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.
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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