When Taxpayers Hit The Road

The Wall Street Journal has an interesting piece on Connecticut — the state which for some time has had the highest per capita income of any state in the union.  Now Connecticut is running into problems with its budget.  The problem?  It has jacked up taxes to the point that its biggest taxpayers, both corporations and individuals, have decided that it just makes sense to move.

leaving-connecticut-1170x514Aetna, a Connecticut institution since 1853 and one of the state’s largest employers, announced this week that it is moving.  General Electric has fled to Boston.  In May the state reduced its two-year revenue forecast by nearly $1.5 billion and has projected a 6 percent drop in income-tax revenue for 2017 and 2018.  Income-tax collections declined this year due to lower earnings at the top, as many high earners have moved to lower tax states.  Sales-tax revenue is forecast to fall by 9 percent, corporate-tax revenue is estimated to drop by 7 percent, and state pension contributions, which have doubled since 2010, will increase by a third over the next two years.  This confluence of bad news leaves Connecticut with a $5.1 billion deficit and three recent credit downgrades.

Is it a coincidence that all of that has happened after Connecticut raised its top individual income tax rate, payable by those who earn more than $500,000 a year, from 5% to 6.99%?  Is it a coincidence that, in the last five years, 27,400 residents have moved to no-income-tax Florida?  Their departures have depressed economic growth in Connecticut and, since high earners also tend to be high spenders, has also depressed home values and sales-tax revenues.

And here’s the kicker:  Connecticut is talking about issuing “revenue bonds,” backed by its shrinking income tax revenues, to try to reduce its borrowing costs and close its budget deficit.  In case you’re interested, that’s something Puerto Rico tried, too — and look where Puerto Rico ended up.

It’s a pretty simple lesson:  while people may not always be rational economic actors, if states keep raising taxes and taking large chunks of your income year after year, at some point taxpayers are going to go to a place where they get to hold on to more of what they earn.  Connecticut is now learning that lesson the hard way, and no-tax states, like Florida, are reaping the benefits.

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“The First Chicken That Tastes Like Chicken”

The other day I was on my morning walk when a commercial truck rumbled past.  It was a truck for the Gerber Poultry Company, advertising its “Amish Farms” brand chicken with the slogan:  “The first chicken that tastes like chicken.”

Intriguing slogan, isn’t it?  It’s a bold claim, as many commercial taglines are, but it’s far more subtle and nuanced than “See the U.S.A. in your Chevrolet” or “M-m-m good!” or “It takes a tough man to make a tender chicken.”

After all, at a certain level, everything — from frog legs to rabbit to squab to alligator — tastes like “chicken.”  At least, that’s what people will tell you.  If it’s the flesh of a creature that has mild, soft white meat that isn’t particularly gamey in flavor, the inevitable culinary reference point is “chicken.”  So, obviously, you’d expect any brand of chicken to taste like . . . chicken.

chicken-surprisedBut the Gerber Amish Farms slogan goes deeper than that.  By claiming to be the first chicken that tastes like chicken, it’s really saying that those of us who haven’t had Gerber poultry don’t really know what chicken tastes like.  Fans of The Matrix will remember the scene at the mess table on the Nebuchadnezzar where Mouse raises the profound question of whether anyone really knows what chicken actually tastes like.  After all, the computers that designed the Matrix presumably would have no idea what chicken truly tasted like — they would simply create a taste, plug it into the Matrix program, and all of the humans linked into the Matrix would accept it as “chicken,” just as they accepted everything else in the simulation as true reality.

So the Gerber Farms slogan presents a jarring concept.  Knowing what “chicken” tastes like is a foundational building block for modern Americans.  If you don’t know what chicken tastes like, what do you know, really?  It would be like learning that the sky actually isn’t blue, or that space aliens live among us, or that Donald Trump is secretly one of the world’s leading theoretical physicists.  Suddenly, your perception of reality is shifted forever, and there’s no going back.

So I’m not quite sure I want to try that Amish Farms poultry and learn what chicken actually tastes like.  It might be like Morpheus offering the red pill . . . or the blue pill.