The Blue State vs. Red State Population War Continues

New York isn’t the only state losing entrepreneurs and high-income earners to lower-tax and lower-cost-of-living states like Florida and Texas. California is having the same experience. And for similar reasons.

California has the highest state income tax in the country. Californians with incomes over $1 million pay a whopping 13.3%. That’s on top of federal taxes for such people, amounting to the state and federal governments taking 50% of the income of the state’s most productive residents.

California is a beautiful state. In addition to its great climate, there are lots of reasons why one would want to live and work there. But if you are a high earner or an owner of a business that employs hundreds or thousands of people, this kind of taxation makes it very tempting to move to a state that is much less punitive with its taxes.

And people are moving away. A recent study indicates how much tax revenue income California is, in fact, losing every year and is likely to lose in the future as it keeps jacking up its taxes on the “wealthy.”

Gov. Newsom is not oblivious to the real-world effects of high taxation. But instead of dealing with the problem directly, he has reacted to the flight of wealthy people and companies from his state by trying to punish them with costly penalties. Which seems sort of third-worldish, don’t you think? Click  here.

On the Other Hand…

It’s not all bad news for New York. Gov. Kathy Hochul surprised many at the end of last year by vetoing two bills that would have driven more businesses and high earners out of her state.

One of the bills would have crippled non-compete agreements.

In my business (the digital publishing business), non-compete contracts usually don’t work. They are either written so tightly that they would be rejected as unreasonable or so loosely that they can easily be skirted by designing the new job in such a way that it falls outside the restrictive language.

Another way of putting it is that in my industry, the most valuable assets are inside individual people’s brains – their ability to conceive of interesting and salable ideas year after year or the ability to know how to sell those ideas to the public.

These are skills, not templates or blueprints or algorithms. They cannot be copied. Or codified. Or stolen. Or even defined.

But that’s my business. When it comes to technology businesses, what is often most valuable is knowledge – knowledge in the form of templates and blueprints and algorithms. Information that can be financially profitable for anyone that has possession of it. To protect against the widespread thievery of this kind of knowledge, we have laws to protect the investors, the creators, the distributors, and everyone else involved in turning a new technology into cash.

In explaining her veto, Hochul said she tried to negotiate a compromise with the legislature “to protect middle-class and low-wage earners while allowing New York’s businesses to retain highly compensated talent.” But progressive legislators weren’t interested.

The governor also vetoed a bill that would have required every corporation registered to do business in New York to consent to being sued in New York’s courts.

I know. That one sounds reasonable. But what a bill like this really does is create an industry of corrupt attorneys that make a living by suing out-of-state corporations that do business in multiple states. I’ve seen this in action. It has nothing to do with protecting consumers. It’s all about extortion.