Economics 101: The New York Times engages in silver liningism.

Your Editor wrote:

The tax increases approved by the voters in November were temporary increases, adding a 0.25% increase to the state sales tax, and creating three new brackets for the most productive Californians, lasting for seven years. For a single Californian earning $500,000 or more, the new 12.3% marginal rate, combined with the new federal top rate of 39.6%, means that 51.9% of his earnings over the thresholds will be seized just in income taxes alone. If his earning power is portable — and for many of California’s top producers, it won’t be — moving to a state like Texas or Florida, which have no state income taxes, is a completely rational economic decision.

How many will? We can’t know yet, but we’ll see in two more years, when Governor Brown’s projection of a balanced state budget is either realized, or it is not.

That was three weeks ago. Now, it seems, that The New York Times is catching up to THE FIRST STREET JOURNAL:

Taxes Are (Still) Not Part of the Draw for California’s Richest

By Adam Nagourney | Published: February 6, 2013

PALO ALTO, Calif. − It is getting awfully expensive to be a millionaire in California.

With the new year, big earners are confronting a 51.9 percent federal-state income tax hit on earnings over $1 million, the result of a confluence of new tax-the-rich levies imposed by California and Congress in the closing days of 2012. That is officially the highest in the nation. And at 13.3 percent, the top-tier California income tax is, in addition to being higher than any other state, the steepest it has been since World War II.

Though no one expects traffic jams at 30,000 feet as panicked millionaires make for the state line, millionaires are once again grumbling about abandoning California for less punishing tax climates. Phil Mickelson, the championship golfer who collects purses in excess of $1 million, suggested that he might become the latest in a line of athletes and entertainment figures, among them Tiger Woods, who left California for states like Florida, which has no personal income tax.

The Republican governor of Texas, Rick Perry, firing a new shot in an old interstate war, began putting radio advertisements on the air in California this week summoning burdened businesses his way. “I have a message for California business: Come check out Texas,” Mr. Perry said.

More at the link.

It seems that the title of this story has been changed; if you look at the actual link to the Times article, the url is:, and the title that comes up on the page tab is “Millionaires Consider Leaving California Over Taxes.” Indeed, if you read the whole story, you will be reading a story which claims that the vast majority of the top producers won’t move, and that most of the millionaires would try tax avoidance measures such as loopholes, income avoidance or diversion, or simply reducing how much work they do.

It isn’t until you get to the last four paragraphs that it is conceded that yes, at least a few top earners have left; it makes your Editor wonder if the editors of the Times didn’t require a whole rewrite of the original. But whether the original was heavily edited or not, we have already seen the business exodus from the Pyrite State.

More, the Times’ story has a significant factual error, claiming that “the state budget has come back into balance,” when, in fact, The Los Angeles Times said that Governor Jerry Brown’s (D-CA) “budget predicts only the second budget surplus in the last decade, with an $851-million surplus projected at the end of the 2013-14 fiscal year — if all his proposals are approved by lawmakers.” California does not have a balanced budget this year — and note that The New York Times’ claim is in the present tense — and the Governor claims that the budget will have a surplus by the end of the next fiscal year, but only if all of his proposals are adopted. Patterico wrote:

Jerry Brown says we will have surpluses. I say we will not.

We’ll see who is right.

It’s pretty simple: either the Governor or Patterico will be right, and there’s a hard date, the end of the state’s FY 2014, at which point the determination can occur. Nor will the answer be subject to interpretation: either the budget will be balanced/ have a surplus, or it will not.1

California is a very attractive state, with a great climate, and there are a lot of reasons why people would want to stay there, in spite of the ridiculous taxes. And most of the top producers can’t pick up and leave: the sources of their income are location-dependent businesses, and moving to Texas means losing the businesses that they built. But some will leave, as we have already documented — see the links above — and others will not start new businesses there, others will choose more business friendly locations.

  1. I would not hold the Governor to the $851 million surplus figure; I would say that if the budget is simply balanced, or has a surplus of even 17¢, Governor Brown will have been vindicated, but if California is still running a deficit at the end of their FY 2014, Patterico was right.

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