Tax The Rich

I was watching the news program ‘Fareed Zakaira GPS’ on CNN this morning. There was a story about Gerard Depardieu’s decision to claim Russian citizenship to avoid France’s new 75% tax rate on millionaires. Russia, by the way has a 13% flat tax. Now, I would not cherish the thought of living in Russia the required 6 months out of the year to maintain my citizenship eligibility, but the thought of paying a government who taxes me to death is even less attractive. While the CNN report stated Depardieu’s story was getting much attention, the numbers don’t support the notion that when a government taxes the rich, the rich pack of their stuff and move to more tax friendly locations. To some degree, that may be true, as corporations are bound by brick and mortar investments, and other physical restrictions that would be more costly to move than paying the higher tax. However, those not bound by costly restrictions will move. So the CNN story tended to support the idea that if the Obama administration continues to tax the rich, they will just pay more in tax. But that’s not true. CNN failed to look forward into the future. Consider upstart companies looking for somewhere to begin their business? Why would they build in New Jersey with a 9% corporate tax rate when Texas has 0%? Or why would they build in the United States when many countries offer friendlier tax environments? Bottom line, the rich will do what’s best for their pocketbooks. And while it may be ‘patriotic’ to pay taxes, according to the Obama faithful, that does not mean you should bend over so they can take advantage of you.