Tag: Laffer Curve

France’s Richest Man Moves to Belgium

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.

via Mail Online.

This story does not exist to any U.S. media outlets.

The left wing media does not want anyone to think the Laffer Curve actually exists.

So now instead of getting a decent amount of money in taxes from this guy — they had to get greedy and push the tax rate to 75% — and now they get NOTHING.

There’s a quote going around today:

The problem is Socialism is that sooner
or later you run out of other people’s money.
— M. Thatcher

2/3 of Millionaires Avoid 50% Tax Rate

Two-thirds of millionaires left Britain to avoid 50p tax rate

Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax, figures have disclosed.

via Telegraph.

Shhhhh…  This is a secret.  No one tell the U.S. media.  They think the “rich” will just stay and give Obama all their money.

Cook County’s New Business Killers, a/k/a Taxes

Cook County Board President Toni Preckwinkle’s proposed budget calls for a 1.25 percent tax on businesses that buy “non-titled” items like office supplies, equipment, building materials and even artwork from outside the county’s borders.  …

County businesses would be allowed to purchase these goods up to $2,500 without any penalty, county officials said. The businesses are responsible for self-reporting the purchases to the county’s revenue department. A Preckwinkle spokesman said the county expects most businesses will comply.  …

The tax is among several initiatives Preckwinkle announced Thursday during a budget presentation, which also called for an additional $1 tax per pack on cigarettes, a 5-cent tax on bullets and an additional $25 tax on gun purchases.

“We’re proposing (these taxes) to subsidize health care,” Preckwinkle said. “Cigarette smoking is the No. 1 cause of preventable disease and gun violence is incredibly expensive.”

The cigarette tax is expected to generate $25.6 million additional revenue in the coming year, and the taxes on guns and bullets are anticipated to bring the county an extra $1 million over the course of 2013.

via Daily Herald.

Shear insanity.  There are so many problems here it’s hard to know where to begin.

As to the increase in the cigarette tax… this is a proven loser.  In 2006 the county earned over $200 million annually from cigarette taxes.  Then they doubled the tax.  Revenue fell to around $131 million.  Now she wants to raise the tax again… that’s the worst thing you can do.  If you want more revenue from cigarettes you need to LOWER the tax rate, not raise it.  The problem here is that Preckwinkle, like all Democrats, do not understand or even believe in the Laffer Curve.  They’re honestly just dumb that way.

How about this tax on bullets?  Well I currently buy a box of 100 rounds out at the Wal-Mart in Villa Park for about $30 + sales tax, or around $33.  Now Preckwinkle wants to add $5 to that box.  Guess what Toni?  I will NOT be buying my ammo in Cook County anymore.  So you’re not going to raise $5 from me… you’re going to lose the $3 in sales tax.  Your “bullet tax” is going to cost the County money…. Lots of money.  Like the cigarette tax, this idea is a net loser.  You know what else, you won’t even be able to claim that I “use” the product (in this case bullets) in Cook County b/c pretty soon all the shooting ranges in the county will go out of business.  So I’ll go shoot in Indiana.  That will be more tax revenue lost.

Lastly, what is up with this office supply tax?  Preckwinkle actually has the stones to call this tax “pro-business” thinking that people will simply comply and buy all there stuff from within the county.  That’s laughable.  She’s such a fool.  How about this Toni; ya think that someone might just open their business in Will, DuPage, or Lake county instead of Cook County?  Guess what Toni, you just made all the office buildings on the North side of Lake Cook road more valuable than the ones on the South side.  Same goes for 191st Street on the south.  You’re now creating another incentive for people to (a) open their businesses outside the county, and (b) move their businesses outside the county.  This tax will cost many many times more than whatever revenue it brings in.

Cook County needs new leadership or it’s going to die.

 

Jimmy John’s Leaving Illinois, Florida Bound

Jimmy John Liautaud is moving part of the sandwich chain that bears his name to Florida next year, making good on a threat issued in 2011 after Illinois hiked its corporate tax rate.

