after the Socialists won elections last year.

Here’s to hoping the politicos in Sacramento and Washington, D.C. learn this principle fast, before the American Debt Star explodes.

WAJ adds — here’s a fourth example, via Drudge, ‘Wall St.’ flees NY for tax-free Fla.:

The city’s hedge-fund executives are flying south — and it’s not for vacation.

An increasing number of financial firms, especially private equity and hedge funds, are fed up with New York’s sky-high city and state tax rates and are relocating to the business-friendly climate in Florida’s Palm Beach County.

And they’re being welcomed with open arms — officials in Palm Beach recently opened an entire office dedicated to luring finance hot shots down south.

“Florida is a state of choice,” said Thalius Hecksher, global development chief for Apex Fund Services, who moved many of his operations to Palm Beach. “It’s organically grown. There’s no need to drag people down here. It’s a zero-income-tax jurisdiction.”


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DINORightMarie | January 28, 2013 at 10:34 am

…Senator Chuck Schumer to propose a Flight Tax to confiscate the assets of wealthy Americans trying to change citizenship.

Although I’ve read about Schumer’s proposal in the past, I still can’t believe the he, a Jewish man, would propose to do EXACTLY what the Nazi’s did to the Jews when they chose to leave.

Of course, it was not just the Nazi’s. The Spanish under Ferdinand & Isabel expelled all the Jews and confiscated their wealth before they were allowed to leave. History has many examples of such – Soviet pogroms also come to mind.

Schumer – how can you live with yourself? Look yourself in the mirror?

Maybe I’m not so surprised, after all……………..

In my novel written two decades ago I predicted, among several other things…

1. what you call “flight tax”, and

2. entitlement riots

All is proceeding as I have foreseen…

    Catherine in reply to Ragspierre. | January 28, 2013 at 10:57 am

    It is a sad day when the majority of Americans feel they need entitlements to get by. Because the government has “tried” and failed to fix the economy, many people are on food stamps and many people who might otherwise work have applied for and received disability benefits. I’m betting that in good times people put up with some health issues but that when employment opportunities dry up people consider applying for benefits if they see no other way out.

Steinberg is my state senator. Even after all this public kabuki in Sacramento, California I was still shocked when he threatened Microsoft on television. Go ahead, Darrel, hire somebody to pick the State’s way through the software maze Microsoft sold you.

Emboldened, he spouted, “I have represented this district for twenty years…” Attention term limit supporters: Steinberg just confirmed that Willie Brown style perpetual predators have no fear of the term limit “solution” especially with the media cover they enjoy.

Fellow Golden Staters, I am looking at Edmund G. Brown Jr, John Garamendi, Gavin Newsome, Kamala Harris, Tom Ammiano as inveterate electoral job hoppers. I am sure someone can name a few SoCal names as well.

Watch their retirement enhancements as they turn the ratchet ever to the left.

Thanks for the chance to comment.


I wonder how many of those “Wall Street” hedge fund executives are going to be audited every year by New York State.

They had better be REALLY, REALLY careful about how they set up the business transactions, and how they set up their “employment agreements.” NYS will (at least try to )tax you even if you are not a “resident” of New York if you are earning income IN New York. This is why I have to be very careful in my contracts to state that any consulting I do for companies in New York is performed in Texas. I might visit NY, but I never actually do any business or work with New York clients while I’m there.

    New York audits Limbaugh every year, hoping that he worked a day while in-state so they can punish him.

    Ragspierre in reply to Chuck Skinner. | January 28, 2013 at 12:43 pm

    Modern technology makes even Wall Street very portable.

    Some of the big financial players are starting to eye the wisdom of picking up their operations and moving to less extractive climes, many in the South or West.

    Thanks for the warning. As soon as my current project is done, next on my list is to make a pitch to a business owner near NYC.

    There is some reason to be cautiously hopeful, and I will keep this thread in mind if things go well.

I guarantee they will eventually try make movement out of tax jurisdiction illegal. The rise of serfdom (in it’s old sense at that) is coming. For those who think it’s far fetched to them I say, they have to do it, think about it.

Prediction: Blue states suffering self-induced emigration losses will try to set up interstate reciprocity agreements for tax collection, but the red states on the receiving end of emigrants will refuse to cooperate.

