Think Taxes Don't Matter?

Thursday, February 16, 2006
Yes, in case it isn't clear, I'm moving. I'm moving out of the great state of California and to the gloomy state of Washington. Why on earth would I do that?

This is due in no small part to one of my favorite subjects, taxes. You see, California has an absolutely horrendous tax system. It has an astounding 9.3% levy on income over $56,642. To make matters worse, it has a pretty high sales tax and the gas tax doesn't help either. Now in comparison, Washington has NO STATE INCOME TAX. Of course it has to generate revenue somehow which it does so through sales, gasoline, cigarette, and property tax. But guess what. Everyting except the Cigarette tax is lower in Washington than in California!

Even if they weren't higher it would make little difference to me since I tend to save a great deal of my income rather than spend it, I don't smoke, and I don't own (and will not own for the time being) property. Now, I surely pay the property tax indirectly through rent but considering I can get a much nicer place for much cheaper than I can get in California, I think I can live with it.

Now I had a competing offer on the table with a company in California. The money was about the same but in the end it was pretty clear that the Washington offer was better simply because I would not be paying state income tax on it. Washington had a built in 10% edge. (There were other reasons I took the job but it's not like I ignored the effective 10% raise).

Ever hear of the Laffer Curve? It is basically the idea that you can only collect so much in taxes before the revenue drops off because people stop working or move to avoid the tax. Believe me, it's true. And the story isn't isolated to just me. I know plenty of other people who make a great deal of money who decided not to come to California in no small part to the rather unfair tax burden.

So instead of getting some taxes from me, and getting the productive work that well-paid workers provide, California will get nothing from me. But hey, you have the beaches and sunshine right?


David Cho said...

Yeah, rub it in.

"considering I can get a much nicer place for much cheaper than I can get in California"

Is that really a true statement about Seattle? Not according to what I hear.

T said...

Yes, it's true. But take it into context. I came from NY, to LA. The most expensive to the 2nd most expensive. Seattle isn't Austin, TX or somewhere like that but it definitely is more affordable than Pasadena.