The founder of Jimmy John’s Gourmet Sandwiches said during a Sept. 18 panel discussion in Chicago that he will relocate the company’s licensing division to Florida, where he plans to move in early 2013. Mr. Liautaud said in January 2011 that he applied for residency in Florida out of anger when Gov. Pat Quinn raised the corporate tax rate to 5 percent from 3 percent.

via Crain’s Chicago Business.

Ya see!!  This is what happens when you raise taxes.  It’s called the Laffer Curve and it’s a real phenomenon.  Illinois is in the down portion of the curve where when you raise taxes you get less income.  Can someone explain that to Gov. Quinn, Michael Madigan, John Cullerton, Rahm, and the rest of The Machine?

Raising taxes — especially on “the rich” — only shifts the actual tax burden further down into the middle class.

What we need is a wholesale rewrite of the tax code.  But that’s a much, much longer post.

Rahm: Higher Cigarette & Amusement Taxes

Mayor Rahm Emanuel is considering an increase in city taxes on cigarettes and entertainment to help close an anticipated $369 million gap in next year’s budget, City Hall sources said Wednesday.  …

It’s unclear how much the cigarette tax might be raised. A city tobacco tax increase would come on the heels of a $1-a-pack state hike that took effect July 1. The city last increased its cigarette tax by 20 cents — to 68 cents a pack — in 2006.

Taxes on a pack of cigarettes in Chicago total $5.67, the second-highest per-pack tax in the nation, behind New York City’s $5.85 a pack. The city expects to bring in $18.7 million in cigarette taxes this year, compared with $32.9 million just six years ago, according to city financial records.

via Chicago Tribune.

Cook County has already proven that when you raise cigarette taxes you lose revenue.  The city’s own numbers are another example of that.

Does Rahm have any plan to cut ANY spending?  Anything other than police officers?

Why don’t we shut down the TIFs?  Take fund necessary to pay off the bonds and do so; take the rest of the funds and return them to the general fund.  That would be quick and easy.

Enough with the !@#$^ taxes.

One Word for CPS Teachers: Save

Save.

Save as much money as you can.

Live well below your means.

The pension time-bomb is coming.

One of the most vexing problems for Chicago and its teachers went virtually unmentioned during the strike: The pension fund is about to hit a wall.

The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.

via NYTimes.com.

and;

“Each day we wait to enact comprehensive pension reform, the problem gets worse,” Quinn said in a statement. “The unfunded liability will grow to more than $92 billion by the end of next fiscal year. Illinois is currently on track to spend more on pensions than education by 2016 and that is unacceptable.
— Pat Quinn

via Des Plaines, IL Patch.

If you think that taxpayers are going to fund your pensions, forget-about it.

If you think you can tax the rich to fund your pensions, forget-about it.

If you think that people are going to move into a community where their property taxes increase by 7% every year in order to fund failing schools, forget-about it.

If you think you’re going to get your COLA every year, forget-about it.

You have two options:  Save every nickel and dime you can, or plan to work until you’re in your 70’s.

Consider:

Illinois has an unfunded pension liability of at least $83 billion, according to state figures. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states, data compiled by Bloomberg show.  …

Illinois had about $28 billion of general-obligation debt as of May 8, according to bond documents. The state of about 13 million people plans to sell $50 million of debt next month for technology projects, John Sinsheimer, the state’s director of capital markets, said in an interview.

via Businessweek.

Further:

Illinois’s backlog of unpaid bills has risen to more than $9 billion because of pension costs and falling federal aid, leaving the state “essentially treading water,” Comptroller Judy Baar Topinka said.

via Bloomberg.

$83B + $28B + $9B = $120,000,000,000 in debt.  The extra $50 million at 0.42% of the total is a rounding error.  It should also be noted that this does not include the City of Chicago (or any other municipality or county debt) which is another $12-16 billion in debt depending on who you ask.

