Since the election of the Socialist Hollande in France, the French government has imposed a tax rate of 75% on those making more than one million Euros per year. Apparently, some of the more wealthy French are leaving, including beloved French actor Gerard Depardieu. In fact, Depardieu was recently quoted as saying that he is more than happy to turn over his French passport and his social security card saying about the card, “which I have never used.” In the same statement Depardieu stated that he had paid all of his 2012 taxes before his departure and that he has paid more than 100 million Euros in taxes in his lifetime.
Contrary to what President Obama wants people to think, the same will also happen in the United States. Maybe, people won’t leave the country per se, although even that is possible – the biggest example being Facebook co-founder Eduardo Saverinwho turned in his US Passport prior to having to pay major taxes on his capital gains from selling Facebook stock. What is liable to happen is that citizens living in higher tax states such as California, New York, New Jersey and Illinois will leave to lesser tax states such as Texas and Florida.
The marginal tax rate in California is now 13.3% on incomes above 3 million dollars and 11.3% on incomes above one million dollars. That means that if you choose to remain in what was once called the Golden States and you happen to be one of the luck people making large sums of money, you will be paying the following Income Taxes:
Federal – Current Marginal Rate – 35%
Proposed Marginal Rate – 39.6%
State – Current Rate – 11.3% over one million and higher if you make more than two million
Medicare – 2.9% on all income
Social Security – 12.4% on income up to $113,700
SDI in California – 1.0% on the First 101,000
Do you want to add this up? Or, are you already shocked at the numbers? Of course, you can add the California Sales Tax to this number and the California Property Tax as well. If you do, you will quickly see that anyone making between 250,000 and one million with a family of four is not really rich at all. They are basically middle class.
If you happen to be over one million, you may be rich, but you are working for the government. In fact at one million dollars, your total income taxes will be approximately 550,000, not taking into account sales and property taxes. This would leave someone making one million dollars a year, $450,000 to live on. Not shabby, but definitely not a millionaire.
This person would save over $100,000 by moving to a state which does not have state income taxes such as Texas. And, don’t think they won’t do it. It is already happening. I personally have a very high net worth friend who has bought property in Montana and has set this up as his home. He will spend the maximum days allowed in California to not be considered a resident and will spend the rest of the time in Montana. And, I happen to know a very famous movie star who is doing the same by moving to Philadelphia.
What will the cash strapped states do when their entire tax base leaves. The will become more financially challenged and will eventually become more like third world countries. It is already happening in California where there are more people on welfare than there are employed.
So, my liberal friends, explain to me why higher taxes are the solution? I believe they are the problem.