Tennis is not the most popular sport in Robeson County, but it provides a great economic lesson. Four of the five top French players in the world have taken up residence in Switzerland and the other lives in Malta. The top player in the world, Serbian Novak Djokovic, lives in Monaco, as does No. 4, Russian Daniil Medvedev, and No. 6, German Alexander Zverev.
Why have all of these multi-millionaires abandoned their home countries, countries they still represent and profess love for? In a word, taxes.
It sounds eminently sensible to me that we should apply a higher rate of tax for multi-millionaires. It also sounds eminently sensible to me that when it comes to paying my own taxes, I want to pay as little as possible. That’s how most people, including multi-millionaires, think. But, too bad for them if their country imposes a high tax rate, right? Wrong. Their wealth allows them to be especially mobile and relocate all of their income to a country that is happy to receive their tax payments at a lower rate.
What happened when Oregon implemented a 2% millionaire state tax? Suddenly, the number of millionaires in Oregon dropped from 38,000 to 28,000. Imagine what the loss of over one-fourth of a state’s wealthy people meant for jobs, charitable donations, and several other factors good for the other people in the state. These folks took their wealth to Washington, Texas, North Carolina, and Florida where those residents benefited greatly. Oregon could have used scientific evidence to know what would have happened since the state of Maryland had implemented a millionaire tax the year before and only two-thirds as many millionaires filed state tax returns the following year. Poof. Tremendous benefit for the state of Maryland was gone.
What will happen if we implement a multi-millionaire’s federal tax? Tens of thousands of people will vanish from the U.S. tax rolls, thwarting the plan to receive all that extra tax revenue. They will simply take up residence in a tax haven such as the Cayman Islands or Monaco. American corporations had already done this before the Trump Administration reduced the corporate tax rate, causing many corporations to return to America.
Do you know what else sounds sensible to me? Raising the minimum wage rate. CNN Business recently reported, though, exactly what decades of previous research has shown — it hurts many of the poorest people in a major way (such as the loss of a full-time job) and it helps many other people in a minor way — slightly more income. CNN Business looked at what happened at Target since 2017 when the corporation took a political stance by saying it would reach a $15 minimum wage by year-end 2020. Target has been making good on that promise: Iits starting wage increased to $11/hour in 2017, $12/hour in 2018, and $13/hour in June. Sounds great, right?
Tens of thousands of employees who received the higher wage, had their hours reduced. Consequently, their take-home pay has gone down, not up. By law, Target must offer health insurance benefits for employees working more than 30 hours a week. Would you rather have 30 hours a week at $11 an hour with health insurance or 28 hours a week at $13 an hour without health insurance? Tens of thousands of Target employees have learned that the latter is much worse. Target has hired 35,000 new employees in the past two years but Lee Beecher, a Target staffer in Santa Clarita, California, and a member of United for Respect said, “The company keeps hiring more and more people part time.”
Companies simply cannot stay in business for the long haul if certain costs exceed the benefit derived from those costs. They will reduce overall hours, convert full-time positions to part-time, automate to self-check-out, and reduce the loss of money in other ways. Paradoxically, the increase in minimum wage increases the incentive for companies to eliminate jobs. None of us wants that.