12,869,257 people in the state of Illinois.  Every man, woman, and child owed owes $9,324.54 to the state.  If you live in Chicago you owe another 5,910.34 locally for total of $15,234.89.  (Are you feeling good about your new contract yet?)

I was just looking over the FY2013 Illinois State Budget as prepared by Gov. Quinn.  On Pg 37 we’re told that Debt Service is 5.42% of all outlays.  That’s over $3.3B per year paying principle and interest on money we borrowed.  That’s $3.3B per year we could use to hire police officers, or teachers, or fully fund the pension funds but will instead go to pay for our bad fiscal decisions of the past.

More importantly, total expenditures are $61.0B.  That means that if we (a/k/a the State of Illinois) completely stopped operating, fired all the employees, shuttered all the buildings, and spend 100% of the budget on paying off debt we’d be debt free in 2 years.

Oh, I know what you’re going to say… You’re going to tell me all about how the Chicago Teachers’ Pension Fund is not as underwater as the general state fund.  True, but it’s still broke and broken.  And there’s no money to fix it.

Then you’re going to say that this is a right guaranteed by the Illinois Constitution.  Oh ya?  Well where’s the money going to come from?  The rich?  You wish:

When New Jersey governor Chris Christie heard British Prime Minister David Cameron invite France’s wealthy to decamp to England to escape a proposed 75% tax rate, he felt something akin to déjà vu. Every day top executives of Johnson & Johnson (JNJ), Merck (MRK), and other companies commute from their homes in Pennsylvania to offices in Christie’s state, saving roughly two-thirds on their state income tax bill — and costing New Jersey’s treasury $50 million, by one estimate.

via Fortune (a/k/a CNN).

You don’t understand the Laffer Curve.

The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a “millionaire’s tax” pushed through by Gov. Martin O’Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

via CNBC.

You’re confused how a state and raise taxes and lose revenue.  It happens all the time.  I wrote a piece about cigarette taxes in Cook County; raised taxes, lost revenue.

The more you tax something the less of it you get.

You tax income, you get less income.  You tax babies, you get less babies.

Even the left-loving Bono (of U2 fame) moves his wealth around to avoid taxes.

In Illinois, if we quadrupled the state income tax on those with adjusted gross income over $500k it would take over 13 years just to get current state pension liabilities square.  This would not cover the additional debt of Chicago Teachers, Chicago Police & Fire, or any of the billions and billions of general debt.

So take your 16% raise and start saving.  Save like your life depends on it.  Because it does.

Denise Rich: Democrat Who Fled the U.S.

Denise Rich, the wealthy socialite and former wife of pardoned billionaire trader Marc Rich, has given up her U.S. citizenship – and, with it, much of her U.S. tax bill. Rich, 68, a Grammy-nominated songwriter and glossy figure in Democratic and European royalty circles, renounced her American passport in November, according to her lawyer.

via Independent Film News.

Another fine Tax Avoidance / Laffer Curve example.

Good to see a rich Democrat in on the action (no pun intended.)

Raise Taxes — Lose Revenue

The current taxes on a pack of cigarettes in Chicago include $2 from Cook County, 98 cents from Illinois and 68 cents from the city. If Quinn signs the latest increase, the taxes in Chicago will be $4.66 per pack, compared with 99 cents in East Chicago.

On Monday, a pack of Marlboros at a 7-Eleven on North Wells Street in downtown Chicago ran $9.69, before the state tax increase. At a 7-Eleven on Hohman Avenue in Hammond, the same smokes went for $6.20.  …

“The cigarette tax increase passed the Senate last week. Quinn has said the hike is necessary to generate about $350 million for the Medicaid program.  …

In 2006, the Cook County tax doubled to $2 per pack.  …

But even as taxes on cigarettes climbed, the revenue in Cook County dropped. In 2006, the county garnered more than $200 million in cigarette taxes. That number plummeted to $131 million in 2010, according to annual reports.