So, in blue states, CA, NY, etc., the percentage of working, tax-paying citizens is dwindling, leaving behind ever-growing percentages of entitlement consumers, creating budget shortfalls, leading to tax increases, leading to more out-emigration, and so on, all in a drain circling death spiral. Awesome!

That great big revenue boost derived from “taxing the rich” just days ago…

yep. Gone already.

It may be more than the cost of taxes that is driving Tina Turner. The paperwork burden is so high both for Americans living overseas and for the financial institutions that hold their assets. If the foreign banks don’t comply fully with the burdensome paperwork for every American customer, the IRS goes after them with serious fines (see UBS). As a result, many Americans (even those with dual citizenship) are having a very difficult time finding banks and brokerage firms that will work with them outside the US. Oftentimes it is entirely impossible to find a financial institution in another country that will take an American’s account. This makes it impossible to hold money overseas, to invest overseas, to access mortgages and loans overseas, even to apply for credit cards overseas. It also makes it impossible for many to be paid oversees, as most Europeans and Asians have long since switched to wire transfers and direct payments instead of checks.

Ms. Turner has significant assets, so it is likely that some banks would be happy to take on the burden of American foreign account regulation to maintain her as a client. Yet, I am sure it will be much simpler when she forgoes her American citizenship.

This IRS burden on overseas banks, which is a burden imposed uniquely by American bureaucrats, makes it almost impossible to live overseas without working for a large multinational that will assist the transition. This is a restriction of movement. Our declaration of independence lists restrictions of movement as a grievance.

Hey, you know who else had an “exit tax”?

Nazi Germany, 1938.

2nd Ammendment Mother | January 28, 2013 at 12:48 pm

If Microsoft is smart…. the should let California play their game. As a business they have the ability to decide who they want to be in business with. Now for a company like MS, government contracts have been good for their bottom line, but they might need to take the position that once existing licenses expire, they won’t seek to renew them.

Don’t feed the beast.

I think the Obamacare will be used to lock the americans into place. You’ll want to move to a better job or for less expenses and the HHS will tell you “well, sorry, the Health bureau for florida is full now. You have to stay put”
And that is how the control starts. And if you don’t answer
the door forc the gun survey guy or the post card on how many and what guns you owns, Presto, end of services for you.No water,gas ,trash pick-up, maybe mail. Want to leave the state? forget it or pay 3 yrs property taxes.

Catherine, you’re quite right. I’m trying to get people to think in terms of what the Libs(Dems) must do instead of what they might do. They must coerce, they must confiscate, they must constrict, if not all for them is lost.

“…Senator Chuck Schumer to propose a Flight Tax to confiscate the assets of wealthy Americans trying to change citizenship. “

When the commies marched into Saigon in 1975, they gave my grandfather two choices.

1. He and his clan could leave the newly liberated Vietnam on condition he surrender the printing factory which he had spent 30 yrs building.

2. He could stay and continue to operate his factory under the auspices of the National Liberation Front (Vietcong) and forgo the pursuit of profits for the good of the people.

Where’s our actionable plan for ending the comparable abuse and tyranny of SOBs like Schumer and his party?

[…] Related: From William a Jacobson of Legal Insurrection, “Star Wars economics in three easy lessons.” […]

TeaPartyPatriot4ever | January 28, 2013 at 11:56 pm


“Pulitzer Award-winning author, producer and director David Mamet has been extremely open about his conversion from “brain dead liberal” to conservative, and in the wake of President Obama’s latest push for stricter gun control measures, Mamet has penned yet another column setting the record straight as he sees it.
In an article for Newsweek, the writer of “Glengarry Glen Ross” and “Hannibal” begins with a cutting analysis of centralized government (all subsequent emphasis added):

“Karl Marx summed up Communism as “from each according to his ability, to each according to his needs.” This is a good, pithy saying, which, in practice, has succeeded in bringing, upon those under its sway, misery, poverty, rape, torture, slavery, and death.

For the saying implies but does not name the effective agency of its supposed utopia. The agency is called “The State,” and the motto, fleshed out, for the benefit of the easily confused must read “The State will take from each according to his ability: the State will give to each according to his needs.” “Needs and abilities” are, of course, subjective. So the operative statement may be reduced to ‘the State shall take, the State shall give.’” unquote-