Let’s stop here for a second and think about that.  In 2006 the Cook County Government DOUBLED the cigarette tax in order to RAISE REVENUE.  What was the result?  Revenue fell by a third!!

Legislators and experts agree some drop-off can be expected as tax increases price people out of the market or alter smoker behavior. The percentage of U.S. adults who smoke declined from nearly 21 percent to 19.3 percent between 2005 and 2010, according to the Centers for Disease Control and Prevention.  …

So during roughly the same period smokers (albeit nationally) kicked the habit to the tune of 8%.  But Cook County revenue off by 34.5%.

Cook County Sheriff Tom Dart has said he thought most of the revenue dip was due to fraud.

Dart and County Board President Toni Preckwinkle joined forces in September to add more staff to the county’s Revenue Department to investigate fraud claims. Within three weeks, investigators seized more than $353,000 in unstamped cigarettes and imposed more than $400,000 in fines, Dart said.  …

Well Mr. Dart, if your own statement is true then you completely suck at your job.  Your missing $69 million and you find $400,000.  You’ve located 0.58% of the missing money.  Less that one percent.

So what’s really happening here?  We know that the double the tax, yet revenues off by a third, only 8% quit, and Tom Dart can’t find the missing money.  So where’s the money?

Larry DeBoer, professor of agricultural economics at Purdue University, noted that Indiana benefits as taxes spike in neighboring states.”There’s no doubt that commerce goes back and forth across the borders,” DeBoer said. “If Illinois increases its tax by $1, we’ll realize about $10 million more in cigarette tax revenue.”

via Chicago Tribune.

Aaaah.  There’s the money!

In Illinois we’re governed by complete morons.  The Laffer Curve is a real thing.  People will change their behavior to engage in tax avoidance.  In this case is primarily involves not buying cigarettes in the City and County but in the collar counties and in Indiana.

More to the point, wouldn’t you think that when you double the tax and see revenue falling and falling and falling that someone would have stood-up and said, “Maybe we should roll-back that tax before we lose any more money?”  But not in this county.

Stupid Quinn and his ilk are going to keep raising taxes until there’s no one left to tax.

Wealthy Flee France (Shhh, don’t tell the U.S. Media)

For those that don’t know, France recently had an election and voted for the most socialist guy on the ballot.  The guy who’s promising to raise taxes on the rich and increase the transfer payments to the poor.  The result?  The rich are leaving…  in droves.

France’s high earners feel increasingly unwelcome in a country now led by a man who has admitted: “I don’t like the rich.” So where are they looking? London. It comes as no surprise – while Hollande prepares to raise taxes, over here David Cameron is cutting the 50pc tax rate for income above £150,000 to 45pc. “I have already worked in London and lived in South Kensington,” said one French banker who expects to return to the UK over the next three months. “The question is how much of Hollande’s rhetoric will materialise into policy.”

Few are keen to find out. Private equity firms and American banks in Paris have already begun making arrangements for their top executives to set up office in London, amid widespread concern about changes to the French income tax regime.

via Telegraph.

This story is told over and over again in the European press, particularly earlier this week (I realize I’m late to the story.)  But the U.S. press is just getting to the story; mostly in the business press.  Neither the Chicago Tribune nor the sun-Times has not written a single word about it.

While it can be shown that the rich are generally willing to pay their fair share, i.e. remain in places with high taxes, it is only when they feel that the quality of life issues make paying the high taxes worthwhile.  There can be no doubt that ever higher and higher taxes will drive the wealthy away; the Laffer Curve is real.

The net result of this is that higher taxes impose a disproportionate burden on the middle class and the poor.  States like Illinois need to move to a more progressive tax structure; however they must do so very carefully in order to assure that the rich are not incentivized to relocate to Indiana.